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Each new technology has its own set of implications. The internet, for example, changed the world. 3D printing hasn't changed the world. At least, not yet. There's a lot of buzz around Artificial Intelligence (AI), but it doesn't seem to have the traction that businesses and governments need to make a huge impact in the years ahead. AI has the potential to create incredible new businesses over the next few years, but there are a few AI stocks that are already in the driver's seat. Here are four best-performing AI stocks that have already benefitted from an AI surge and are still trading at great prices:
The government of the United States will be a major player in the field of artificial intelligence (AI), as the technology could give the United States a competitive edge over the rest of the world. As a software company that has strong government relationships, Palantir Technologies (NASDAQ: PLTR) is in a unique position.
The US government accounts for more than half of the company's revenue. Palantir's software platforms act as operating systems for organizations, leveraging artificial intelligence (AI) and machine learning (ML) to analyze and leverage data. The firm recently started to report consistent GAAP earnings, and analysts expect earnings to continue to roll in at an annualized rate of 72% for the next decade. At only 55x forward earnings, there's plenty of room for investment growth over the remainder of this decade.
Artificial intelligence (AI) necessitates the use of large amounts of computing power to process large amounts of data at high speeds. Chip company Nvidia (NASDAQ: NVDA) took the lead in AI last year as companies began pouring money into the development of these cutting-edge computer systems. Nvidia's business (and its stock) exploded last year, and it now accounts for about 90% of the entire AI chip market. Of course, Nvidia could continue to grow from AI's growth alone, even if competitors chip away at its market share. While the stock has doubled in value over the last year, the company's robust earnings-growth prospects make the stock very attractive on a forward-looking basis. Simply put, growth should carry the shares higher over the next few years.
Combine one of the most dominant business models in the world with AI upside, and you've got yourself a social media giant. Meta Platforms (META), which owns Facebook, Instagram, and WhatsApp, generates billions of dollars in ad revenue from advertising to its more than three billion monthly app subscribers. Facebook co-founder and CEO Mark Zuckerberg has also invested heavily in building artificial intelligence technology that improves its advertising business, making him something of a wild card in the long run. While Meta experienced some headwinds in 2022, the stock has rallied more than 300% since bottoming out in 2021. The company's 20% expected long-term compound annual growth rate makes the stock's current price a bit of a bargain. Given its dominant position in the social media space, Meta can be considered a higher-floor AI stock than most.
While you shouldn't expect Nvidia to lose its leadership in the AI chip market, there is a good chance that AI will become so pervasive that more chip companies will be able to compete. AMD (NASDAQ: AMD) could be the next best bet after Nvidia. AMD hasn't seen the growth surge that Nvidia has seen, but it did announce an AI chip line at the end of 2023 that it claims will outperform Nvidia's H100 series. AMD may need to back up its claim with sales data, but analysts are optimistic about the company's long-term growth prospects. With long-term growth estimates of more than 35%, AMD's forward P/E ratio of 44 is a reasonable price for that growth. While this stock carries more risk, the upside could surprise investors should AMD be able to gain more share of the AI chip market than Wall Street believes it should.
