AI Chip Market Disruption: DeepSeek's Breakthrough and Its Impact on Industry Leaders

Better Artificial Intelligence Stock: AMD vs. Nvidia | The Motley Fool

A surprise development may have turned the market for artificial intelligence (AI) chips on its head. DeepSeek, a China-based start-up, developed an open-source large language model, claiming it took two months and cost less than $6 million. Amid that news, AI chip stocks such as Advanced Micro Devices (AMD -2.45%) and Nvidia (NVDA -3.67%) plunged. Admittedly, the dust has yet to settle, and perceptions of these stocks may change as more information comes to light. Nonetheless, with this industry possibly in flux, it brings up the question of whether AMD stock or Nvidia stock is the semiconductor stock to buy right now. At first glance, it may appear AMD is better positioned for this development. Since Nvidia is the market leader in AI accelerators, AMD has not benefited as extensively. However, the data center segment (which designs its accelerators) has become a financial bright spot in AMD's otherwise lagging financial performance. In the first nine months of 2024, data center revenue grew 107% yearly. That comprised 48% of company revenue, up from 25% in the year-ago quarter. Still, even though it has not outperformed Nvidia, AMD's most advanced AI accelerators have commanded significant pricing power. Hence, it is unclear how higher demand for less advanced accelerators might affect revenue for the data center segment. Additionally, data center growth has had to compensate for the revenue drops in AMD's gaming and embedded segments, which reached 58% and 38%, respectively, over the same period. Overall, AMD's $18 billion in revenue for the first three quarters of the year grew 10% annually. Indeed, signs have emerged that the gaming and embedded segments have bottomed. Thus, even if pricing power in the data center segment gets reduced, AMD's overall revenue picture could improve. Moreover, the falling price of AMD stock has made it cheap. Struggles with profits have skewed its P/E ratio, but its forward P/E stands at just 23 at this writing. Also, with a price-to-book ratio of 3, bargain hunters may look at AMD in a new light. For all of AMD's efforts to catch up, Nvidia remains the dominant player in the AI accelerator market, which has translated into an overall performance that has far outpaced AMD's. In the first three quarters of fiscal 2025 (ended Oct. 27, 2024), Nvidia's revenue of $91 billion rose an astounding 135%. Approximately 87% of that came from the data center segment. With the high demand for accelerators, growth in this segment is likely the main reason for Nvidia's growth. Unfortunately, investors have to remember that the chip industry is highly cyclical, and the news from DeepSeek could reverse those gains. Top-of-the-line AI accelerators have commanded premium prices. Should demand fall, it would force Nvidia to slash prices, which would slow or possibly reverse its massive revenue growth. Not all of the news for Nvidia is bad. DeepSeek built its model on Nvidia H800 chips, according to multiple reports. Furthermore, Nvidia's CUDA software is still necessary for parallel computing using Nvidia GPUs. Still, if the ability to utilize Nvidia's less-advanced GPUs has increased, it bodes poorly for sales of the most advanced technology, a negative for its stock. Amid the uncertainty brought by DeepSeek, Nvidia stock was down nearly 20% from recent highs as of the time of this writing. Indeed, Nvidia may not appear expensive with its 50 P/E ratio, but the uncertainty about DeepSeek calls the reliability of its 47 forward P/E ratio into question. Additionally, its price-to-book ratio of 43 is stratospheric by any measure, and if DeepSeek's breakthrough leads to falling revenue, Nvidia could struggle to justify such a book value multiple. Under current conditions, AMD looks like the safer bet. Indeed, it bodes well for Nvidia that the DeepSeek breakthrough occurred with its processors. Also, dominating such a market gives it a competitive advantage. Unfortunately, with improved capabilities at the lower end, the meaning of that competitive advantage becomes more uncertain. Moreover, the DeepSeek development makes AMD more appealing to customers and investors, as the ability to build models with lower-end processors could boost demand for its accelerators. Furthermore, prospects for the recovery of its lagging sectors should draw investors back to that stock. Ultimately, when considering Nvidia's elevated price-to-book ratio, AMD's low valuation and improved growth prospects make it the safer bet for now.

