The buzz around artificial intelligence (AI) has set Wall Street abuzz in 2023, driving a 50% surge in the Nasdaq-100 technology sector over the past year. The advent of OpenAI’s ChatGPT marked the start of an AI boom that shows no signs of slowing down. Analysts predict the AI market to grow at a rapid pace, with projections indicating spending could reach close to $2 trillion by 2030.
Breaking Away from the Herd: Shifting Focus
While industry behemoth Nvidia (NASDAQ: NVDA) has dominated the AI spotlight, boasting a 220% surge in its shares since last May and securing the world’s third-highest market cap, there are whispers about other AI stocks that may offer even bigger gains in the long run. Here are two AI stocks that should be on investors’ radars instead.
1. Advanced Micro Devices: A Diamond in the Rough
Advanced Micro Devices (NASDAQ: AMD) has seen its stock climb 72% over the past year, riding on the coattails of Nvidia’s success in AI and carving out its own niche in the market. While AMD’s market cap pales in comparison to Nvidia’s, its substantial market share in GPUs hints at significant AI potential. With a lower market value, AMD presents a promising growth trajectory over the next decade.
Despite a recent 3% dip in its shares following its Q1 2024 earnings report, AMD’s AI-focused data center segment reported an impressive 80% revenue growth year over year. The company’s MI300X AI GPUs have been a hit, with sales exceeding $1 billion since launch, catering to clients like Microsoft, Meta Platforms, and Oracle. In addition, AMD’s lower P/S ratio suggests it may offer better value compared to Nvidia, making it an enticing option in the AI realm.
2. Alphabet: Unveiling the Power of Software
Alphabet (NASDAQ: GOOG, NASDAQ: GOOGL) has witnessed a 7% uptick in its shares post its Q1 2024 earnings release, surpassing expectations and showcasing the fruits of its substantial AI investments. While chipmakers like Nvidia and AMD play a crucial role in AI hardware development, investing in the creators of AI software like Alphabet offers a unique opportunity.
Alphabet’s revenue soared 15% year over year in Q1 2024, surpassing Wall Street estimates by nearly $2 billion. AI innovations have boosted various segments of Alphabet’s business, especially within Google Services, where AI-powered ads have propelled a 14% revenue increase year over year.
Google Cloud, Alphabet’s cloud computing platform, reported an impressive 28% sales growth and a staggering 371% spike in operating income to $900 million year over year. With its extensive user base through platforms like YouTube and Android, Alphabet is poised to leverage AI in diverse applications, offering substantial potential for long-term growth.
Unleashing the Potential: Through a Different Lens
Both AMD and Alphabet stand out as promising players in the AI landscape, offering unique growth opportunities for investors seeking to capitalize on the AI surge. While market giants like Nvidia have shone bright, these hidden gems may hold the key to unlocking substantial returns and reshaping the AI market.
* Stock Advisor returns as of May 6, 2024