After a more than seven-fold increase since the end of the third quarter of 2022 Nvidia is now close to the correction area. The high-flying stock could fall even further.
Investors may be eager to buy Nvidia on a decline. This could prove to be a smart move in the long run. However, there are other artificial intelligence (AI) stocks to consider. I expect the following three AI stocks to outperform Nvidia over the next five years.
1. Alphabet
Google parent alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has been a big winner from the AI boom, with its shares rising more than 40% in the last 12 months. While this performance can’t hold a candle to Nvidia’s, Alphabet could be gaining momentum while Nvidia is losing some momentum.
Assessment is an important aspect. Nvidia trades at nearly 35 times sales, while Alphabet’s price-to-sales ratio is below 6.5. Of course, I expect Nvidia to deliver stronger revenue growth than Alphabet in the next few years. However, Nvidia stock is priced for perfection – and most companies don’t deliver perfection for very long.
After the public embarrassment with its generative AI models, Alphabet has almost become an AI outsider in the eyes of some investors. However, don’t underestimate the company’s AI expertise. Apple According to Bloomberg, Google could implement Gemini in its iPhones. If this happens, I believe this will be a major catalyst for Alphabet stock.
I also think Waymo will be a key growth driver for Alphabet over the next five years. Cathie Wood’s Ark Invest predicts that the robotaxi market will reach over $10 trillion in sales by the early 2030s. I’m not that optimistic, but I still expect this market to boom, with Waymo being one of the biggest beneficiaries.
2. Metaplatforms
Metaplatforms (NASDAQ:META) was one of the best-performing megacap stocks not named Nvidia. The social media giant’s shares are up nearly 140% in the last 12 months, and I think Meta has even more room to run.
Like several other major technology companies, Meta is trying to reduce its dependence on Nvidia’s GPUs by using its own AI chips. Like many of its competitors, Meta is also more attractively valued than Nvidia.
While Nvidia faces increasing competition, Meta could benefit fewer Competition. A bill is being passed in the US Congress that would require Bytedance to divest TikTok, otherwise the company will face the consequences of an effective ban in the US
However, I don’t think Meta needs a TikTok ban to surpass Nvidia in the next five years. Meta CEO Mark Zuckerberg announced last year that business messaging would be the company’s “next big pillar.” He recently said that smart glasses with embedded AI assistants could be Meta’s “killer app.” I suspect Zuckerberg is right on both counts.
3. UiPath
Great AI stocks aren’t limited to megacap monsters. UiPath (NYSE: PATH) hasn’t delivered the high returns that Nvidia has achieved over the last 12 months, nor has it kept pace with Alphabet and Meta. However, with a market cap of just $12.4 billion, UiPath could get much bigger in the next five years.
I recently wrote that UiPath was my pick for the best AI stock to buy right now. The relatively small size was a deciding factor in my selection. More importantly, I view UiPath as an emerging AI company that is in its early stages of growth.
UiPath is a leader in robotic process automation (RPA) and this market is growing by leaps and bounds. Unsurprisingly, UiPath continues to deliver exceptional revenue growth: Revenue rose 31% year-over-year to a record high in the fourth quarter. The company also reached profitability for the first time, a key milestone that could set the stage for accelerated stock gains.
Rapid advances in AI are allowing the company to automate business processes it couldn’t in the past, and UiPath is capitalizing on this opportunity. Last year Clipboard AI was introduced, with TIME The magazine named it one of the best inventions of 2023. UiPath also introduced its AI-powered assistant AutoPilot in the fourth quarter.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keith Speights has positions at Alphabet, Apple and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Nvidia and UiPath. The Motley Fool has a disclosure policy.
Prediction: These 3 artificial intelligence (AI) stocks will outperform Nvidia in the next 5 years was originally published by The Motley Fool