2 Artificial Intelligence (AI) Stocks That Could Help Make You a Fortune in 2025 | The Motley Fool

DeepSeek just took the market by storm, launching a large-language artificial intelligence (AI) model very similar to OpenAI's ChatGPT but at a fraction of the development cost, at least according to the Chinese start-up behind the technology. DeepSeek's mobile app has already been downloaded by millions, surpassing ChatGPT's download volumes across several major platforms. And yet in many ways, the AI revolution has just begun. And there are two stocks primed to benefit regardless of whether ChatGPT or DeepSeek ultimately reign supreme. If you've been following the ongoing AI craze, you're likely already familiar with Nvidia (NVDA 0.77%). The chipmaker's stock price has soared in recent years, with its market capitalization now totaling several trillion dollars. And while many investors have looked elsewhere for less popular AI stock picks, there's one major reason why Nvidia still belongs in nearly every AI investor's portfolio. Nearly every AI company in existence today is made possible, at least in part, due to Nvidia's products. Its H100 chips were considered a breakthrough in GPU manufacturing, making it significantly more efficient to train and run AI models like ChatGPT and DALLE, which require huge amounts of data and thus computational power. According to a 2022 article from Forbes, H100 chips "shattered" machine learning benchmarks when it came to training AI models. Nvidia has been able to use its early lead in AI GPUs to attract a strong developer ecosystem as well as market-leading revenue, which it has been able to reinvest to maintain its market share, estimated to be between 70% and 95%. The company's upcoming Blackwell chips are expected to be even more powerful with notably smaller energy demands -- a huge bonus considering how energy-intensive the AI industry has become. Suffice to say that Nvidia has carved out a powerful economic moat. The quality and reputation of its AI GPUs leads the market, providing an economic advantage it can use to not only maintain its lead, but build on it for years to come. Competitors may make breakthroughs of their own, but Nvidia's sheer financial might, as well as its near myopic focus on AI chips, will make it a difficult giant to slay. Put simply, the AI industry needs more and more GPUs on a near daily basis, and Nvidia is the undisputed leading supplier. If you're betting on AI, Nvidia should be a part of your portfolio. But don't forget other critical suppliers like the company below. There's an age-old saying that during a gold rush, sell pickaxes. The morale here is simple: If you're supplying a craze with critical components, you'll still make money even if the craze proves short-lived or ephemeral. Nvidia certainly fits this bill. AI companies need GPUs to survive, and Nvidia is by and large the best supplier right now. The same is true for data center businesses like Microsoft's (MSFT -6.18%) intelligent cloud segment. While many associate Microsoft with PCs and Office products, the company has really evolved into a cloud computing business. Last quarter, Microsoft generated sales of $65.6 billion. Its Intelligent Cloud segment generated $38.9 billion of that sum -- roughly 60%. Microsoft expects to spend $80 billion this year building out even more cloud compute infrastructure, a huge chunk of which should go to power AI services and platforms. AI companies need GPUs to function, but they also need cloud infrastructure. In particular, they need fast and efficient cloud infrastructure that is scaled globally, allowing their products to function economically, connecting to customers and other data centers around the world. Controlling roughly 25% of the cloud compute market globally, Microsoft is in a prime position to benefit directly from the AI revolution, with the financial backing necessary to match the AI industry's growth rates. We've already seen some huge bombshells in 2025 when it comes AI capabilities and adoption. The recent DeepSeek news should be just the beginning, with Nvidia and Microsoft remaining positioned to be long-term winners.

