Is Walmart an Underrated Artificial Intelligence (AI) Stock?

Investing in tech stocks may seem like the obvious way to benefit from the growth in artificial intelligence (AI), but the reality is that there are many industries that will have opportunities to leverage the new technologies that come from it. Retail, for example, has room for many added efficiencies due to AI when it comes to not only the in-store experience but also delivery.

One company that looks to be leading the AI revolution in retail is Walmart (NASDAQ: WMT). While the big-box retailer is known for being a safe, blue-chip stock for its consistency and reliability, could it also make for an underrated AI stock to own over the long haul?

Image source: Getty Images.

Walmart looks to leverage AI in multiple ways

An exciting opportunity for Walmart is to offer drone delivery, which can drastically reduce delivery times and make it easier to reach customers in rural areas. The company has partnered with Wing, a drone delivery company, and it recently announced plans to offer drone delivery services to over 40 million Americans. By next year, the company estimates it'll have more than 270 drone delivery locations throughout the country.

Walmart has also been making it easier for consumers to shop for products through chatbots, recently reaching agreements with OpenAI and Alphabet. This will enable customers to shop and buy items through an "Instant Checkout" process that doesn't require them to even leave their chatbot, whether it's Gemini or ChatGPT. It's a great example of Walmart's constant pursuit of innovation and adapting to changing customer needs and preferences.

Could Walmart's stock have more room to rise?

Walmart has some promising growth opportunities ahead due to AI. However, the stock's high valuation may suggest that it already has some of that potential priced in right now. Walmart's stock has risen 140% in five years, and it now trades at more than 40 times its trailing earnings -- a steep premium for a retail stock, unless, of course, investors are factoring in a lot of AI-powered growth ahead.

The consensus analyst price target of $123.20 also implies that there may not be a lot more upside for the stock (roughly around 5%), at least in the near term.

Walmart's stock doesn't look underrated given the premium it's trading at today, but it may still be a good investment for the long term, as the company is clearly looking at ways to leverage AI to its advantage. And as it becomes leaner and more efficient, profits are almost sure to rise, making this an appealing investment to hang on to for the foreseeable future.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Walmart. The Motley Fool has a disclosure policy.