AI Giants Dominate Tech Landscape: Nvidia, AMD, and Others Poised for Growth in 2025

2 Core Artificial Intelligence (AI) Stocks to Buy and Hold Forever | The Motley Fool

The artificial intelligence (AI) revolution represents a fundamental transformation that may be unprecedented in human history. This technological shift promises to reshape how society operates and create value across every sector of the economy. To this point, a research report by PwC Global projects AI's total economic impact will reach $15.7 trillion by 2030, with $6.6 trillion coming from productivity gains and $9.1 trillion from consumption effects. How can investors capitalize on this powerful trend? Two tech giants stand at the forefront of this tech transformation, each maintaining near-monopolistic positions in crucial segments of the AI value chain. Below I'll examine how these industry leaders have built enduring competitive advantages in AI development and manufacturing that make their stocks compelling long-term holdings. Nvidia (NVDA -1.14%) leads the AI computing market through its graphics processing units (GPUs) and proprietary CUDA software platform. The company's comprehensive ecosystem has locked down an estimated 70% to 95% market share in AI accelerators, defining the standard for AI development. How did we get here? Nvidia transformed its gaming-focused parallel processing capabilities into the backbone of AI computing. While multiple tech giants scramble to catch up, Nvidia's early lead in AI hardware and its proprietary CUDA platform creates enormous switching costs -- in terms of both money and time -- for its customers. This dominance isn't cheap, however. Nvidia stock commands a premium at 30.5 times forward earnings. Yet the market's high expectations may still undervalue its long-term potential. The global race to build AI data centers has only begun. As cloud providers and enterprises worldwide accelerate their AI deployments, Nvidia stands ready to power the next decade of innovation. This AI chipmaker, in turn, screens as a top buy-and-hold play. ASML Holding (ASML -2.14%) is the only company producing extreme ultraviolet (EUV) lithography machines, which are essential equipment for manufacturing advanced semiconductors. The company's sophisticated machines contain more than 100,000 parts each and require multiple 747 cargo planes for delivery, highlighting the incredible complexity of their technology. ASML's technological leadership stems from decades of innovation and close partnerships with research institutions and suppliers. A single EUV machine takes 12 to 18 months to assemble, costs up to $380 million, and embodies such intricate engineering that no single person can fully comprehend its entire operation. Like Nvidia, investors pay a premium for ASML's wide technological moat, with shares trading at 28.7 times forward earnings. This premium to the S&P 500's 24.1 times forward multiple seems justified, given ASML's unique competitive position and critical role in the AI value chain. Recent company guidance projects strong growth driven by AI data center expansion, with management expecting AI server markets to reach $350 billion by 2030. As a result, Morningstar analyst Javier Correonero anticipates EUV spending will grow at a robust 16% annually through the end of the decade, making ASML stock an exceptional candidate for AI-focused investors seeking long-term value creation. Artificial intelligence promises to reshape the global economy in ways that may exceed even current ambitious projections. While the timing remains uncertain, experts suggest that achieving artificial general intelligence (AGI) could compress a century of technological advancement into just five years. Both Nvidia and ASML have built formidable competitive advantages in critical segments of the AI hardware chain. Their near-monopolistic positions and continuous technological innovation make them compelling candidates to benefit from AI's exponential growth trajectory. In a world potentially racing toward AGI, these industry leaders appear perfectly positioned to drive what could become the most transformative period in human history.

