AMD may have fallen behind Nvidia in the race to develop AI chips, but it wouldn’t be a good idea to discount its prospects in this lucrative market. After all, the AI chip market is currently in its early phases of growth and generated an estimated $52 billion in revenue https://cryptolisting.org/ last year. However, by 2032, AI chip revenue is expected to shoot up to a stunning $1.11 trillion. Advanced Micro Devices (AMD -4.36%) and Palantir Technologies (PLTR 0.11%) are two companies that can help investors benefit from two fast-growing niches of the AI market.
Micron Technology (MU)
Financial research expert Jim Reid of Deutsche Bank recently cautioned of “signs of over-exuberance” regarding Nvidia. Nvidia is what comes to mind when you think of AI stocks, especially considering its 164% rise over the last year. The new AMD Ryzen AI300 Series CPUs for laptops with advanced neural processing will alter AI computing. On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Companies Gearing Up for a Stock Split
Micron Technology makes high-performance memory and storage hardware that powers AI solutions. The chipmaker’s products are used in data centers and self-driving cars. C3 AI provides SaaS (software as a service) applications to develop, deploy and run enterprise-scale AI applications. Offerings include purpose-driven software suites for supply chain optimization and energy efficiency, and industry-specific solutions for financial services and oil and gas. With all that potential, some investing experts are tagging AI as the “next big thing” in technology (even though AI goes back to the 1950s).
What are AI stocks?
The QTUM portfolio focuses on companies that enable quantum computing, which extends the limits of what AI and machine learning can accomplish. These stocks include makers of hardware, connectivity solutions and cooling systems plus companies that collect and manage big data. Top holdings include business intelligence provider Microstrategy (MSTR), memory chip maker Micron Technology Micron Technology and semiconductor company Onto Innovation (ONTO). AI stocks present investors with the opportunity to tap into one of the most popular—and potentially most revolutionary—technology trends today. But there are significant risks to investing in AI stocks, including the uncertain future of the industry and the potential dangers of AI technology itself.
- Arista Networks provides products and software for data center and cloud computing.
- Fortunately, you have quality options in both categories—including a few stocks you already know.
- IRBO is the most diversified of these AI funds with 118 holdings as of February.
- Artificial intelligence (AI) is still a massive theme in the market.
- Specifically, Wood believes this company has data on cancer that will help it corner the medical AI market.
- Such initiatives, together with Microsoft’s AI-powered tools and the monetization potential of Azure cloud services, led Wedbush analysts, among others, to lift their price targets on MSFT.
The company has over 20 in-house patents and patents pending for its innovations. In the third quarter, the company posted a 21% year-over-year spike in annual recurring revenue to $914 million, and the dollar-based net expansion rate was 119%. Additionally, the number of customers with annual recurring revenue of $250,000 or greater was up what jobs are exempt from overtime pay 20.5% year-over-year. In its second-quarter earnings report, the company said revenue doubled year-over-year, and was up 88% from the previous quarter. And its data center revenue jumped 171% year-over-year thanks to AI. IBM, through its Watson products, sells AI and ML services that help its customers make better decisions and more money.
Disadvantages of AI Stocks
As a result of these risks, investing in AI companies should only form a small part of a diversified investment portfolio. Investors may also want to consider other options such as investing in an AI-related fund (which we cover in more detail in our FAQs below). AI has already been widely adopted in the development of self-driving cars, digital healthcare solutions and algorithm-based trading. Its share price hit over $340 in 2021, rewarding shareholders with an increase of 130% over the previous two years.
The company has contracts with multiple organizations within the U.S. Department of Defense and other government agencies, but it’s also been quickly building its base of private-sector customers. AMD’s performance has been robust; recent quarterly numbers exceeded Wall Street projections.
However, investors should also weigh up the risks of investing in AI shares. Some of the technology remains in its infancy, with little visibility as to the ultimate ‘winners and losers’ in the race to capitalise on the potential opportunity. The company’s share price grew exponentially from 2020 to 2021, increasing more than five-fold to hit a high of $320 in late 2021. Having dipped in 2022, it’s delivered a stellar performance this year and is currently trading at an all-time high. The company manufactures memory chips for the personal computers, smartphones, network and data centre markets, in addition to the healthcare and automotive industries.
Micron is also using AI internally to optimize its own processes. Growing efficiency coupled with higher demand sets MU up for nice returns ahead. Adobe has already rolled out generative AI features within its Photoshop application.
