This year was a big one for artificial intelligence (AI) stocks, with these players posting the biggest gains S&P500. Investors have rushed into the shares to take advantage of a major market opportunity early. Analysts predict that the current $200 billion AI market will reach more than $1 trillion later this decade. That could mean significant revenue for companies using AI, as well as for companies developing AI products and services.
And today, some of these AI players are already seeing big wins in terms of profits and stock performance. In fact, two top AI companies are currently trading at record highs, having soared into the triple digits since the start of the year. These players have both reported fantastic profits and offer solid long-term prospects, Wall Street says only one of which is a purchase today. Let’s zoom in on each of these AI leaders.
Nvidia (NASDAQ: NVDA) has become an AI empire in recent years, selling not only its top graphics processing units (GPUs) but also a full range of products and services to support any AI project. This has resulted in triple-digit earnings growth quarter after quarter, and the growth may be far from over. For three reasons.
First, as mentioned, the AI market is booming and should continue to grow over the next decade, providing companies in the space with continued revenue growth opportunities. Second, Nvidia is already a leader with the best performing GPUs available, and that has led to demand for its products exceeding supply. Finally, Nvidia has promised to update these GPUs annually, a major move that should keep the company in the lead.
Nvidia stock may not be dirt cheap at 50x earnings estimates, but given the company’s growth, 70%-plus gross margin, and long-term prospects, the valuation seems reasonable. Although Wall Street’s average price forecast for the next twelve months predicts a gain of less than 4%, the average recommendation from analysts is a ‘buy’. So the overall feeling is that Nvidia is a stock to pick up today – while it may not soar in the coming year, the stock still has what it takes to move higher in the long term.
Palantir Technologies (NYSE:PLTR) has been around for about twenty years and has been associated with government contracts for most of its history. But thanks to the leap into AI, both Palantir’s overall growth and commercial activities have skyrocketed. For example, in its most recent quarter, Palantir reported its highest level of quarterly profit ever.
Why are companies and governments flocking to this software company? Palantir helps customers unify and leverage their data using AI. And this often produces breakthrough results: from increased efficiency to entirely new ways of getting things or projects done.