Should You Forget Intel and Buy 2 Artificial Intelligence (AI) Stocks Right Now? | The Motley Fool

It's an important lesson in business -- companies that fail to adapt fall behind. One familiar example is Blockbuster Video, which could have purchased Netflix for $50 million, but the CEO didn't see any value in the idea. Netflix is now worth nearly $400 billion, while Blockbuster is history. Intel (INTC 1.27%) is experiencing something similar although not as permanent. It's unlikely that Intel will go out of business; however, missing out on smartphones (more on this below), the recent failure to embrace artificial intelligence (AI), and other missteps have the company reeling. The proof is in the pudding. Nvidia stock has skyrocketed, while Intel has crashed: Intel is undergoing a much-needed leadership change now, but turnarounds take time. Meanwhile, these two AI stocks below could outperform. When Intel missed out on supplying the chips for the iPhone, it was a devastating blow and a massive boon for Arm Holdings (ARM 1.50%). Arm-based chips are in more than 99% of global smartphones. Talk about dominating the market. Arm doesn't make the actual chips; it designs the framework (which it calls the architecture) for the chips and licenses the designs to other companies, notably the tech giants. Arm makes money from licensing and royalties for products containing its chip architecture. Arm's revenue hit a record $844 million last quarter, the second quarter of fiscal 2025, ended Sept. 30, on 5% year-over-year growth. Growth was throttled due to the timing of some licensing revenue, so Arm expects 13% growth next quarter and 22% for the fiscal year, based on the midpoint of its guidance. One of the best things about Arm's business model is lasting revenue. As shown below, the company still receives royalties for products developed decades ago. This strategy provides consistent sales and boosts profitability since few costs are associated with products developed years ago. Arm has several sales verticals, including mobile, cloud computing, automotive, and the Internet of Things (IoT). As of fiscal 2024, the company held 41% of the market share in automotive, 15% in cloud, 54% in IoT, and 99% in mobile. Arm's market dominance in several sectors bodes well for growth. As of this writing, Arm's stock price has appreciated 93% so far in 2024, giving it a $153 billion market cap. This means it trades for 39 times its midpoint sales guidance for this fiscal year, quite a steep price. However, Arm will eventually grow into its valuation. Interested investors should consider dollar-cost averaging to lessen the risk of buying at a near-term high and take advantage of potential dips in the stock price. You have undoubtedly heard of Nvidia, the world's data center beast with a $3 trillion-plus market value. Nvidia provides high-powered graphic processing units (GPUs) that facilitate lightning-speed data processing. But Nvidia doesn't act alone. Data centers also need other infrastructure, like the optical interconnects, switches, controllers, and more that Marvell Technology (MRVL 3.47%) produces. Gigantic data centers are being built at a brisk pace. For instance, Amazon just announced a $10 billion investment in an Ohio center, Microsoft has broken ground on billion-dollar projects in several states, and Elon Musk's xAI supercomputer is forecast to contain 1 million GPUs. These massive builds are tremendous tailwinds for Marvell, which expects a total market opportunity of $75 billion by 2028. Marvell's revenue hit $1.5 billion in the latest period, the third quarter of its fiscal 2025, ended Nov. 2, on 7% growth. The data center accounted for $1.1 billion of total sales, a 98% year-over-year increase. Marvell expects to accelerate total sales growth next quarter to 26% or $1.8 billion. Marvell isn't operating profitably yet; however, many significant expenses are non-cash, like depreciation, restructuring charges, and stock-based compensation. The company reported an impressive non-GAAP (adjusted) operating margin of 30% last quarter. On Wall Street, 33 of 36 analysts rate the stock a buy or strong buy, yet the average price target is $118 per share, slightly lower than the $123 price as of this writing. The analysts will probably begin increasing their targets as revenue accelerates. Still, investors should consider using the same risk mitigation buying techniques mentioned above. Hopefully, Intel's turnaround will be swift and successful. But it has a long way to go. In the meantime, AI stocks like Marvell and Arm Holding have much more momentum and upside.