3 Artificial Intelligence (AI) Stocks That Could Deliver Stunning Returns This Year | The Motley Fool

Artificial intelligence (AI) investing has been in the spotlight for the past two years, and nothing should change that in 2025. It's still the infancy of this megatrend, and plenty of stocks are ripe for growth. Three stocks that I think could see massive returns in 2025 are Nvidia (NVDA -3.12%), Alphabet (GOOG 1.16%) (GOOGL 1.13%), and Taiwan Semiconductor Manufacturing (TSM -1.22%). These three are major players in the AI field, and their returns could stun investors this year. I know what you're thinking: "Nvidia again? It's already risen so much already." That's true, but there's still plenty of upside. The company makes graphics processing units (GPUs), the computing muscle behind many of the AI innovations we've seen. Because it has a dominant grip on this field, it has been the primary beneficiary of all of the AI investments companies have made. This is evidenced by its revenue growth, which has been tremendous over the past few years. While growth has technically started to slow, can you say a company whose revenue increased by 94% year over year is experiencing slow growth? I don't think so. Plus, Nvidia is expected to have another strong year in 2025, as Wall Street analysts project its revenue will reach $196 billion by the end of fiscal 2026 (ending January 2026) -- a 52% rise from fiscal 2025. That's another year of strong growth from one of the top AI investments over the past two years. Its returns probably won't be as great as they were in 2023 or 2024, but I still think investors will be stunned by how much Nvidia's stock rises again in 2025. Alphabet is a huge player in AI, and its Google Gemini generative AI platform is evidence of that. Gemini has brought advancements for Alphabet's advertising business, which makes up 75% of its total revenue. These improvements help Alphabet stay relevant in its industries, and they have the upside of Google Gemini being deployed by other companies for their own use. Another huge segment is its cloud computing division, Google Cloud. This sector is riding a massive growth wave thanks to AI. Many companies can't afford to build a powerful server filled with Nvidia GPUs, so they rent computing power from providers like Google Cloud. This has translated into phenomenal growth for the segment, whose revenue rose 35% year over year in the third quarter. However, what makes Alphabet's stock a real value is its low price tag. It trades for about 22 times forward earnings, far cheaper than many of its big tech peers. Compared to a company like Apple, which trades for 30 times forward earnings, Alphabet is actually putting up meaningful growth at a cheaper price tag. Alphabet stock is incredibly cheap, and part of its returns that will stun investors will come when it is valued at a similar level to its big tech peers. None of the AI technology today would be possible without Taiwan Semiconductor, also known as TSMC. There are other chip foundries in the marketplace, but none have TSMC's consistent track record of developing and producing cutting-edge chips. AI investments aren't slowing, which will benefit the company. TSMC is a fairly neutral party in the AI competition since it makes chips for nearly every company vying for AI supremacy. Similar to Nvidia, an investment in Taiwan Semi doesn't require you to pick a winner in the AI trend; it just allows you to capitalize broadly on the AI wave. AI has been a massive trend for TSMC, with related revenue tripling in 2024. And that's just the start. Management projects that AI-related revenue will double again in 2025 and have a mid-40% compound annual growth rate (CAGR) for the next five years. That's monster growth, and it's something investors should focus on. However, AI is just one part of TSMC's business. Overall, management sees revenue growing near a 20% CAGR over the next five years, a level few companies can achieve. Because of this strong and steady growth powered by AI and other industries, Taiwan Semiconductor is a great buy.

