These Are My Top Artificial Intelligence (AI) Stocks to Buy Right Now - Latest Global News

These Are My Top Artificial Intelligence (AI) Stocks to Buy Right Now

The demand for artificial intelligence (AI) is growing rapidly, and this is not surprising as this technology is expected to make a significant contribution to the global economy in the long term. According to PwC, AI could contribute a whopping $15.7 trillion to the global economy by 2030, driven by an increase in labor productivity as well as a surge in consumer adoption of this technology.

Not surprisingly, spending on AI is expected to grow from an estimated $135 billion last year to a whopping $827 billion in 2030. Therefore, now would be a good time to invest in top companies that could benefit from the growing adoption of this market and are likely to deliver solid returns to investors over the long term.

modern micro devices (NASDAQ:AMD) And Palantir Technologies (NYSE:PLTR) are two companies that can help investors profit from two fast-growing niches of the AI ​​market. Let’s look at the reasons why these two companies could prove to be top AI picks in the long run.

1. Advanced Micro Devices

AMD may have fallen behind NVIDIA in the race to develop AI chips, but it would not be a good idea to underestimate its prospects in this lucrative market. After all, the AI ​​chip market is currently in the early growth phase, generating an estimated revenue of $52 billion last year. However, by 2032, AI chip sales are expected to grow to a staggering $1.11 trillion.

AMD only needs to claim a small part of this massive market to fuel its long-term growth. Nvidia reportedly controlled 94% of the AI ​​server chip market last year. The company’s data center revenue was a whopping $47.5 billion in fiscal 2024 (which coincided with most of calendar year 2023). AMD’s data center revenue, on the other hand, was $6.5 billion in 2023.

However, in the first quarter of 2024, AMD’s data center revenues increased an impressive 80% year-over-year to $2.3 billion as demand for its AI graphics cards increased. The company expects to sell at least $4 billion worth of AI chips in 2024, and it’s worth noting that AMD has been steadily increasing its AI chip revenue forecast in recent quarters.

AMD’s revenue is expected to reach $25.5 billion in 2024, up 13% year over year. The company’s current estimate for AI chip sales this year suggests that this technology could contribute just over 15% of revenue in 2024. However, analysts are forecasting stronger revenue growth for AMD in the future.

Chart showing AMD revenue estimates for the current fiscal year

Chart showing AMD revenue estimates for the current fiscal year

AMD revenue estimates for the current fiscal year, data from YCharts.

AI is likely to play a key role in this acceleration. This is because AMD is trying to weaken Nvidia’s dominance in AI chips. AMD recently unveiled its new AI chip, known as the MI325X. The chipmaker claims that this chip is 30% faster than Nvidia’s H200 processor, the successor to the company’s popular H100 chip.

AMD says this new chip will be available to customers in the fourth quarter of 2024. More importantly, the company is doubling the pace of AI chip development and intends to launch a new AI chip every year.

Such moves could help AMD penetrate the AI ​​chip market and increase its market share. Vijay Rakesh of Mizuho Securities believes that Nvidia’s AI chip market share could drop to 75% in 2025 and 2026. With AMD pushing the envelope in product development and Nvidia struggling to produce enough chips to meet its customers’ demand, there’s a good chance that AMD could play a significant role in the AI ​​chip market in the long run, even if it plays second fiddle to Nvidia.

AMD could therefore become one of the top suppliers of AI semiconductors in the long term. Investors would therefore do well to buy the company’s shares before the company steps on the accelerator again in 2024 after modest growth of just 13% so far.

2. Palantir Technologies

AMD can help investors capitalize on the growing need for AI hardware. Palantir Technologies, on the other hand, is proving to be a solid bet on the growing need for AI software. S&P Global Market Intelligence estimates that the generative AI software market could be worth a whopping $52 billion in 2028 and could register a CAGR of 58% until the end of the forecast period.

Palantir has started to capitalize on this great growth opportunity. In the first quarter of 2024, Palantir reported that its remaining performance obligations (RPO) increased to $1.3 billion, a significant increase of 38% from the same quarter last year. A company’s RPO refers to the total value of future contracts it must fulfill.

The fact that this figure rose faster than Palantir’s 21% revenue growth during the quarter means that the company is preparing for robust long-term growth by building a healthy revenue pipeline. The rapidly growing adoption of Palantir’s AI software platform, especially among commercial customers, is a key reason why the company is seeing impressive growth in its RPO.

Palantir has made its name as a provider of software platforms for U.S. federal agencies, but is now also targeting commercial customers to make the most of the capabilities of AI software. This strategy is bearing fruit, with Palantir’s commercial customer base increasing an impressive 53% year-over-year in the first quarter of 2024. Commercial revenue increased 27% year-over-year, outpacing the increase in Palantir’s overall revenue.

The company is now also receiving government contracts in the AI ​​field, including a recent one from the Pentagon. All of this suggests that Palantir is pulling the right strings to capitalize on the lucrative opportunity in the AI ​​software space.

Furthermore, Palantir’s earnings are expected to grow 85% annually over the next five years. The stock market could reward this impressive growth with additional benefits in the long term, making Palantir a top AI stock to buy as it could add to the healthy 35% gains it has already posted in 2024.

Should you invest $1,000 in Palantir Technologies now?

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Harsh Chauhan does not own any stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.

These are my top artificial intelligence (AI) stocks to buy now. Originally published by The Motley Fool

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