Is Verizon an Underappreciated Artificial Intelligence Stock to Buy in 2025?

Verizon Communications (VZ) may not be the first company that comes to mind when thinking about artificial intelligence (AI) stocks, but the telecom giant could be an overlooked gem in the AI investment landscape. With a market cap of $163.25 billion and a forward price-to-earnings ratio of 8.28, Verizon's stock price has been hovering near its 52-week low, presenting an attractive entry point for investors. But is Verizon truly an AI stock worth buying in 2025?

Verizon's Role in AI Edge Computing Growth
Verizon's 5G network plays a crucial role in the growth of AI edge computing, which is expected to expand tenfold from $27 billion in 2024 to $270 billion by 2032. The company's partnership with Nvidia to deliver AI to private networks, such as the one for FIFA's 2026 World Cup, demonstrates its commitment to facilitating this growth. Verizon's CEO, Hans Vestberg, has stated that the company is opening up new opportunities for growth and innovation by expanding its 5G Ultra Wideband network and scaling its private networks business.

Key Factors Driving Verizon's Wireless Service Revenue Growth
Verizon's wireless service revenue growth is driven by several key factors, including:

1. Expansion of 5G Ultra Wideband Network: Verizon is expanding its 5G network, which supports fast speeds and security required to deliver AI to devices on the edge of a computer network. This expansion opens up new opportunities for growth and innovation in AI edge computing.
2. Growth in Private Networks Business: Verizon is scaling its private networks business, providing wireless services dedicated to specific organizations. For instance, Verizon will provide a private network to FIFA for the men's 2026 World Cup. This growth in private networks contributes to Verizon's wireless service revenue.
3. AI Edge Computing: The AI edge computing sector is forecast to expand tenfold from $27 billion in 2024 to $270 billion by 2032. Delivering AI to the edge is key to facilitating the growth of self-driving cars, robotics, and the Internet of Things. Verizon's role in AI edge computing positions it to benefit from this growth.
4. Growing Revenue from Wireless Services: In Q3 2024, Verizon's wireless services produced $19.8 billion in sales, a 3% year-over-year increase. This growth in wireless service revenue is a significant contributor to Verizon's overall revenue.

Verizon's Debt Burden and AI Investments
Verizon's large debt burden could potentially impact its ability to invest in AI and other technologies. As of Q3 2024, the company had over $150 billion in debt on its balance sheet. However, Verizon's strong free cash flow (FCF) generation provides some reassurance. In the last 12 months, Verizon's FCF was $18.54 billion, which can be used to invest in the business, pay debt obligations, and fund dividends. Verizon's CEO, Hans Vestberg, has stated that the company is already using AI and generative AI commercially and sees more opportunities in this area.




Verizon's AI Strategy and Revenue Growth
Verizon's AI strategy focuses on three priorities: optimizing internal processes and operations through machine learning, enhancing product experiences, and establishing an AI-based revenue stream. The company is already using AI for optimizing internal processes, such as creating efficiencies in fuel consumption, and enhancing product experiences by providing personalized information to customers. Verizon's CEO, Hans Vestberg, has stated that AI will become even more important to the company's cost transformation program over time.

In conclusion, Verizon's role in AI edge computing growth, key factors driving wireless service revenue growth, and strong FCF generation make it an attractive AI investment despite its recent share price decline. While Verizon's debt burden is a factor to consider, its commitment to AI investments and strong FCF generation suggest that it can continue to invest in AI and other technologies. As Verizon's AI strategy matures, it could become a significant player in the AI investment landscape, making it an underappreciated AI stock to consider buying in 2025.