2 AI Stocks to Buy Before They Soar to $4 Trillion in 2025, According to Certain Wall Street Analysts | The Motley Fool

Joel Fishbein at Truist Financial recently reiterated his Microsoft target price of $600 per share. That implies 44% upside from its current share price of $416. It also implies a market value of $4.4 trillion. Importantly, both analysts set their target prices following reports that Chinese AI start-up DeepSeek trained an advanced AI model while spending significantly less than U.S. companies. That suggests neither analyst is particularly worried that U.S. companies will pull back on AI infrastructure investments. Additionally, Dan Ives at Wedbush Securities also expects Nvidia and Microsoft to attain $4 trillion market values in 2025 as the AI boom continues to build steam. He recently speculated that DeepSeek building a sophisticated model for "$6 million with no Nvidia next-generation hardware is likely a fictional story." Here's what investors should know about Nvidia and Microsoft. Nvidia is the market leader in data center graphics processing units (GPUs). Those chips are the industry standard in accelerating computationally intense workloads like artificial intelligence (AI). That means the company has a massive tailwind at its back. Data center GPU sales are projected to increase at 29% annually through 2030, according to Grand View Research. Nvidia reported strong financial results in the third quarter of fiscal 2025, which ended in October 2024. Sales increased 94% to $35 billion on particularly strong momentum in the data center segment, which itself reflects persistent demand for AI hardware. And non-GAAP earnings jumped 103% to $0.81 per diluted share. That marks the sixth straight quarter in which the company reported triple-digit earnings growth. CEO Jensen Huang during his keynote speech at 2025 CES highlighted big opportunities in physical AI, a term that refers to machine learning models that can understand, navigate, and interact with the physical world. Nvidia offers a full-stack computing solution spanning supercomputing infrastructure, software development tools, and embedded processors for self-driving cars and autonomous robots. Looking ahead, Wall Street expects Nvidia's adjusted earnings to increase 50% in the next four quarters. That makes the current valuation of 45 times adjusted earnings look very reasonable. Those numbers give a price-to-earnings-to-growth (PEG) ratio of less than 1. Traditionally, PEG multiples below 1 are considered cheap. Additionally, Dan Ives at Wedbush Securities thinks self-driving cars and autonomous robots represent a $1 trillion opportunity for Nvidia, in addition to the $1 trillion opportunity the company has outlined in accelerated computing and generative AI. Consequently, Ives thinks the Wall Street consensus underestimates earnings by as much as 30% in the next few years. If Nvidia continues to meet or exceed earnings estimates in the coming quarters, I think the company could achieve a market value above $4 trillion (or even $5 trillion) before the end of 2025. Microsoft has two important growth engines in enterprise software and cloud computing. Specifically, it is the largest software company and the second largest public cloud in the world, and it's using AI in both business segments to create new revenue streams. For instance, Microsoft 365 Copilot automates tasks across its office software, and Azure AI is a cloud platform for building AI applications. Microsoft reported reasonably good financial results in the second quarter of fiscal 2025, which ended in December 2024, beating estimates on the top and bottom lines. Revenue increased 12% to $69.6 billion on strong sales growth in enterprise software and cloud services. And GAAP net income increased 10% to $3.23 per diluted share. CEO Satya Nadella on the earnings call said AI products achieved an annual revenue run rate of $13 billion, up 175% from last year. No product category has hit that milestone more quickly in company history. Microsoft also reported 31% sales growth in cloud services, and 13 percentage points of that growth came from AI products, according to CFO Amy Hood. However, management provided third-quarter guidance that fell short of what Wall Street anticipated, causing shares to tumble 5% after hours. And the stock still looks expensive. Wall Street expects earnings to increase 10% in the next four quarters, but shares trade at 33 times earnings. Those numbers give it a PEG ratio above 3, which is generally considered overvalued. Having said that, Microsoft has reported above-consensus earnings in every quarter in the past two years, and that may continue as customers increase AI spending. Indeed, Morgan Stanley sees Microsoft as the clearest winner in AI software. If that continues, the company may achieve a market value of $4 trillion by the year's end in 2025.

2 Brilliant Growth Stocks to Buy Now With $300 | The Motley Fool

Consistently buying shares of growing companies can put you on the path to building great wealth. One of the best areas to look for growth stocks right now is artificial intelligence (AI) -- a market expected to grow substantially over the next decade. If you have a few hundred dollars you don't need for paying bills or reducing debt, here are two great stocks to help you profit from this opportunity. Advanced Micro Devices (AMD -0.16%) should benefit from the buildout of data centers, which provide the computing power needed for AI to work. AMD sees a $500 billion opportunity for its data center chip business, and investors have a chance to buy the stock at an attractive valuation right now. The shares are currently trading 45% off their previous high. While AMD's data center revenue soared 122% year over year in the third quarter, some of AMD's smaller business units, including chips used in industrial markets and video game consoles, didn't perform as well and are still struggling with macroeconomic headwinds. The outlook for these segments has been very soft, which has contributed to the stock's decline over the last year. But the stock won't stay down for long. The growing demand for graphics processing units (GPUs) was enough for AMD's total revenue to increase 18% year over year in the third quarter. AMD is also seeing robust demand for its Ryzen consumer PC processors. The other segments will eventually recover and provide an additional tailwind for the company. AMD has one advantage that should benefit the company's growth over the next several years. Its data center GPUs are designed with high memory capacity, which will be useful for inferencing -- the next phase of AI development that will allow for real-time data processing and allow computers to think more on their own. Analysts expect AMD's earnings to grow 44% on an annualized basis over the next few years, yet the shares trade at a market-average forward price-to-earnings multiple of 25. The stock is a no-brainer buy at this valuation level. Another brilliant stock that could rocket higher in the coming years is Lam Research (LRCX -1.91%). Lam is a leader in selling equipment and services to the semiconductor industry for manufacturing chips. It's the pick-and-shovel supplier of the AI gold rush. It's a very profitable business, and the stock has been a winner for long-term shareholders. Lam's earnings grew more than 20% per year over the last 10 years. With AI requiring more complex chip manufacturing processes, the company has a bright future. Lam is providing cutting-edge equipment that helps chip manufacturers build faster processors and smaller devices, and the business earns very high margins. Over the last year, Lam generated $4 billion in net income on more than $15 billion of revenue, representing a profit margin of 26%. Companies are clearly paying a premium for Lam's expertise, which indicates there are not many substitutes for the service Lam offers. The stock is currently trading 26% off its recent peak. One reason for the dip is uncertainty about the recovery in the memory chip market, which represented 35% of Lam's revenue in the most recent quarter. But data centers will need more memory capacity that will drive more demand over time, so this near-term uncertainty provides a great buying opportunity. Investors can buy shares at 23 times this year's earnings estimate. This valuation looks very attractive for a company expected to grow earnings at a 16% annualized rate in the coming years.

