Billionaire investor David Einhorn says buying HP stock is a cheap way into the AI craze

• David Einhorn said computer hardware maker HP could eventually benefit from AI.
• HP will likely see "high-teens growth" in the years ahead, he said.
• He said HP stock trading around 10x earnings looks "very reasonable."

Famed hedge fund investor David Einhorn is eyeing a tech stock that could be an under-the-radar artificial intelligence play.

The Greenlight Capital founder said his firm isn't necessarily interested in the parts of the market where investor enthusiasm is highest. Instead, his fund is betting on more affordable names that may be positioned to benefit from AI down the road.

One of these names is computer hardware firm HP, Einhorn told Bloomberg TV.

"PCs are due for a regular replacement cycle, because a lot were bought after COVID in 2020, and 2021, and we could have a better than normal cycle if 'AI PCs' turn out to be a thing," Einhorn said.

HP is up over 20% year-to-date, trading at $36.21 per share as of 2 p.m. ET on Thursday.

Einhorn said he sees the company on pace for accelerated growth over the next few years. The stock is trading 10 times earnings, pays a dividend yield of over 3%, and spends 100% of free cash flow paying shareholders, he said. Buyback yield is around 7%.

"So we see mid-teens, high-teens growth for the next couple of years, just as you go through a cycle share count reduction, and so for this you're paying just 10 times earnings — which is very reasonable from our perspective," Einhorn outlined.

More prominent AI plays are less alluring as the market has become increasingly expensive, he said.

Einhorn made a similar argument in Greenlight's latest quarterly letter to investors, saying that the tech sector's "nosebleed valuations" have made the market increasingly risky.

"I think the market as a whole is really quite expensive, considering we're in a strong part of the economic cycle and we're about 23 times earnings," he told Bloomberg. "So it's hard for me, as somebody who actually pays a lot of attention to what I pay for things, to want to chase those things."

Away from AI space, Einhorn said that the fitness equipment company Peloton looks significantly undervalued. After he made the argument at the Robin Hood Investors Conference on Wednesday, the stock spiked 11% that day.