What's Next for Five of 2024's Most Dramatic Tech Stock Stories

(Bloomberg) -- Tech investors will remember 2024 as a year in which the artificial intelligence trade gained even more steam and giants like Nvidia Corp. and Meta Platforms Inc. carried the S&P 500 for the second time in a row. But beyond the biggest tech names, there were plenty of other interesting trades. Heavy spending on AI by tech behemoths helped extend a rally beyond chip and server makers to select software stocks, power producers and even owners of vast caches of data used to develop AI services. "Companies that weren't the first beneficiaries are starting to see growth," said Scott Yuschak, managing director of equity strategy at Truist Advisory Services. "Right now AI is what to like within tech, but we expect a broader tech tape in 2025." The year also brought plenty of drama, with one of the most popular AI plays slumping amid accounting problems that threaten its stock listing. And a semiconductor pioneer's turnaround went off the rails, resulting in the ouster of its chief executive officer. Here's a roundup of some of the year's biggest stock stories and the outlook for each going into 2025. Reddit Reddit Inc.'s initial public offering in March was a hit with investors, but few anticipated the extent of gains to come. The social-media network owner's shares have jumped 373% since they listed, fueled in part by data-licensing deals with major companies like OpenAI and Alphabet Inc.'s Google, which use Reddit data to train large-language models. That, coupled with investments Reddit is making to better monetize its user base, contributed to a strong quarterly report and forecast in October that sent the stock soaring. Reddit shares have dramatically outperformed Meta and other social media peers over the past six months, and the rally has room to run in 2025, according to Morgan Stanley analyst Brian Nowak. He upgraded the stock to overweight earlier this month, saying that engagement and advertising initiatives will continue to fuel growth. Palantir Technologies Few software companies have managed to generate significant revenue from AI services, but Palantir Technologies Inc. is a standout. Demand for its data-analysis AI products has reinvigorated growth, putting sales on pace to expand 26% in 2024, up from 17% in the prior year. The shares have gained 316% in 2024, pushing its market value to more than $160 billion, up from $37 billion at the beginning of the year. The stock was added to the S&P 500 in September and will join the Nasdaq 100 next week. While some on Wall Street are cautious on the stock after this year's rally, analysts at Wedbush are betting that 2025 will bring more gains on expectations for more AI-fueled growth. With a price-to-projected-earnings multiple of more than 150 times, Palantir is the second-most expensive stock in the S&P 500, behind Ventas Inc., according to data compiled by Bloomberg. Only three of 22 analysts tracked by Bloomberg have a buy rating on Palantir. Vistra So vast are the energy needs of AI computing that some utilities stocks crossed Tech Watch's radar this year. Power producer Vistra Corp. is the top-performing stock in the S&P 500 in 2024, with a 245% gain that has even topped Nvidia's 160% advance. Vistra's revenue has seen a boost from power-hungry data centers, and with tech behemoths pledging to spend even more on AI next year, the outlook for electricity and other infrastructure providers looks positive. Vistra, along with peer Constellation Energy Corp., have been particularly prominent among utilities because of their position as independent power producers -- a status that means they sell electricity at market prices, unlike regulated utilities. Intel Heading into 2024, Intel Corp. shares were getting a lift from investor optimism that things couldn't get much worse for the troubled chipmaker. That bet couldn't have been more wrong. Intel shares have dropped 62% this year as it fell further behind competitors like Nvidia and Advanced Micro Devices Inc. while facing mounting costs from building new plants and investing in production technology. In August, it suspended a dividend that had been in place since 1992 and announced a plan to cut 15,000 jobs. Chief Executive Officer Pat Gelsinger was forced out earlier this month. With two interim CEOs running the company as the board searches for Gelsinger's permanent successor, Intel's path looks murkier than ever. Questions about strategy changes and whether the company will be split up likely won't be answered for months. Only seven of more than 50 analysts tracked by Bloomberg recommend buying the shares. Super Micro Computer Super Micro Computer Inc. looked unstoppable in the first half of the year amid soaring demand for its servers used in data centers. The stock peaked in March, days after it was tapped for inclusion in the S&P 500, with a market value of $66 billion. In August, the company was targeted by a short seller. A day later, it delayed its annual report, citing a review of its internal controls, which put the stock's Nasdaq listing in jeopardy. In October, its auditor resigned. The shares are now down 73% since that March record. Super Micro hired a new auditor in time to get an extension from Nasdaq, and now has until Feb. 25 to file its financial reports. In the meantime, it reportedly brought on Evercore Inc. to help it raise capital.