This Unstoppable Artificial Intelligence (AI) Stock Climbed 90% in 2024, and It's Still a Buy at Today's Price | The Motley Fool

This stock may be a better bet on the future of AI than either Nvidia or Broadcom. Artificial intelligence (AI) was the driving force behind many of the stock market's biggest winners in 2024. As big tech companies spend more and more on building out AI data centers and training large language models, several AI infrastructure companies are poised to continue benefiting throughout 2025. While chip designers like Nvidia and Broadcom had stellar 2024s and could continue to do well in 2025, investors may want to look up the supply chain for an even better opportunity. Taiwan Semiconductor Manufacturing (TSM -13.33%) saw its stock soar 90% in 2024, but the most recent outlook for management suggests the stock has a lot higher to climb in 2025 and beyond. TSMC had a lot of exciting news to share with investors when it reported its fourth-quarter earnings results earlier this month. First of all, the fourth quarter was great for business. Revenue climbed 39% year over year and earnings per share soared 57%. Those profits were driven by better-than-expected gross profit margin, which touched 59%. The strong outperformance came as a result of high demand for its most advanced technology: its 3-nanometer and 5-nanometer processes. TSMC's biggest advantage is its cutting-edge technology. Nvidia CEO Jensen Huang said TSMC is "the world's best by an incredible margin." That's why his company, along with Broadcom and a slew of other chip designers, all opt to use TSMC for their most advanced chips. And it's why TSMC is able to attract over 60% of all spending on chip manufacturing. That massive market share ensures TSMC is able to stay ahead of the competition. With more revenue from customers, it can invest more in R&D and capital expenditures to improve its technological capabilities. In fact, TSMC expanded its market share in 2024 as a result of strong demand for advanced AI chips only it can produce. The semiconductor manufacturing business requires massive capital expenditures ahead of demand to ensure there's enough capacity to meet demand. TSMC has historically done a good job of predicting demand and investing appropriately. To that end, management said it plans a big step up in capital expenditures in 2025. It's budgeting between $38 billion and $42 billion, compared to $29.8 billion in 2024. That spending's supported by its long-term revenue growth outlook of 20% per year for the next five years. AI-related demand is playing a huge role in that outlook. Management expects AI accelerator revenue (which would include demand from Nvidia and Broadcom) to double in 2025 and increase at a mid-40% compound annual growth rate for the full five-year period in its forecast. The future looks very bright for TSMC, but the stock price might not fully reflect how much earnings growth is yet to come for the chip manufacturer. In the immediate future, management expects mid-20% growth in revenue. While management called out several factors that could weigh on gross margin this year during its fourth-quarter earnings call, those should be offset by the ramp-up in production of 3nm chips. Indeed, analysts expect 28% growth in earnings per share for the year. The stock trades for less than 25 times analysts' 2025 earnings estimates as of this writing, which is an incredible price for a company expected to grow earnings as fast as TSMC. Earnings growth will likely come down in the future, although not by much. Management maintains its long-term gross margin forecast of 53%, about 5 percentage points below its first-quarter 2025 outlook. Operating margin might hold up a bit better thanks to scale, however, if management's 20% annual revenue growth forecast comes to fruition. The result should be earnings growth in the high teens through the rest of the decade. Recent innovations from Chinese company DeepSeek suggest big tech companies could scale back their spending on AI accelerators. At the same time, lower costs to train and run artificial intelligence models could increase demand to the point where total spending continues to climb at a rapid clip. Big tech's response to DeepSeek remains a risk for TSMC at this point. Over the long run, however, TSMC's position as the leading chip manufacturer is unlikely to change. That ensures it'll participate in the growth of AI and any new advancement in computing for the foreseeable future. Even with those risks in mind, the stock looks like an absolute bargain at less than 20 times forward earnings.

