The Deep Value Play for Growth Investors Isn't Artificial Intelligence, It's This Forgotten Industry

The Deep Value Play for Growth Investors Isn't Artificial Intelligence, It's This Forgotten Industry

Investing in artificial intelligence (AI) stocks has been all the rage in recent years. Nvidia, Palantir Technologies, and Broadcom have been among the most popular investments due to their impressive results and growth potential.

But valuations are high, and talk of a bubble having formed is undeniable. While there may still be room for AI stocks to rise higher, there's also plenty of room for them to crash if there are cracks in their growth stories.

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For growth investors seeking deep value stocks that truly offer considerable upside, there may be another industry to focus on instead, one that's been largely forgotten: cannabis.

Why there may be a resurgence in the cannabis industry

Marijuana legalization isn't on the horizon, but under the Trump administration, there has been a greater push for reform. Earlier this year, regulators moved forward with plans for rescheduling medical marijuana from a Schedule I substance to Schedule III, which was seen as a big win for the industry, potentially paving the way for future legalization. While the rescheduling process has recently been delayed, causing concern among cannabis investors, it's still expected to take place.

And despite marijuana remaining illegal at the federal level, cannabis companies have continued to operate in the U.S. for years, as marijuana is legal in dozens of states. While crossing state lines remains illegal, companies have still been able to amass significant sales numbers. Curaleaf Holdings (OTC:CURLF) is a leader in the industry, generating $1.3 billion in revenue in the trailing 12 months. Other companies in the industry that have generated over $1 billion also include Green Thumb Industries and Trulieve Cannabis.

Greater reform in the industry could, however, unlock more opportunities and efficiencies that can drastically improve their financials and long-term growth prospects.

Legalization could also lead to job growth and boost the economy. It has the potential to be a compelling election issue to watch for in the future, which could make cannabis stocks much more attractive investments.

There is significant upside potential for investors willing to take on some risk

Curaleaf is a top cannabis company, but it has still experienced a 73% loss in value over the past five years. Even though it's doing well and growing its operations, it's the lack of reform, legalization, and optimism around the industry that's been weighing on it and other cannabis stocks.