2 Artificial Intelligence (AI) Stocks That Could Go Parabolic

By | December 22, 2023

people sit around a blackboard with a parabolic curve

Artificial intelligence (AI) stocks have been in the spotlight over the past year, thanks to the huge impact this technology is likely to have across multiple industries. McKinsey estimates that AI adoption could add as much as $13 trillion to the global economy by 2030.

There are many ways investors can take advantage of this huge opportunity. There are two companies that can gain a lot from the adoption of AI in two different sectors Advanced micro devices (NASDAQ: AMD) And SentinelOne (NYSE:S).

Both stocks were on fire in 2023. While AMD shares are up 113%, SentinelOne is up 83%, with much of that jump happening since early November. Both companies’ recent stock price action suggests they may have already gone parabolic – which refers to a rapid rise in a company’s stock price over a short period of time, similar to the right side of a parabolic curve.

However, there is a good chance that these two AI stocks could make another parabolic run in 2024.

1. Advanced micro devices

Nvidia (NASDAQ: NVDA) is the market leader in AI chips. The company reportedly controls between 80% and 95% of this lucrative market, which AMD estimates will be worth $45 billion this year.

Nvidia’s dominant share explains why it has been growing at a tremendous pace in recent quarters. The company’s third quarter 2024 revenue (for the three months ended October 29, 2023) increased 206% year over year to $18.1 billion. Nvidia predicts fiscal fourth quarter revenue will rise at a faster pace of 233% year over year to $20 billion.

However, AMD aims to end Nvidia’s free rein in the AI ​​chip market with its MI300 series data center accelerators. Earlier this month, AMD announced the availability of its latest AI accelerators, which will be deployed by, among others Microsoft, MetaplatformsAnd Oracle in the cloud. Server manufacturers such as Dell And Super microcomputer will also offer server solutions based on AMD’s new chips.

It’s worth noting that AMD’s latest MI300 processor family is based on a 5nm/6nm (nanometer) manufacturing node from Taiwanese semiconductor manufacturing, popularly known as TSMC. This is identical to the node on which Nvidia’s flagship H100 AI graphics processing unit (GPU) is based, indicating that AMD wants to provide a competitive alternative to Nvidia’s processors.

Additionally, AMD’s flagship MI300X accelerator is equipped with 192 GB of HBM3 memory and has a peak bandwidth of 5.3 TB/second. That’s higher than Nvidia’s H100 processor, which comes with 80 GB of HBM and has a memory bandwidth of 3.35 TB/second. The specs could also translate into solid real-world performance, with AMD claiming its MI300X processor could go head-to-head with the H100 in performing certain AI tasks.

As a result, it should come as no surprise that AMD will see a big jump in AMD’s AI-related revenues in 2024. The company currently predicts that it could sell at least $2 billion worth of AI chips next year, but that figure could be far too high. higher considering AMD could get a big chunk of its foundry partner’s supply next year. Furthermore, AMD sees a $400 billion revenue opportunity in AI chips by 2027, indicating that it could gain a lot from this market in the long run.

So if AMD manages to secure a healthy supply of AI chips to meet robust end-market demand and indeed take some of Nvidia’s share, it could grow faster than Wall Street expectations. Consensus estimates suggest AMD’s revenue could rise 16% to $24 billion in 2024, but there are emerging catalysts that could help AMD exceed these estimates. It should come as no surprise to see this AI stock go parabolic in 2024, delivering more upside to investors.

2. SentinelOne

AI adoption in the cybersecurity market will grow rapidly in the long term. According to Bloomberg, spending on generative AI-based cybersecurity could grow from just $9 million in 2022 to $14 billion in 2032, with a whopping compound annual growth rate of 109%.

SentinelOne is already taking full advantage of this opportunity, as evidenced by its third quarter fiscal 2024 results (for the three months ended October 31, 2023), released on December 5. The company’s quarterly revenue rose an impressive 42% year over year to $164 million, easily surpassing the consensus estimate of $156 million. In fact, SentinelOne posted a smaller loss of $0.03 per share compared to the loss of $0.16 per share in the same period last year. Analysts would have settled for a loss of $0.08 per share.

The company has forecast fiscal 2024 revenue of $616 million, which would be a 46% increase from last year. SentinelOne previously expected revenue of $605 million in the current fiscal year, but it appears that increasing adoption of the company’s AI-powered cybersecurity platforms has caused guidance to be tightened.

SentinelOne launched a generative AI-powered solution known as Purple AI in April this year to detect, analyze and respond to cyber threats. An organization’s security analysts could simply use text prompts to conduct cybersecurity operations, and the great thing is that SentinelOne has already started delivering this offering to its customers.

The company also offers an AI-powered cloud security solution known as Singularity, which helps customers protect their cloud workloads. This solution should help SentinelOne tap into the cloud security market, which is expected to generate annual revenues of $106 billion by 2029, up from $21 billion in 2021.

These fast-growing markets should have a positive impact on the company’s growth and explain why analysts have increased their revenue forecasts lately. Not surprisingly, analysts expect SentinelOne to continue to deliver solid growth in the coming years.

S Revenue estimates for the current fiscal yearS Revenue estimates for the current fiscal year

SentinelOne shares currently trade at 13.5 times sales. While that may seem expensive at first glance, investors shouldn’t ignore the fact that the company has experienced nice growth and justified its rich revenue figures with impressive revenue growth.

S PS ratio chartS PS ratio chart

Assuming it maintains a similar multiple after two years and reaches $1.06 billion in revenue, as we saw in the chart above, its market cap could jump to $14.3 billion. That would be a 78% jump from current levels. However, don’t be surprised to see this cybersecurity stock post even stronger gains and go on a parabolic run as it continues to exceed expectations and post better-than-expected growth thanks to new catalysts like AI.

Should you invest €1,000 in advanced micro-devices now?

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Super Micro Computer. The Motley Fool has a disclosure policy.

2 Artificial Intelligence (AI) Stocks That Could Go Parabolic was originally published by The Motley Fool

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