When OpenAI launched ChatGPT-3 to the public in late 2022, it sparked massive interest in artificial intelligence (AI). While companies had been working on AI technologies for years — with Alphabet acquiring the innovative start-up DeepMind in 2014 — the release of ChatGPT marked a significant step forward in what generative AI could accomplish.
Since then, markets have reacted positively, rewarding businesses that either create AI products or provide essential hardware for those companies. Amid the excitement, some believe the technology could truly transform industries. According to PwC, one of the leading accounting firms, AI could contribute an impressive $15.7 trillion to the global economy by 2030.
Given the changes since late 2022, let’s explore two AI stocks with promising potential.
1. Meta Platforms: A Budget-Friendly Giant
Among the major tech players, Meta Platforms (NASDAQ: META) stands out as surprisingly affordable. Despite a 66% increase in its stock value this year, it remains one of the cheapest options in tech, with only Alphabet having a lower forward price-to-earnings ratio (P/E). Challenges like antitrust scrutiny and competition from AI are affecting Alphabet, a significant factor in its lower valuation.
Although Meta faces its own antitrust issues, its stock price does not seem overly inflated considering the solid performance of its business. A low valuation alone doesn’t guarantee a wise investment, but it certainly adds to the appeal when combined with strong financials.
While Facebook may not have the same hype it once did, it still boasts a robust user base. With 3.3 billion users engaging with Meta’s platforms daily — a 7% increase year-over-year — the company’s advertising revenue has surged, bringing in nearly $20 billion last quarter, up an astounding 47% from the previous year.
Meta is also pushing forward with its AI initiatives. The company plans to invest $40 billion this year in capital expenditures (capex), a substantial part of which will support its ambitious AI research and product development. This investment is likely to foster growth in both its user base and advertising revenue.
2. Nvidia: The Unrivaled Leader
It is no surprise that Nvidia (NASDAQ: NVDA) shines as a leading figure in the AI movement. Since late 2022, its stock price has surged more than 1,000%, yet its P/E ratio remains consistent, suggesting that earnings growth has kept pace with its stock rise.
Is the upward trend sustainable? Indicators suggest it is. Just like Meta, many tech companies are heavily investing in AI, with a significant portion directed toward Nvidia. For example, Alphabet plans to increase its capex to around $50 billion this year, a notable jump from $31 billion the previous year. These tech titans have prioritized AI, and Nvidia stands out as the top supplier of AI hardware.
The demand for Nvidia’s current flagship AI chip, Hopper, remains high; even Elon Musk recently ordered 100,000 for his company xAI. Meanwhile, Nvidia is preparing to launch its new Blackwell iteration, which is already sold out for a year.
This positive trajectory is encouraging for Nvidia investors. While unexpected events can alter market conditions, signs point to continued growth for Nvidia. Although the company trades at a premium relative to peers, the market has shown a willingness to invest in its potential, even before the AI boom.
Should You Invest $1,000 in Nvidia Now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