The Best Stocks to Invest $50,000 in Right Now | The Motley Fool

While the market has continued its winning ways to start the year, there are still some attractive investment opportunities -- even in the technology sector. Technology continues to help shape the world we live in and artificial intelligence (AI) appears to have the potential to be a game changer for multiple sectors of the economy. That suggests there are opportunities to be had for those with cash available to invest. Whether you have $50,000 or $5,000 to invest, there are technology growth stocks you can invest in right now. Here's a look at three of them. The leader in AI infrastructure, Nvidia's (NVDA -3.12%) graphics processing units (GPUs) provide the computing power needed to train AI models and run inference. The company has taken a huge 90% market share in the GPU space due largely to its CUDA software platform, which makes it easy for developers to program its chips for various AI tasks through CUDA X, a collection of AI-focused microservices, libraries, and tools built on top of its CUDA platform. Nvidia continues to benefit from the increasing computing power needs of companies looking to advance their AI models. As these models advance, they are using exponentially more GPUs to be trained on. For example, Meta Platforms' (META 1.74%) Llama 4 AI model used 160,000 GPUs in its training, compared to only 16,000 for Llama 3. Meanwhile, there has been talk of companies using 1 million AI chip clusters in the near future. In addition, cloud computing companies are greatly expanding their AI data center footprints to try to keep up with demand. Nvidia's largest customer, Microsoft, has plans to spend an astronomical $80 billion building out additional data centers this year. Nvidia is on track to more than double its revenue for the second straight year in 2024 and is projected to grow its revenue by more than 50% in 2025. Despite this, the stock trades at a reasonable valuation, with a forward price-to-earnings ratio (P/E) of 31 times based on fiscal 2026 estimates and a price/earnings-to-growth ratio (PEG) under 1, which is typically considered undervalued. While Alphabet (GOOGL 1.13%) (GOOG 1.16%) is one of the cheapest megacap tech stocks, the company has a lot to offer investors. It is the largest digital advertiser in the world, and its adtech platform serves ads both for its own properties as well as third parties. Its crown jewel is its Google search engine, which holds about a 90% global market share in search. While some AI-powered competitors have been emerging, no company has the search history data or scale with both users and advertisers that Google commands. Meanwhile, Alphabet has its own big AI opportunity in front of it, with it historically only serving ads on approximately 20% of its searches. Creating new ad formats for its AI overviews would be a large incremental opportunity for the company down the line, allowing it to serve ads to much of the 80% of its searches it does not currently monetize. Alphabet also owns the most viewed video streaming service in the world, YouTube. This is another huge advertising platform for the company. Unlike most other streaming services, YouTube doesn't have to pay upfront for content, instead using a revenue-sharing model with its content creators. YouTube Shorts, which are shorter videos similar to TikToks, is a nice opportunity, and the company is bringing AI video generation to help creators make videos for this platform. Meanwhile, Alphabet's fastest-growing business is its cloud computing unit, which saw revenue surge 35% last quarter as the company helps organizations create their own AI models and applications. In addition, Alphabet has taken leadership positions in the emerging technologies of quantum computing and autonomous driving (Waymo). Investors get this strong leadership and emerging business for a forward P/E of only 19.5 times 2025 analyst estimates. Like Alphabet, Meta Platforms is a dominant player in digital advertising, currently the No. 2 in terms of market share. The company serves its ads through its social media and messaging platforms, which include Facebook, Instagram, Threads, WhatsApp, and Facebook Messenger. Given the huge amount of data Meta has on its users, it can give advertisers very targeted audience demographics for their ad campaigns. The company has done a great job over the years turning Facebook and Instagram into top destinations for users. Meanwhile, its newest platform, Threads, has been seeing strong growth, with 275 million users at the end of Q3 and growing by 1 million users a day. Overall, Meta has nearly 3.3 billion users who use one of its platforms on a daily basis. In addition to its huge user base, what Meta does better than any other social media platform is monetize its user base. It grew its family average revenue per person (ARPP) metric last quarter by 12% to $12.29. That is 4 times the average revenue per user (ARPU) of rival Snap and 7 times that of Pinterest. Meta does a particularly good job monetizing users outside of the U.S., which is an area where competitors have tended to struggle. Meanwhile, Meta is investing heavily in AI, with its Llama large language model (LLM) powering its AI offering. It's seeing its AI-based recommendations lead to more time being spent on its platforms, including an 8% increase on Facebook and 6% on Instagram last quarter. Meta also offers AI adtech tools, such as image generation, to help advertisers improve ads and increase conversion. The company eventually hopes to integrate AI into future computing devices like smart glasses, while it is also still heavily investing in the metaverse. The stock, meanwhile, is attractively priced at a forward P/E of under 22 times next year's analyst estimates.

