AI’s Growth Potential: Key Stocks to Watch for Long-Term Gains

Artificial intelligence (AI) represents a significant growth opportunity for this generation. Consider how much has changed globally since the release of ChatGPT at the end of 2022. According to Market Research Future, the global AI industry was valued at approximately $106 billion last year, with projections indicating it will grow at over 30% annually to exceed $2 trillion by 2035.

Top AI Stocks: Three Key Players

Several AI stocks have delivered remarkable returns over the past couple of years and hold promise for the next decade. Here are three examples that could benefit long-term investors.

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1. Nvidia: Leading the AI Chip Market

Nvidia (NASDAQ: NVDA) has emerged as a leader in the initial surge of AI investments. Its GPU accelerator chips are the preferred choice for companies building data centers to train and operate AI models. Notably, spending on data centers continues to be strong.

CEO Jensen Huang has indicated that chip demand may eventually transition from cloud data centers to more specialized AI applications. Recent product announcements include a desktop-sized AI supercomputer and specialized servers for agentic AI. Huang views AI as a massive infrastructure opportunity worth trillions of dollars.

2. Palantir: Expanding AI Applications

Palantir Technologies (NASDAQ: PLTR) represents one of the hottest stocks in the AI sector, though it comes with a notable valuation. For those looking beyond the immediate future, Palantir offers substantial growth potential. The company develops custom software applications on its proprietary platforms and has seen accelerated growth since launching its AI-focused AIP platform two years ago.

In Q1 2025, Palantir reported a remarkable Rule of 40 score—sum of revenue growth rate and profit margin—of 83. Its adaptable software solutions target various sectors, from military missions to hospital scheduling. While its origins lie in government contracts, the private sector is expected to drive growth in the coming years.

3. Arm: A Versatile Chip Leader

Arm Holdings (NASDAQ: ARM) boasts some of the clearest growth prospects among these stocks. The company specializes in designing and licensing semiconductor chip architectures for various applications, including data centers and vehicles. Currently, about 47% of the world’s chips use Arm-based designs, up from 43% in 2022, illustrating its growing market share.

Future growth in markets like AI, smart manufacturing, and robotics is expected to boost the global semiconductor market. Research from Roots Analysis estimates that the semiconductor industry was worth $623 billion last year and will grow to over $1 trillion by 2035. Arm Holdings stands to benefit significantly from these trends.

Strategic Considerations for Investors

While Arm’s stock may appear expensive, its industry leadership and impressive gross profit margin of 97% help justify the valuation. Analysts project earnings to grow annually by an average of 28% in the long term. Investors may want to consider strategic buying, especially during market dips.

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