2 Unstoppable Artificial Intelligence (AI) Stocks Soaring Over 200% to Buy and Hold for the Long Term

By | March 3, 2024

Artificial intelligence (AI) has captured the attention of investors thanks to its potential to revolutionize many sectors, from healthcare to automotive. Some researchers even predict that the size of the AI ​​market could exceed $1 trillion by 2030. So investors have been buying shares of potential winners, including those powering AI models and companies using AI to improve their operations.

This has led to explosive gains for some stocks, which may lead you to wonder whether, in some cases, many years of good news have been priced into the shares at their current levels. That’s a fair question, and it’s clear that, as with any new, fast-growing field, some winners won’t be able to keep up.

But there are those who do. In fact, two top AI stocks that are up more than 200% in the past year show no sign of stopping. And that means it’s a great idea to buy these potential winners and hold them for the long term. Their gains may be just beginning.

An AI-powered robot finger and a human finger touch.An AI-powered robot finger and a human finger touch.

Image source: Getty Images.

1. Nvidia

Nvidia (NASDAQ: NVDA) jumped into the spotlight when it became the company for the essential ingredient to power AI: the chip. However, the company is far from new to chip design.

Nvidia developed graphics processing units (GPUs) years ago and they became the standard for the gaming industry. Their ability to perform many processing tasks simultaneously made them the crucial ingredient for all visual elements involved in powering games – and a few years later, this same ability made GPUs critical for powering AI as well.

Today, Nvidia controls more than 80% of the AI ​​chip market, and the company’s reputation, full suite of products and services, and rising investment in research and development mean it is likely to remain at the forefront. Nvidia’s revenues over the past year have shown an impressive growth rate, with annual revenue and net profit increasing by triple-digit percentages. Revenue has been setting records quarter after quarter, led by the company’s data center unit, which includes its AI offering.

It’s also important to note that Nvidia’s products are used by all the major cloud platforms, meaning the company can reach customers through services they know and trust – and these cloud platforms work to sell Nvidia products to these customers.

Even considering Nvidia’s massive gains over the past year and a half, the company is trading at just 31 times forward earnings estimates, a reasonable price given Nvidia’s market dominance and future growth prospects.

2. Palantir Technologies

Businesses of all kinds have a lot of data that, if collected and managed properly, can be extremely valuable to their operations. This is true Palantir Technologies (NYSE:PLTR) comes in. The software company helps business and government customers collect data and use it to make important decisions. And AI plays a central role in the process.

Last year, Palantir launched its Artificial Intelligence Platform (AIP), and business boomed. In the company’s most recent letter to shareholders, CEO Alex Karp referred to AIP as the future of Palantir and said it has already driven gains in revenue and customers. The way Palantir introduces AIP to potential customers is particularly smart: the company organizes ‘boot camps’ to showcase its services and show individual companies how AIP could be a game-changer for them.

Palantir was once best known for serving governments, but today it has focused on growing its commercial business, and those efforts are paying off. In the fourth quarter, Palantir’s commercial revenue growth exceeded government revenue growth – with a gain of 32% versus an 11% gain. And US commercial revenues in particular boomed, rising 70% year over year.

Now let’s talk about valuation. Palantir’s may seem lofty based on 74 times forward earnings estimates, but I’d be willing to pay a premium for this stock knowing that the company is making a significant shift toward growing its commercial operations and expanding its recently launched AIP service.

Here the key is to imagine the potential a few years down the road. And from that perspective, given the momentum with commercial customers and AIP, Palantir seems like a clear buy today.

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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

2 Unstoppable Artificial Intelligence (AI) Stocks Soaring Over 200% to Buy and Hold for the Long Term was originally published by The Motley Fool

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