Generative AI tools ChatGPT and Google Bard took AI mainstream, but the real AI work is happening in enterprise organizations around the world. Businesses are plowing money into AI solutions that they can sell or use internally to improve their own operations. I think Alphabet is a great AI stock pick, as the tools it is creating are helping advertisers become more efficient and successful. With other areas of its business succeeding, too, it’s a fantastic AI stock pick.
Sundar Pichai, Google’s CEO, cited its Google Cloud Platform and AI-powered services as prominent growth drivers. Despite this earnings beat, Alphabet shares hold a potential upside of 12.5%. Its chips are popular for demanding workloads that applications like large language models require. The pure-play chip stock also just announced an upgraded version of its AI computing platform, the HGX H200, which major cloud infrastructure services plan to deploy in 2024. The roots of artificial intelligence (AI) technology go all the way back to the late 1950s, when computers started to become much more powerful. But the proliferation of AI stocks hasn’t come until much more recently, as artificial intelligence became commercially viable over the past decade or so.
The company would go onto many other categories, including automotive, industrial, food and consumables, and healthcare. The origins of PROS Holdings (PRO, $36.75) go all the way back to 1985. The founders were a married couple, Mariette and Ron Woestemeyer. They saw an opportunity to leverage data science to optimize pricing.
Somewhat similar to Snowflake but trading at a lower price point, SPLK stock should entice investors who consider smaller AI-related stocks to be too risky. This makes SNOW stock an excellent bet for the AI-driven economy as more and more enterprises recognize the importance of AI and increase their own reliance on this new technology. Snowflake also offers cybersecurity and various data services, but its AI capabilities particularly make SNOW interesting right now. There is no official sector designation that accounts solely for AI yet.
The current yield is about 1.5%, and has been growing at more than 22% average annually for the last five years. Having worked in investment banking for over 20 years, I have turned my skills and experience to writing about all areas of personal finance. My aim is to help people develop the confidence and knowledge to take control of their own finances. For example, if the pound strengthens against the dollar, US shares will be worth less in their sterling equivalent. Tax treatment depends on one’s individual circumstances and may be subject to future change.
SOUN will likely worry some investors, as it’s still a penny stock with plenty of volatility. However, SoundHound is worth watching as AI momentum continues to spread. Qualcomm doesn’t often receive attention in discussions of AI stocks, as it still operates in the shadow of Wall Street darling Nvidia.
Some companies will benefit from the development of AI, such as chipmakers and software developers. The company has been at the forefront of developing high-end GPUs for the gaming, data centre, professional visualisation and automotive sectors. It’s also expanding its AI capabilities, investing in cloud services and the metaverse. Leading graphics chip company Nvidia has taken advantage of the AI boom, with its graphics cards becoming the de facto standard in data centers worldwide. Machine learning’s training phase demands a lot of computing power; the phase that follows, the inference phase, requires less. Graphics processing unit (GPU) chips, which were once used primarily for rendering video games, support both phases well.
Meta operates Facebook, Instagram and WhatsApp, as well as many other companies. It utilizes and expands on AI in many capacities, including integrating it with virtual reality and translators for communication. The company has an “A” financial health rating from Morningstar, and it is expected to grow EPS by 21.9% next year.
Nvidia continues to dominate the high-end GPU market with the RTX 4090, the best graphics card for gaming and professional use. However, AMD’s RX 7900 XTX is a good alternative for individuals who want outstanding performance at a lower price. It has repeatedly beat Wall Street projections with strong quarterly performance. Of course, nothing is risk-proof – I want to be crystal clear about that. However, by spreading exposure across a wide canvas, investors can distribute the probability of downside.
Thanks to its strategic implementation of AI, The Trade Desk is also better positioned than ever to deliver on that prediction. Precedence Research expects the market for AI in renewable energy to reach $75.82 billion by 2030, growing at a CAGR of 27.9%. That means there’s significant opportunity for both STEM stock and CHPT to grow. The company also recently reported positive pre-earnings news that sent shares up in late January. As with any sector, there’s no definitive way to choose which AI stocks you should invest in. Rather, there are personal preferences and portfolio needs that every investor should assess for themselves.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. Since the current AI boom has grown, this growth runway has only expanded. A company with Siemens’ reach and resources could usher in a robot revolution for Europe and beyond. At the time of the Boston Dynamics deal, InvestorPlace contributor Joel Baglole speculated that Hyundai would be a good bet among AI stocks.