The world's #2 gold miner is running on fumes [it has to buy] (From Golden Portfolio)

When investors go hunting for ways to profit from the artificial intelligence boom, they reach for the obvious names: the chipmakers, the cloud giants, the software firms racing to embed AI into everything. What almost nobody thinks to look at is the humble electronics retailer. Yet that may be exactly where one of the more unexpected opportunities is quietly taking shape.

Best Buy Co. Inc. (NYSE: BBY) has just received a vote of confidence from Wall Street, with Truist Securities upgrading the stock to Buy on the view that the retailer benefits as AI works its way into the everyday gadgets it sells. It's an angle that’s flown under the radar up to now, and it poses an interesting question—could this unglamorous high-street name be one of the smarter ways to play the AI theme?

The shares have already been on a tear, up roughly 50% from the multi-year low they touched back in May. With a closely watched earnings report due at the end of the month, this fresh take from Truist is worth exploring.

The Analyst Case for a Second-Half Surge

The upgrade came with a new price target of $95, implying about 14% in upside from where the shares currently sit. The reasoning leaned on the firm's own data tracking what shoppers are actually spending on their cards, which showed encouraging trends over the recent quarter, often an early sign of stronger results to come.

The crux of the argument is one of expectations. Truist suspects a solid sales figure in the upcoming report could prompt the market to pencil in a stronger second half than it currently anticipates, a shift in sentiment that would almost certainly lift the stock. In other words, the current setup should reward investors who are comfortable positioning themselves before the crowd catches on.

That’s the near-term hook. But the more interesting part of the thesis is what lies behind it: a longer-term story about the products flowing through Best Buy's stores and how the AI revolution is starting to touch even a decades-old brick-and-mortar retailer like this one.

Why This Is an AI Story at All

The key thing to grasp is that this isn’t about Best Buy building or using AI systems of its own. It's about the company simply selling the physical devices that the AI boom is starting to create demand for.

Think about it like this—as AI spreads into more and more consumer gadgets like watches and health rings, someone has to put those products in front of shoppers, and few are better positioned than the country's largest dedicated electronics retailer.

There are plenty of reasons to think that Truist’s theory isn’t just a stab in the dark. Best Buy’s management, for example, recently highlighted that emerging categories, including many AI-enabled devices, saw their sales double year over year.

As a result, Best Buy is leaning into the trend by rolling out dedicated in-store experiences centered on gadgets like AI glasses. Combine that with the ongoing recovery in its enormous computing business, itself increasingly tied to a new generation of AI-capable PCs, and a pretty compelling growth story emerges.

What Could Still Go Wrong

The most obvious cause for concern is the fact that shares have rallied so hard in recent weeks, and there’s a chance a good deal of this optimism is already baked into the price. Should the upcoming earnings report disappoint, on the AI-gadget theme or elsewhere, it could open the door to a sharp retreat.

There's also the simple fact that Best Buy remains, at its core, a consumer electronics retailer working thin margins in a fiercely competitive market. It faces relentless pressure from online rivals, and its fortunes rest on shoppers' willingness to splash out on discretionary gadgets, the first thing to go when the economy wobbles.

It’s a world away from the corporate AI and cloud budgets that power the chipmakers, and are locked in for years ahead. A nervous household can cancel plans to buy a new smartwatch overnight; a tech giant can't unwind its data center commitments nearly as fast.

A Cheaper Way Into the Same Trend

For that reason, the AI-device trend is best seen as an enhancement to Best Buy’s investment case rather than a catalyst for wholesale transformation. It gives Best Buy a credible growth angle, but the core business still has to hold up its end.

Best Buy will never be the racy way to play artificial intelligence, and that's the point. With a price-to-earnings ratio of just 15, it offers some interesting exposure to the same powerful trend that the likes of Advanced Micro Devices Inc (NASDAQ: AMD) are trying to capitalize on with a 124 PE ratio. With earnings due in just a few weeks, investors will soon learn whether the angle holds up.

Read this article online ›