2 Growth Stocks Down Over 35% to Buy Right Now | The Motley Fool

The stock market rocketed to new highs in 2024, but investors can still find reasonably priced growth stocks that are poised for outstanding returns. Artificial intelligence (AI) continues to be a promising market to look for long-term winners. Dell Technologies (DELL -0.43%) and C3.ai (AI -3.61%) are seeing growing demand for their AI products, but their share prices are currently trading at discounts to their 52-week high. Here's why these stocks are timely buys right now. After reaching a 52-week high of $179.70 last year, shares of Dell Technologies currently trade around $112. Dell is a great stock to buy to benefit from growing demand for AI servers. About half of its revenue comes from PCs and related products, but the other half comes from infrastructure products, including servers, where Dell is one of the leading suppliers. Dell's third-quarter revenue grew 10% year over year, which was mostly driven by demand for AI products. Servers and networking revenue specifically jumped 58% over the year-ago quarter, and the demand for these products is expanding Dell's addressable market. CEO Michael Dell said the AI opportunity is "very significant" and compared it to the emergence of the internet more than 30 years ago. The 1990s was a phenomenal decade of growth for Dell's PC business that delivered wealth-building gains for early investors in the company. The investment in AI servers could deliver a similar level of growth for Dell's infrastructure business. Statista forecasts the AI server market will surpass $200 billion by 2029. Dell could also see growing revenue on the consumer side as more AI-optimized PCs hit the market. Once the company is seeing strong growth from servers and PC products, the stock will likely be trading at a higher share price, which is why now is the right time to consider buying shares. Analysts expect Dell's earnings to grow at an annualized rate of 13% in the coming years. Against those estimates, Dell stock looks undervalued, trading at a forward price-to-earnings ratio of 14 and also paying a dividend yield of 1.53%. On the software side, C3.ai is one of the leading vendors for enterprise AI applications. This is an exploding market, driving accelerating revenue growth for the company. After rocketing to a new high of $45.08 toward the end of 2024, the shares could be a great buy on the dip, currently trading around $33.18. C3.ai's AI products are helping organizations make faster and more informed decisions, and it's showing up in recent earnings results. In the most recent quarter, revenue grew 29% year over year, driven by expanding agreements with U.S. government agencies, including the Department of Defense, and several large companies. It was the sixth consecutive quarter of accelerating growth. The stock hasn't performed as well as rival Palantir Technologies, which is a larger and more profitable business. Unlike its competitor, C3.ai is not generating a profit yet. Losses on the bottom line certainly raise C3's risk profile, but that's also allowing investors to buy the stock at a significantly lower valuation that could set up explosive returns once the company is turning a healthy profit. While investors are paying 66 times trailing revenue to buy shares of Palantir, C3.ai trades at a price-to-sales multiple of 12. C3.ai should see improving margins as it continues to grow revenue and achieves greater scale, but the bigger concern for Wall Street in 2025 appears to be the company's dependency on Baker Hughes, which represented 18% of C3.ai's revenue last quarter. The Baker Hughes agreement is scheduled to expire later in June, so analysts are concerned about the potential loss of a major chunk of revenue in the near term. However, revenue excluding Baker Hughes grew 41% year over year in fiscal Q2. Moreover, the energy tech company makes up significantly less of C3's revenue than a few years ago, as the customer base grows. As more investors recognize C3.ai's growing customer base across multiple industries, the stock should benefit. Continued revenue growth is the main catalyst that could send the stock soaring over the next few years. The accelerating growth over the last year is a great indicator of where the company is headed, so buying at least a small position in C3.ai stock for the long term is worth it right now.

