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Investors have been making a lot of money by investing in AI stocks. Not every artificial intelligence stock has been profitable, but the winners have been crushing the stock market. Despite the massive run-up, some of these stocks still have the potential to make new millionaires. It’s a reflection of how much the AI industry is set to grow.
Experts have projected that the AI industry will maintain a 36.6% compounded annual growth rate from now until 2030. That gives many corporations a lengthy runway, and these AI All-Stars may benefit the most.
Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA) has been leading the AI industry with its innovative GPU chips. Many investors look at Nvidia’s earnings to gauge how well the artificial intelligence industry is doing as a whole.
Investors had plenty to cheer about when Nvidia reported Q4 FY24 earnings. Revenue increased by 265% year-over-year while net income surged by 769% year-over-year. Nvidia’s guidance suggests that it will report $24.0 billion in Q1 FY25 revenue. That’s a big jump from the $7.19 billion in revenue from Q1 FY24.
Strong demand for AI chips and technology suggests that Nvidia’s growth can continue. Data center revenue is Nvidia’s main segment, but it also benefits from other vibrant segments like gaming and professional visualization. Nvidia’s automotive segment is the only one that has been down year-over-year.
Nvidia stock has gained 87% year-to-date and is up by roughly 2,200% over the past five years. It’s been a generational winner, and analysts believe it has more room to run. It is currently rated as a “Strong Buy.”
Microsoft (MSFT)
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Microsoft (NASDAQ:MSFT) has enjoyed a strong start in the AI industry due to a series of acquisitions, hiring top experts in the industry, and the release of Copilot. Microsoft Copilot offers AI-powered solutions that increase productivity. You can create PowerPoint presentations and documents much quicker with this technology, and that’s only scratching the surface.
Microsoft recently released Copilot for Security which makes advanced cybersecurity resources more accessible to small businesses. According to Microsoft, its Copilot tool allowed analysts to breeze through tasks 26% faster. Novice analysts were also 44% more accurate on tasks.
This Copilot spinoff is one of many possibilities. Microsoft can continue to develop its Copilot product line while growing in its other segments. The tech conglomerate operates in many industries, but cloud computing is the company’s most important opportunity.
Microsoft Cloud represented more than half of the company’s total revenue in Q3 FY24. It also grew by 23% year-over-year while Microsoft’s overall revenue increased by 17% year-over-year. The tech firm expanded its profit margins once more by reporting 20% year-over-year net income growth.
Alphabet (GOOG,GOOGL)
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Microsoft’s AI advances haven’t made a dent in Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) dominance in the search engine market. Google has a search engine market share that exceeds 90%.
Alphabet’s Gemini blunders painted the perception of the tech giant being behind in the AI race. While Microsoft has been creating more AI products, Alphabet’s Gemini era is starting to move along nicely. Alphabet’s revenue increased by 15% year-over-year in Q1 2024. Advertising and cloud computing were the key drivers.
Google Cloud continues to gain market share in the cloud computing industry. Alphabet’s cloud segment had a higher growth rate than Microsoft’s cloud division in the most recent quarter. It’s been that way for the past few quarters as more businesses turn to Google Cloud for storage, cybersecurity, and AI capabilities.
The stock is up by 22% year-to-date and has gained 193% over the past five years. Analysts believe the stock has more room to run and rated it as a “Strong Buy.”
Crowdstrike (CRWD)
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Crowdstrike (NASDAQ:CRWD) has established itself as a leading cybersecurity firm. Many businesses use the Falcon Platform, resulting in $3.44 billion in annual recurring revenue. Investors have been rushing to accumulate shares as the stock is up by 30% year-to-date. Furthermore, it’s gained 400% over the past five years.
Artificial intelligence has enhanced productivity and continues to create new possibilities. However, this technology is also available to unethical hackers who can now initiate more attacks. Crowdstrike has adjusted its platform in response to the rising threat of artificial intelligence.
Cybersecurity is increasingly becoming a battle of AI versus AI. Crowdstrike is investing heavily in artificial intelligence features that help businesses detect threats and respond to them sooner. Those initiatives have attracted more business. Revenue increased by 33% year-over-year in Q4 FY24 while GAAP net income came in positive at $53.7 million. It’s a welcome development for a firm that reported a $47.5 million net loss in the same period last year.
Palantir (PLTR)
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Palantir (NYSE:PLTR) is a big data analytics company that offers innovative AI solutions for businesses and governments. The stock has been on a tear recently. It’s up by 24% year-to-date and has more than doubled over the past year. The stock trades at a lofty 172 P/E ratio but also has a 65-forward P/E ratio.
The forward P/E ratio is more palatable, but it’s still a lofty valuation. Some analysts are encouraging investors to buy the stock anyway. Bank of America (NYSE:BAC) assigned a $28 price target which suggests a 36% upside. Wedbush has a more aggressive $35 price target that implies a 70% upside.
Palantir reported 21% year-over-year revenue growth in Q1 2024 and achieved GAAP profitability for the 6th consecutive quarter. Rising profits will help the valuation look more attractive for long-term investors. Commercial revenue increased by 27% year-over-year while government revenue was up by 16% year-over-year.
Arista Networks (ANET)
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Arista Networks (NYSE:ANET) produces the hardware that enables many cloud computing platforms. Many data centers use the company’s technology, and the computing power of AI has increased the demand for Arista’s solutions.
The company has been thriving long before the AI boom became mainstream in 2023. The stock is up by 36% year-to-date and has soared by 402% over the past five years. Investors got a bit jittery after concerns about Nvidia gobbling Arista Networks’ market share, but the firm put these concerns to rest with its recent earnings report.
Arista Networks reported 16.3% year-over-year revenue growth in Q1 2024. GAAP net income came to $637.7 million compared to $436.5 million in GAAP net income during the same period last year. It marks a 46.1% year-over-year increase.
The tech firm has been winning higher price targets since its latest earnings report. Wells Fargo (NYSE:WFC) believes the stock can reach $340 per share which suggests an 8%upside. KeyBanc (NYSE:KEY) is more optimistic and has set a $349 price target which implies an 11% upside.
Qualcomm (QCOM)
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Qualcomm (NASDAQ:QCOM) is a reasonably valued chipmaker that trades at a 24.5 P/E ratio. It also offers a 1.87% yield and has maintained a compounded annual dividend growth rate of 8.62% over the past decade. The company has hiked its dividend for 19 consecutive years. The stock has more than doubled over the past five years and is up by 30% year-to-date.
Qualcomm’s Snapdragon chip is the go-to choice for many smartphones. AI enhancements to the chip have resulted in pro-level photos and videos. As smartphone makers rush to incorporate artificial intelligence in their technology, they will need more advanced AI chips, and Qualcomm is ready to deliver.
The company endured a slow start in 2023 as other AI stocks rallied, but the company has caught its stride. Revenue increased by 1% year-over-year in Q2 FY24. That’s not much, but it’s better than the revenue declines from last year. Meanwhile, net income increased by 37% year-over-year to reach $2.3 billion for the quarter.
On this date of publication, Marc Guberti held long positions in NVDA, MSFT, GOOG, and ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.
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