Investing In AI: Top Growth Stocks for Future Success
Artificial intelligence (AI) has seen impressive advancements in recent years. Businesses are starting to enjoy real cost savings by integrating this technology, leading to significant investment opportunities. According to Statista, the AI market is projected to grow at an annual rate of 28% until 2030, reaching a remarkable $826 billion.
If you have extra cash that isn’t needed for debts or other expenses, this may be a prime moment to build a portfolio of growth stocks poised to benefit from the AI boom over the coming years. Below are two companies currently trading at appealing valuations, presenting a chance to capitalize on this unique investment environment.
1. Advanced Micro Devices
Before users can access AI-driven products, they require the necessary computing infrastructure to train AI models. This presents a vast opportunity for Advanced Micro Devices (NASDAQ: AMD), a top supplier of graphics processing units (GPUs) and other chip technologies.
AMD supplies various chips used in multiple markets, such as consumer computers and data centers. Notably, demand for the Instinct MI300 GPUs led to a 122% year-over-year surge in data center revenues last quarter, making it the primary revenue source for the company as it approaches 2025.
The company is also witnessing robust demand for its central processing units (CPUs). Major corporations like Meta Platforms have employed over 1.5 million AMD Epyc chips in their data centers, powering their social media services.
In the last five years, AMD’s research and development spending has significantly increased. The company expanded its team of engineers to focus on AI innovations, culminating in the launch of the MI300. Management anticipates a market for AI accelerators, including data center GPUs, could hit $500 billion by 2028.
Despite a strong 31% increase in earnings year-over-year last quarter, AMD stock trades at only 24 times the expected earnings for 2025. This aligns with the overall market average and hints that AMD might be undervalued.
With the potential for a rebound in the coming year, AMD stock could deliver impressive returns for investors.
2. Alphabet (Google)
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has offered market-beating returns over the past decade. The search engine giant continues to show strong growth in revenue and earnings, with the stock experiencing a 36% increase over the last year. Its AI investments may further benefit investors in 2025 and beyond.
This past year has been eventful for Google as it introduced new versions of the Gemini AI model, which powers multiple products. The launch of its Willow chip for quantum computing further solidified Google’s position as a technological leader in this expanding field.
While Google generates most of its revenue from advertising, it leverages AI to provide relevant search results and content, attracting billions of users to its platform and boosting ad revenue.
In the last four quarters, Alphabet spent $49 billion in capital expenditures, partly focused on data centers and AI, fueling future growth.
Alphabet’s strong performance in the growing digital advertising market suggests continued profitable growth that can be reinvested in technology. The company’s latest revenue report showed a 15% year-over-year increase, raising its trailing-12-month net income to a striking $94 billion.
With Alphabet proving its capability to deliver solid financial results while investing in advanced technology like quantum computing, the stock may hold greater value than its current price. Shares can be purchased for around 21 times the expected earnings for next year, positioning investors for sustainable returns for years to come.
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Randi Zuckerberg, a former director of market development at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, also holds a position on The Motley Fool’s board. John Ballard has interests in Advanced Micro Devices. The Motley Fool recommends and holds positions in Advanced Micro Devices, Alphabet, and Meta Platforms. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
