Or a chipmaker Nvidia says it’s partnering with a company to develop an artificial intelligence (AI) product, perhaps that’s something investors should watch out for. Given that most AI-based servers have Nvidia GPUs in them, it knows a lot about what’s going on in that part of the computing environment.
During Nvidia’s Q3 conference call, it revealed another company it’s working with to bring AI to other customers: Accenture (NYSE: ACN)The world’s largest technical consulting firm.
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Nvidia CFO Colette Kress said during their conference call that Accenture has created a new unit with 30,000 employees trained on Nvidia’s AI technology. This makes it one of the companies best equipped to provide customers with AI skills they may lack in-house. While tech giants want Alphabet not at all Microsoft have large teams given this technology, companies in the banking, industrial, or oil sectors, for example, should not have these types of internal resources. As a result, they should work with consulting firms like Accenture.
Accenture CEO Julie Sweet has this to say about generative AI:
In every industry, there is a problem or opportunity that GenAI can now solve differently. Our deep understanding of both industry and technology positions us to be the best at creating real value from GenAI and our customers.
That sums up the AI-related investment thesis of Accenture, as the benefits from generative AI are set to go even further in the coming years. However, it is a large consulting company with many areas of specialization and expertise. It’s not pure-play AI.
But does the whole business with AI boost equal a win-win investment?
In its fiscal 2024 fourth quarter, which ended Aug. 31, Accenture saw a new revenue of $20.1 billion, of which artificial intelligence accounted for one billion dollars. So while generative AI has definitely boosted business, it only accounted for 5% of total bookings, making it a small part of the big investment picture.
Fiscal 2024 was not a very big year for Accenture, as customers were conservative with their spending. Revenue rose only 3% in Q4 and only 1% for the year. The 2025 revenue outlook is slightly better – management expects revenue to grow by 3% to 6% in local currencies. (As a global business headquartered in Ireland, it is exposed to fluctuating currency exchange rates.) However, given that many AI companies are growing their revenue at faster rates than that, should Accenture invest in it?
On a forward price-to-earnings basis, Accenture’s stock is very expensive.
ACN PE Ratio (Forward) data by YCharts.
The shares are trading at around 28 times forward earnings, the same value for Meta Platforms and Taiwan Semiconductorboth are growing faster than they are. So why would Accenture make a better stock pick?
Another advantage investors get from Accenture is its generous share capital program. It increased its dividend by 15% in Q4, and at the current share price, it has a yield of 1.6%. It also buys back a lot of stock – $4.5 billion worth last year alone. Decreasing the special accounting portion will increase its own earnings, which are expected to increase between 5% and 8% in 2025 revenue.
However, even with the dividend and stock buyback plan, Accenture’s stock is too expensive for my taste, especially when there are other AI companies that are growing fast and trading at similar or cheaper prices. Because of that, I’ll pass on it now.
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Randi Zuckerberg, former director of marketing and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Meta Platforms, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Accenture Plc, Alphabet, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2025 $290 calls on Accenture Plc, short January 2026 $395 calls on Microsoft, short January 2025 $310 calls on Accenture Plc, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Says This Artificial Intelligence (AI) Stock Is Worth Watching in 2025 was originally published by The Motley Fool.
