Investors Eye Major AI Opportunities with Nvidia and Amazon Stocks

Nearly every expert agrees: the AI revolution is poised to be substantial. Many investors are working hard to identify companies that can capitalize on this remarkable growth potential, which could last for decades. According to the United Nations, the AI market is expected to reach $4.8 trillion by 2033, soaring from just $189 billion in 2023.

Looking to enhance your portfolio? The two companies discussed below offer distinct investment opportunities, both poised to benefit significantly from rising AI expenditures.

Nvidia: A Cornerstone of AI Innovation

In the realm of AI stocks, Nvidia (NASDAQ: NVDA) stands out as a leader. The company’s products are essential for the broader AI ecosystem. Without Nvidia, current advancements in AI demand and innovation would likely be far less pronounced. Nvidia’s proactive investments in this space are yielding substantial returns, and its early advantage is likely to remain robust moving forward.

Nvidia’s critical AI products include graphics processing units (GPUs), which enable vast amounts of data processing—a key requirement for developing, training, and running AI applications. Currently, Nvidia commands a 70% to 95% market share in AI-specific GPUs, illustrating its pioneering role in the industry. While competitors are closing the gap in performance, Nvidia’s CUDA developer suite may help maintain its competitive edge.

CUDA, which stands for Compute Unified Device Architecture, allows users to customize Nvidia’s chips for specific applications. This integration fosters loyalty as clients tailor their offerings around Nvidia hardware. Despite Nvidia’s stock trading at 40 times earnings, its pivotal position in AI suggests that growth rates will eventually validate the high valuation.

Nvidia Stock is a necessary investment for AI-focused portfolios. Image source: Getty Images.

Amazon: A Strong Contender in the AI Market

While many see Amazon (NASDAQ: AMZN) primarily as an e-commerce powerhouse, its AWS segment plays a crucial role in the AI landscape. The Amazon Web Services division, which generates a considerable portion of its profits, is the world’s largest cloud infrastructure provider, holding about 30% of the market share. Most AI applications depend on AWS’s servers for development and deployment.

In the last quarter, AWS produced $11.8 billion in operating profit, which is substantial compared to Amazon’s total operating profit of $18.4 billion. Although AWS faces competition in the cloud space, Amazon’s financial resources and international presence position it well to expand its capabilities to meet the growing demands of the AI sector.

While its cloud segment isn’t as unique as Nvidia’s chips, Amazon’s robust infrastructure and market reach are significant advantages. Investors recognizing Amazon’s long-term potential in AI may view it as an attractive opportunity for portfolio exposure.

In summary, both Nvidia and Amazon present compelling cases for investors looking to capitalize on the AI shift. These stocks offer distinct advantages, aligning investments with the promising future of artificial intelligence.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.