3 Artificial Intelligence (AI) Stocks That Could One Day Be Worth $1 Trillion

By | March 3, 2024

Artificial intelligence (AI) is changing the world. It goes far beyond OpenAI’s ChatGPT and other chatbots. AI will personalize products and advertisements for customers. It will allow people to work smarter, faster and possibly even perform certain tasks so people don’t have to.

According to a study by PricewaterhouseCoopers, AI could contribute nearly $16 trillion to the global economy by 2030. This means that the investment opportunities extend beyond just the global economy. Nvidia (NASDAQ: NVDA) and other major technology companies.

Three Motley Fool contributors have identified themselves Snowflake (NYSE: SNOW), Palantir Technologies (NYSE:PLTR)And Advanced micro devices (NASDAQ: AMD) as winners with the potential to one day grow into billion-dollar stocks. Here’s what you need to know about these three AI stocks with trillion-dollar potential.

Snowflake is working with Nvidia on generative AI

Justin Pope (Snowflake): Nvidia has become a household name in the field of artificial intelligence (AI), but don’t forget Snowflake. The data cloud company worked with Nvidia on generative AI last summer. Snowflake is a cloud-based data platform that allows customers to store, organize, share and retrieve their data. Snowflake’s partnership with Nvidia is a big deal because the latter is the AI ​​chip leader in the industry, which should drive business to Snowflake as companies integrate AI into their business.

Today, Snowflake has a market cap of $75 billion. The company generates annual revenues of $2.7 billion. Snowflake wins business from top companies, including 691 of the Forbes 2,000 worldwide. With a usage-based billing model, the 131% net revenue retention indicates that customers are spending more on the platform over time.

The long-term growth opportunities are enormous. The world is becoming increasingly digital and creating more and more data over time. That’s contributing to Snowflake’s growth and doesn’t seem to be changing. AI models will likely train on more data in the future as AI becomes more intelligent and capable.

Snowflake’s CEO recently retired, but the former CEO was not a founder. Investors should keep an eye on the new CEO’s performance but not let this recent development scare them away from stocks. The company is established and has its roots deep in the business world. Data could become one of the biggest investment trends of the future, so Snowflake is a good bet to become one of the next big megacap tech companies.

Palantir’s market cap could eventually cross the $1 trillion mark

Jake Lerch (Palantir Technologies): With a current market capitalization of about $54 billion, Palantir still has a long way to go before breaking the $1 trillion mark. I didn’t expect this to happen in the next ten years. However, that doesn’t mean Palantir won’t eventually climb the $1 trillion mountain — or that it’s a bad stock to own.

Palantir is a software company specializing in AI-powered big data analytics. Although the company first found a market for its services in government intelligence agencies and the defense industry – partnerships it still maintains today – Palantir’s future depends on its ability to win over commercial customers.

And the company appears to be making significant progress on that front. In the last quarter (the three months ending December 31, 2023), Palantir’s commercial customer base grew to 497. In addition, revenues from U.S. commercial customers rose 70% from a year earlier to $131 million. Nevertheless, government revenues still exceed commercial revenues:

Segment

Financial year 2023

Growth rate (YYY)

Government revenue

$1.2 billion

14%

Commercial income

$1.0 billion

20%

Data source: Palantir Technologies. YOY = Year after year.

As more and more companies sign up with Palantir, that will likely change. As Alex Karp, CEO of Palantir, put it: “Our performance in the US commercials is obviously extraordinary, some would say bombastic.”

Be that as it may, the AI ​​revolution shows no signs of slowing down, let alone stopping. And as more organizations adopt AI for analytics and cost savings, Palantir is ready to sign them up as a new customer. If that happens, you can expect Palantir’s market cap to rise. Maybe — possibly — all the way to $1 trillion.

When it comes to AI chips, Nvidia isn’t the only game in town

Will Healy (Advanced micro devices): When it comes to the AI ​​chip market, Nvidia is dominant, claiming at least 80% of the market, according to analyst estimates. The insatiable demand for these types of semiconductors has propelled Nvidia to a market capitalization of approximately $2 trillion. It has also caused customers to look elsewhere for such chips, and the company best positioned for second place is likely Advanced Micro Devices.

As a leader in CPUs, GPUs and data centers, the company is well suited for this role, and recently leveraged this expertise by releasing its AMD Instinct MI300 Series Accelerators to meet this demand. The MI300A combines the CPU and GPU in one unit, while the MI300X chip is the company’s most advanced generative AI accelerator.

Furthermore, Allied Market Research predicts that the AI ​​chip market will reach $384 billion by 2032, a compound annual growth rate of 38%! So AI chipmakers should benefit across the board.

Currently, the data center and AI segment represents approximately $6.5 billion of AMD’s revenue, approximately 29%. In addition, AMD is prominent in the client, gaming and embedded segments, and together they accounted for more than $16 billion of AMD’s nearly $23 billion in 2023 revenue. So these segments will contribute to the company’s growth, albeit probably at a slower level. pace than AI.

As it stands, it has reached a market cap of about $300 billion, which means the stock would need to rise about 3.3 times to reach a market cap of $1 trillion. This seems like an achievable goal. Analysts predict 36% higher profits in 2024, with an additional 51% increase next year. Moreover, the forward price-to-earnings ratio is approximately 48.

Such a valuation is high, but far from bubble levels, suggesting that AMD could organically reach a market cap of $1 trillion. If AMD can meet some of this massive demand for AI chips, the semiconductor stock’s market cap could reach the $1 trillion level sooner rather than later.

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Jake Lerch has positions at Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in Advanced Micro Devices, Palantir Technologies and Snowflake. The Motley Fool holds positions in and recommends Advanced Micro Devices, Nvidia, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.

3 Artificial Intelligence (AI) Stocks That Could One Day Be Worth $1 Trillion was originally published by The Motley Fool

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