Here Are My Top 3 Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in 2025. Hint: Nvidia's Not on the List. | The Motley Fool

Artificial intelligence (AI) should remain as a top opportunity for investors in 2025, but there are plenty of opportunities beyond Nvidia. Even though 2024 is drawing to a close and a new year full of surprises is upon us, artificial intelligence (AI) will surely remain a top priority for investors next year. While Nvidia is widely considered the ultimate barometer for the health of the AI ecosystem, I see a few other candidates as top investment choices for 2025. Advanced Micro Devices (AMD -2.83%), Amazon (AMZN -0.66%), and Tesla (TSLA 4.34%) are opportunities to buy hand over fist next year as AI mania continues. Industry trends suggest that Nvidia owns a staggering 88% share of the GPU market. On the surface, such a strong foothold might suggest that Nvidia simply has the most superior products in the marketplace. While some customers would argue that this is very much the case, there is a more nuanced reason for Nvidia's dominance -- namely, a lack of competition over the last two years essentially provided Nvidia with a first-mover advantage. However, over the last year or so, AMD quietly emerged as a formidable competitor in the data center GPU realm, thanks in large part to its MI300 accelerators. The MI300 has been such a bellwether for AMD that its own data center services business is growing at essentially the same rate as Nvidia's (which has been decelerating over the last few quarters). Next year, AMD is scheduled to release a next-generation architecture, dubbed the MI325X, which is geared toward competing with Nvidia's new Blackwell GPUs. Furthermore, AMD's GPU roadmap also includes a planned launch in 2026 for its MI400 chipset, which is likely an answer to Nvidia's Rubin architecture, which is also planned for 2026. While I'm not insinuating that AMD will become a larger enterprise than Nvidia, the company's pace of innovation needs credit. With that, I could easily see AMD beginning to acquire incremental market share away from Nvidia as investment in AI infrastructure continues to boom. AMD is a screaming buy right now as investors appear to be overlooking the company's progress, which is currently overshadowed by that of Nvidia. Amazon as the single most lucrative opportunity among mega-cap tech. While Amazon's core operations sit between e-commerce and cloud computing, the company also has a subscription business (Prime), a streaming platform, and a fast-growing advertising unit. Amazon is an incredibly unique business, as its diverse model allows it to stitch AI-powered features across the company's broader fabric. Between holiday-driven shopping trends, corporate budgets focusing more on AI, and new investments in its streaming services, Amazon looks poised for a blowout fourth-quarter performance. On top of that, the company is making some notable investments in AI infrastructure -- namely in the form of homegrown chips (Trainium and Inferentia) as well as through a lucrative partnership with OpenAI competitor Anthropic. Even with all of these exciting moving pieces, Amazon's revenue is only growing at 11% annually. Although this may appear mundane, Amazon's free cash flow is growing at over 120% year over year, providing the company with heaps of cash that it can use to reinvest back into the business. This level of financial flexibility is hard to match, and it's only a matter of time before Amazon begins to show material acceleration across the top line while continuing to mint profits. Amazon is a no-brainer opportunity for investors with a long-term time horizon. Over the last couple of years, Tesla struggled to match or exceed historical growth levels as demand for its electric vehicles (EV) became protracted on the heels of a tough macroeconomic environment. Those days may be in the rearview mirror, though. Perhaps the biggest near-term tailwind for Tesla is its foray into autonomous driving, known as Full Self-Driving (FSD) technology. While FSD has made notable progress over the last few years, there is reason to believe that 2025 could be the beginning of a generational growth narrative for Tesla's ambitions in self-driving. Wedbush Securities analyst Dan Ives thinks that Elon Musk's close relationship with President-elect Donald Trump could significantly speed up the timeline to bring FSD to widespread commercialization. Furthermore, if Trump decides to remove or change regulations around EV tax credits, Tesla could benefit from such action in the long run. Although Tesla stock has been soaring since the election, and shares are hovering around all-time highs, it's still a compelling opportunity for long-term investors. For now, I'd caution against buying into the momentum and look for a more reasonable entry point should a sell-off occur. Nevertheless, 2025 will be a milestone year for Tesla thanks to the narrative surrounding FSD, and the start of a new growth narrative for the company.

