Top 3 Japanese AI Stocks Trading Up To 37% Below Fair Value

China and the US just agreed to scale back tariffs on a wide range of goods and set up a formal channel to talk specifically about artificial intelligence. That kind of thaw can shine a spotlight on Japanese AI players, especially those tied to chips, software and cloud tools that power systems like ChatGPT. This article breaks down three stocks from our undervalued Japan AI screener that may be worth watching.

The three undervalued AI stocks covered below are only a sample, since the full screen surfaced 13 more companies with equally compelling narratives that are not included here.

If you want to quickly cut through the noise, head straight to the Undervalued Artificial Intelligence/ AI Stocks screener to identify, analyze and focus on the highest conviction ideas in this AI theme.

Cresco (TSE:4674)

Overview: Cresco is a Tokyo based IT services group that builds and runs AI systems, data platforms, RPA and cloud based digital solutions for Japanese enterprises.

Operations: Cresco generates its ¥66,277 million in revenue entirely in Japan, with income tied to domestic enterprise and public sector technology spending.

Market Cap: ¥75.3 billion

Cresco is directly exposed to the AI theme through its Digital Solution Business, which develops and deploys AI systems, RPA and data analytics on cloud infrastructure for corporate clients. Earnings grew 22.4% over the past year and the stock trades on a lower P/E than the JP Software sector. Investor attention now hinges on how one unresolved pressure shapes those AI driven margins.

To see how that pressure shows up in the numbers, review the 2 key rewards and 1 important warning sign before Cresco's AI work either widens or compresses those margins.

Systena (TSE:2317)

Overview: Systena is a Tokyo based IT services group that builds, tests, and runs AI, IoT, cloud, and DX systems for enterprises.

Market Cap: ¥155.5 billion

Systena is directly connected to the AI theme through its AI and IoT engineering and DX services, where it helps clients design, verify, and deploy AI driven automation, LLM enabled applications, and cloud based AI workloads across platforms like Cloudstep and Canbus.IoT. Investors following developments around ChatGPT may focus on how various factors could influence the way these AI projects translate into long term profitability.

That profitability question hangs over Systena's AI work, so step into the analyst forecasts for Systena to see where expectations may already be stretching or lagging behind reality.

WingArc1st (TSE:4432)

Overview: WingArc1st develops AI driven invoiceAgent AI OCR and cloud form software that turns paper based documents into structured, usable business data.

Operations: WingArc1st generates ¥31,437 million in revenue from its Data Empowerment Business, with all of that activity coming from Japan.

Market Cap: ¥114.7 billion

WingArc1st plugs straight into the AI theme through invoiceAgent AI OCR and cloud form tools that automate document capture for Japanese enterprises. Earnings growth of 16.7% and an estimated 12.51% yearly outlook frame that AI workflow story inside a software model that could look very different depending on how one unseen pressure plays out.

That unseen pressure could reshape how investors frame WingArc1st, so tap into the analyst forecasts for WingArc1st to see where expectations and AI workflows may be decoupling.

Seeking Alternatives Before The Crowd?

Fresh ideas do not stay under the radar for long. Spot potential breakout momentum before prices start flying or opportunities get caught dropping out of reach, and act now.

• Target dependable income streams by scanning for 20 dividend fortresses that aim to keep cash flows coming even when market enthusiasm cools.
• Hunt for resilient operators using the 21 resilient stocks with low risk scores to zero in on businesses where balance sheets and risk profiles stay front and center.
• Chase future-facing infrastructure by running the 87 AI infrastructure stocks and focus on companies helping power the data and compute build out behind AI momentum.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com