Up 22% to 273%, There's Still Time to Buy These 3 Stocks | The Motley Fool

Since their initial public offering (IPO) in March 2024, Reddit shares have advanced by more than 270%. That's about 16 times the S&P 500's 17% return over the same period. Reddit, which operates one of the most visited websites, specializes in topic-based message boards. That makes it a hit with advertisers, which can tailor their ad purchases based on the topics and interests that relate to their products and services. The company continues to grow its user base. In its most recent quarter (ended Sept. 30, 2024), it reported 97 million daily active users (DAUs), up 47% from one year earlier. And engagement increased as well. Conversion page views, an ad performance metric, increased by 40% year over year. Revenue grew 68% to $348 million for the quarter. That impressive growth is expected to continue. According to data compiled by Yahoo! Finance, analysts predict the company will generate $1.75 million in sales in 2025, up 37% year over year. As for risk, the stock's price-to-sales ratio of nearly 24 puts it out of reach for value investors, but in the world of fast-growing tech, its valuation remains reasonable, if still on the expensive side. In summary, Reddit is well-positioned to deliver excellent revenue growth thanks to its steady rise in users and its ad-based business model. Investors looking for a solid tech stock with room to grow should consider it. Will Healy (Sea Limited): Amid the focus on places like the U.S. and China, investors often ignore the nearly 640 million people in Southeast Asia. The region includes top-tier markets like Singapore and developing countries such as Thailand and Vietnam. In the case of Sea Limited (SE 1.14%), capitalizing on those markets helped spark a 226% increase in the stock price over the last year. For those who do not know Sea Limited, it is a conglomerate encompassing three businesses. It operates a fintech enterprise in Southeast Asia called Sea Money, which has performed consistently well. The company's e-commerce arm, Shopee, is the region's leading online retailer. Lastly, Sea Limited began as an online gaming company. This segment, called Garena, claims Free Fire, one of the world's leading mobile games, as its best-known offering. Thanks to these businesses, the stock grew massively in 2020 and 2021 as the pandemic increased activity for all three segments. But it pulled back in 2022 as pandemic gains reversed. And Shopee's failed attempts to expand outside of Southeast Asia and a ban on Free Fire in its largest gaming market, India, contributed heavily to the declines. Amid the sharp drop, Shopee decided to follow the lead of Amazon and other peers by investing in logistics in its home region. Moreover, according to news reports, a relaunch of Free Fire in India is "imminent," which should boost Garena's recovery. The successes have bolstered Sea's financials, and in the first nine months of 2024, its nearly $12 billion in revenue was up 26% compared to the same period in 2023. Growth in all three of its businesses drove this increase. In the first three quarters of 2024, net income fell to $207 million versus $260 million in the year-ago period. However, the company also increased its spending on e-commerce and other services during the period by $1.5 billion, an investment which should help cement its competitive advantage in its core markets. Finally, on the valuation front, a relatively recent return to profitability has left it with a high price-to-earnings ratio (P/E). But its forward earnings multiple is 31, and given the company's considerable potential for continuing growth, that valuation could help draw more investors to the stock in 2025. Justin Pope (Meta Platforms): It can feel like you've missed the boat on Meta Platforms. The stock is up over 60% in the past 12 months and even more over the past two years. Yet, there is still room for newcomers to hop aboard. The company has conflicted investors over the past few years by pouring billions of dollars into artificial intelligence (AI) and virtual reality via its Reality Labs, which has only resulted in billions of dollars in losses. However, there are emerging signs that the AI push could soon start paying off. According to a recent Bloomberg report, the company is developing multiple products to get users off their smartphones, including at least three new models of smart glasses, a wrist device, and earbuds. Its Quest brand has succeeded with its augmented reality headset, fending off Apple's Vision Pro, which seems like a failed product thus far. Meta was among the first major AI companies to open-source its AI model (Llama), making it freely available to developers. This could expand Llama's use in enterprise and government applications as it competes with closed AI ecosystems such as OpenAI. It's still early to know what impact these factors may have on the business, but fortunately, Meta is already worth buying. The social media giant continues to grow its user numbers, and the ongoing uncertainty over TikTok's future could funnel more engagement to the company's Facebook, Instagram, WhatsApp, and Threads platforms. Management has unleashed generative AI for advertisers, helping them craft more effective ad campaigns, which only reinforces Meta's advertising strength and pricing power. Today, the stock trades at a P/E of 29. That's a reasonable valuation for a company that analysts expect to grow earnings at an 18% annual rate over the long term. Investors can confidently buy Meta stock today for its strong core business and what may come in the future.