3 Brilliant Growth Stocks to Buy Now and Hold for the Long Term | The Motley Fool

Some of the world's most dominant companies in high-growth markets, such as cloud computing and artificial intelligence, offer compelling valuations. The economy and the stock market experience ups and downs over time. Being a long-term investor allows you to see the forest for the trees and base your investments on big-picture trends that could dictate which stocks perform the best over time. Over the past decade, cloud computing, e-commerce, and digital advertising have been prominent growth stories. While those still have more upside, emerging industries like artificial intelligence (AI) are already paving the path to the future. The brilliant companies leading these industries have already enriched shareholders and have the fundamentals and growth prospects to continue winning for the foreseeable future. Consider buying these three top-notch growth stocks today and holding them long-term. AI chip company Nvidia (NVDA -2.25%) is the poster child of the AI craze that has swept the market since early 2023. The company built its business on graphics processing units (GPUs), and their strong computing power and task-specific functionality made them such a good fit for training AI models in data centers that Nvidia essentially took almost the entire market. Cloud computing companies have spent billions of dollars on Nvidia's H100 chips to amass the computing power needed to run AI applications through the cloud. That launched Nvidia into hyper-growth mode, and its next-generation chips are poised to be just as successful. The reality is that AI requires immense computing resources, and the need grows as models become more advanced and more companies want to deploy AI applications. You can see that Nvidia's business remains on an upward trajectory, with analysts estimating that it will generate nearly $200 billion in revenue next fiscal year: Analysts estimate Nvidia will grow earnings by an average of 20% annually over the next three to five years. The stock trades at a forward price-to-earnings (P/E) ratio of 47, a reasonable valuation for arguably the most important company in the still-nascent AI industry. Nvidia should continue winning, so consider buying today and adding opportunistically. Google is one of the world's most famous brands and is so dominant in internet searches that regulators ruled it a monopoly earlier this year. That alone puts its parent company, Alphabet (GOOG -1.16%) (GOOGL -1.11%), on this list. But Alphabet is far more than a search engine; it owns the world's most-visited video platform (YouTube), the world's third-largest cloud (Google Cloud), and a host of interests in other technologies, like autonomous driving, quantum computing, and smartphone software. Alphabet is fiercely competing for AI leadership with other technology rivals. It could have an edge because it owns the primary ingredients to develop and deploy AI, including a cloud business (Google Cloud), an AI model (Gemini), and a treasure trove of first-party data on which to train its AI. Alphabet has $93 billion in cash and generated $55 billion in free cash flow over the past four quarters. The company is a financial juggernaut that can outspend (or at least keep pace with) any competitor: Given its existing businesses and AI upside, it's hard not to love Alphabet's investment prospects. Analysts estimate the company will grow earnings at an average annual rate of almost 18% for the next three to five years. That growth rate makes the stock a compelling value, trading at just 24 times earnings. E-commerce giant Amazon (AMZN -0.66%) went from selling books online to selling just about everything. Its ascension to control roughly 40% of all e-commerce in the United States makes it one of the most significant corporate success stories ever. Just as impressive has been the company's ability to pivot, starting and expanding new businesses that have risen to the top of their respective markets. Amazon's Prime subscription gives the company direct access to over 200 million customers, helping it create additional opportunities in video streaming, grocery, and healthcare. Amazon also operates the world's largest cloud computing platform, which has become the primary source of the company's profits. Customers can deploy AI applications through Amazon's cloud platform, making it a key cog in AI for as long as it retains its market share. Amazon's ability to pursue various markets makes it a clear-cut growth stock. The future looks bright, partly because Amazon's core businesses still have plenty of life left. Consider that e-commerce (Amazon's oldest business) accounts for less than a fifth of retail spending in America! Amazon recently launched online vehicle sales, proving it can and will target almost any consumer market. Analysts estimate Amazon will grow earnings by an average rate of 28% over the next three to five years, making the stock a solid buy at its forward P/E of 44.

