Artificial intelligence (AI) is gaining attention from investors because of its potential to revolutionize so many industries, from healthcare to automotive. In fact, some researchers predict that the size of the AI market could soar to more than $1 trillion by 2030. As a result, investors are buying stocks in potential winners, including those that are enhancing their AI models or using AI to improve their operations.
This has led to explosive gains in some stocks, and in some cases, you may be wondering if the long-anticipated good news is being priced into stock prices at current levels. I don’t know. That’s a valid question, but like any emerging high-growth sector, it’s clear that some rising companies don’t have the necessary capabilities to keep up the pace.
But some people do. In fact, his two top AI stocks, which have risen more than 200% in the past year, seem unstoppable. That means it’s a great idea to buy these potential winners and hold them for the long term. Their gains may have just begun.
1. Nvidia
Nvidia (NASDAQ:NVDA) The company rose to prominence by becoming the go-to company for chips, an essential element for powering AI. However, the company is not new to chip design.
Nvidia developed the graphics processing unit (GPU) several years ago and it has become the standard in the gaming industry. The GPU’s ability to handle many processing tasks simultaneously has made it a critical element for all visual elements involved in powering games. And years later, this same ability made his GPU essential for powering AI as well.
Nvidia currently controls more than 80% of the AI chip market, and the company’s reputation, suite of products and services, and increasing investment in research and development make it likely to dominate. Nvidia’s revenue over the past year has shown an impressive pace of growth, with annual sales and net income increasing at triple-digit percentages. Sales have been setting records every quarter, driven by the company’s data center division, which includes AI products.
It’s also important to note that Nvidia’s products are used on all major cloud platforms. This means the company can reach customers through services they know and trust. These cloud platforms also work to sell her Nvidia products to these customers.
Even considering Nvidia’s strong gains over the past year and a half, the company trades at only 31 times forward earnings. This is a reasonable price considering his Nvidia’s dominance in the market and future growth prospects.
2. Palantir Technologies
Businesses of all types have large amounts of data that, if properly collected and managed, can be extremely valuable to their operations.Here is Palantir Technologies (NYSE:PLTR) The software company helps business and government customers aggregate data and use it to make critical decisions. And AI will play a central role in that process.
Last year, Palantir launched its Artificial Intelligence Platform (AIP) and the business is rapidly growing. In the company’s latest letter to shareholders, CEO Alex Karp called AIP the future of Palantir and said it is already driving revenue and customer growth. The way Palantir presents his AIP to potential customers is particularly clever. The company hosts “bootcamps” to highlight its services and show individual companies how AIP can be a game changer for them.
Once known primarily for its government services, Palantir has recently focused on growing its commercial business, and that effort is paying off. In the fourth quarter, Palantir’s commercial revenue growth outpaced government revenue growth, rising 32% compared to an 11% increase. And U.S. commercial revenue was particularly strong, increasing 70% year over year.
Now, let’s talk about ratings. Palantir’s forward earnings estimate of 74 times may seem high, but know that the company is in the midst of a significant shift toward expanding its commercial business and growing its newly launched AIP service. I’m willing to pay a premium for this stock.
The key here is to imagine what might be possible in a few years. And from that perspective, Palantir looks like a clear buy today, given the momentum in enterprise customers and AIP.
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Adria Cimino has no position in any stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
2 “Unstoppable Artificial Intelligence (AI) Stocks Rise Over 200%, Buy and Hold for the Long Term” was originally published by The Motley Fool
