Nvidia Amid the excitement surrounding artificial intelligence (AI), the stock price has soared 263% over the past year. But Wall Street isn’t expecting an encore performance next year either. In fact, analysts see the following: Amazon (AMZN -1.95%) and atlassian (team -5.43%) AI stocks to buy right now.
Specifically, NVIDIA has a median 12-month price target of $850 per share. This represents a 3% upside from the current stock price of $823 per share. However, Amazon’s median price target of $205 per share implies an upside of 15% from the current price of $178 per share. Additionally, Atlassian’s median price target of $255 per share implies an upside of 22% from the current share price of $209 per share.
That doesn’t mean Nvidia is a bad investment. These price targets are educated guesses about what will happen over the next 12 months. Even if Nvidia underperforms during that period, the stock could still outperform over the next five years. But investors shouldn’t get hung up on one AI stock. The smartest way to profit is to spread your money across multiple AI stocks.
With this in mind, Amazon and Atlassian should do some further thinking.
1. Amazon
Amazon reported strong results in the fourth quarter, combining impressive sales growth with improved profitability. Revenues rose 14% to $170 billion, driven by momentum in retail and advertising services and a sequential acceleration in cloud computing revenues. The company also reported GAAP net income of $1.00 per diluted share, an increase from $0.03 per diluted share in the prior year.
Given that Amazon is a major player in three fast-growing markets: e-commerce, digital advertising, and cloud computing, investors can expect similar momentum in the future.
Specifically, the company operates the most popular online marketplace by number of monthly visitors. Amazon is the world’s third largest ad tech company. Amazon Web Services (AWS) is a leading provider of cloud infrastructure and platform services.
Additionally, Amazon is implementing a smart growth strategy that can drive share gains across all three businesses. In e-commerce, the company recently moved from a national fulfillment network to regional hubs to reduce costs and speed delivery times. In digital advertising, Amazon recently introduced generative artificial intelligence (AI) tools that automate marketing content creation for brands. And in cloud computing, the company is focusing on growing demand for AI with new products such as Bedrock, CodeWhisperer, and Amazon Q.
In detail, Bedrock is a cloud service that streamlines the development of generative AI applications. CodeWhisperer is an AI-enabled coding companion that helps developers improve their productivity. Amazon Q is an AI-enabled business assistant that automates a variety of tasks, from drafting social media posts to summarizing information.
Going forward, online retail sales are expected to grow at 8% per year through 2030, with ad tech and cloud services revenue expected to grow at 14% per year over the same period. This gives Amazon a good chance of achieving his double-digit sales growth until the end of his 20s. In fact, Wall Street expects the company to grow revenue by 11% annually over the next five years.
Contrary to that consensus estimate, the current valuation of 3.2x sales seems reasonable. Long-term investors should consider buying a small position in this growth stock now.
2. Atlassian
A difficult macroeconomic environment is weighing on Atlassian, but upbeat second-quarter results suggest headwinds are waning. Revenue increased 21% to $1.0 billion, and non-GAAP net income increased 65% to $189 million. Management also said that customer conversion from free to paid has stabilized and customers have added paid seats more quickly. Unfortunately, the stock price fell sharply following this report as investors reacted (or perhaps overreacted) to the cautious guidance.
Artificial intelligence could be a big tailwind for Atlassian in the coming years. The company sells work management and IT service management software that helps organizations plan, track, and complete projects, especially complex projects like AI application development. In that regard, Atlassian is well-positioned to take advantage of on-demand given its position as a leader in enterprise service management and enterprise agile planning software.
Additionally, Atlassian has introduced a set of AI capabilities called Atlassian Intelligence. It allows users to use natural language to draft text, summarize information, surface insights, and automate tasks across the platform. The company also integrated virtual agent technology into his IT service management software to automate IT support interactions. These features not only create new monetization opportunities, but also make existing products more attractive. Co-founder and co-CEO Michael Cannon-Brookes said Atlassian Intelligence has had a “great reception from our customers.”
Atlassian said its software addresses a $29 billion market growing at 14% annually in 2022, suggesting a market opportunity of more than $37 billion today. Wall Street analysts expect the company’s sales to grow 22% annually over the next five years. Considering the tailwinds behind the business, this consensus estimate is reasonable, and the current valuation of 13.8 times sales looks reasonable. Investors should consider buying a small position in this growth stock today.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Trevor Jennewine has positions at Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon, Atlassian, and Nvidia. The Motley Fool has a disclosure policy.
