When OpenAI’s ChatGPT-3 was released to the public in late 2022, it created a flurry of interest in everything artificial intelligence (AI). Although companies had been developing the technology for years — Alphabet acquired the groundbreaking AI startup DeepMind in 2014 — ChatGPT and modern generative AI felt like a giant leap forward.
Since then, the markets have exploded, rewarding companies that bring the technology to market or supply those who do with crucial hardware. While there is a lot of hype, it is more than possible that the technology will live up to it. This could be truly revolutionary, and it’s not just the companies selling AI products that are saying so. PwC – one of the ‘big four’ accountants – estimates that the technology could add $15.7 trillion to the global economy by 2030.
With everything that’s happened since late 2022, here are two AI stocks that could deliver.
1. Metaplatforms are still relatively cheap
Of all the major players in big tech, Metaplatforms (NASDAQ: META)is still one of the cheapest stocks (by technical standards) despite a 66% gain this year. The only company that trades at a lower term price-earnings ratio (P/E) Alphabet, likely through a combination of antitrust actions and the threat that AI competitors pose to its search business, is the company’s lifeblood.
While Meta has its own antitrust issues — no one in the big tech sector seems safe right now — its shares are still surprisingly cheap given the state of play. A relatively low valuation in itself is hardly a reason to invest in a company, but it doesn’t hurt, and Meta delivers the goods where it counts.
Facebook may have lost some of its luster, but you’d be surprised how popular it still is. It is by far the most popular social media platform today with a very active user base and it is just one of the company’s many platforms. In fact, Meta owns the first, third, fourth and seventh most popular social media platforms in the world.
According to the company, 3.3 billion people use one or more of its platforms every day, and that user base grew 7% year-over-year last quarter. That kind of audience means Meta’s advertising business is, too terribly profitable; The company earned nearly $20 billion from advertising last quarter, up a whopping 47% year over year.
With the release of Meta AI and the company’s heavy investments in the space, the company is on track to spend $40 billion in capital expenditures (capex) this year, a significant portion of which will go toward supporting its “ambitious AI” research and product development efforts’. ” — it’s in a great position to continue growing its user base and ad revenue.
2. Nvidia is still the king
I’m sure this one didn’t surprise you. Nvidia (NASDAQ: NVDA) is undoubtedly an epitome of the AI boom, with shares up more than 1,000% as of the end of 2022. The crazy thing is: the price-earnings ratio is still about the same as it was back then, which means that profit growth has kept pace.
Can the ride continue? It certainly seems that way. Like Meta, the rest of Silicon Valley is also investing heavily in AI – and much of it is focused on Nvidia. Take Alphabet. The company expects to spend roughly $50 billion on capital expenditures this year, up from $31 billion the year before. And judging by what they said during the last earnings call, these big tech giants plan to keep the money flowing. AI is their #1 priority and Nvidia is the #1 supplier of AI hardware.
While the company’s current iteration of its flagship AI chip, Hopper, is still selling like crazy — Elon Musk just bought 100,000 of them for his company xAI — Nvidia is about to start shipping the new Blackwell iteration. It has been sold out for at least a year.
All of this is great news for Nvidia investors. While unforeseen developments can always occur and believing that everything is a “sure thing” in the market is a recipe for disaster, there is every indication that Nvidia will continue to see solid growth for a while. It trades at a premium that is high even for tech stocks, but the market has consistently shown a willingness to pay that or more for Nvidia even before the AI boom took off.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
2 No-Brainer Artificial Intelligence (AI) Stocks to Buy Now was originally published by The Motley Fool