History Says the Nasdaq Will Soar in 2025. Here's the 1 AI Stock to Buy Before It Does. | The Motley Fool

The Nasdaq has blasted higher over the past two years, gaining more than 43% last year and now heading for an increase of more than 33% for 2024. This is thanks to the artificial intelligence (AI) boom, as five of the benchmark's most heavily weighted stocks and several others in the top 10 operate in this high-growth area. Today's $200 billion AI market is forecast to reach more than $1 trillion by the end of the decade, meaning companies that got involved in this technology early could greatly benefit in the years to come. Why is everyone excited about AI? Because it could revolutionize the way many things are done, saving companies time and money -- and that's great news for earnings growth. This alone could offer us optimism about the path the Nasdaq will take next year. But history also offers us reason to believe in another Nasdaq win. Since 1990, five out of six periods of gains have involved the index rising for more than two consecutive years. So, the Nasdaq has generally posted three or more years of gains in recent times. Of course, there's no guarantee this will happen -- indexes and stocks can surprise us -- but if it does, you'll want to be prepared. And the best way to prepare is to buy one particular stock before the Nasdaq soars once again. Let's find out which one. This player is a member of the Nasdaq, the S&P 500, and, most recently, it joined the Dow Jones Industrial Average. It's advanced more than 2,400% over the past five years. But don't worry. Thanks to its dominance in the AI market and something important unfolding right now, it still could have plenty of room to run. And that's why it still makes an excellent buy today, one that could again lead the Nasdaq higher next year. I'm talking about Nvidia (NVDA -2.25%), the seller of the world's most powerful graphics processing units (GPUs). These chips are key elements in many crucial AI tasks, such as the training and inferencing of models. Customers have recognized Nvidia's strength here, and that's why they've been willing to wait for deliveries of these top products and pay more than they would for rival AI chips. In fact, Oracle co-founder Larry Ellison even said in recent times that he and Tesla leader Elon Musk actually begged Nvidia's chief, Jensen Huang, for more GPUs. So, the world's biggest companies -- those with the resources to invest heavily in AI -- see value in choosing Nvidia over the competition. This and Nvidia's pledge to update its GPUs on an annual basis should keep it in the top spot in this fast-moving industry. One thing in particular could translate into earnings strength in the quarters to come and more gains for the stock, too. This quarter, Nvidia is ramping up production of its new Blackwell architecture, a game-changing offering with many customizable features, such as different chips and networking options. Blackwell is Nvidia's strongest AI platform yet, and demand has been "staggering," the company said during its most recent earnings call. Nvidia even expects several billions of dollars in Blackwell revenue during this first quarter of commercialization. So, as this launch unfolds and Blackwell starts contributing big to Nvidia's already soaring revenue -- it jumped 94% to $35 billion in the most recent quarter -- investors may continue to flock to this market leader. But what about valuation? At 47 times forward earnings estimates, Nvidia's stock isn't dirt cheap. However, I don't think this level is extremely expensive either, considering Nvidia's leadership in the market, commitment to innovation, and one other key element: Nvidia's profitability on sales. The company has maintained a gross margin of more than 70% over the past few quarters. All this could boost Nvidia in the quarters to come and drive further gains in the Nasdaq in 2025. The good news is that even if Nvidia stock takes a pause next year, the long-term earnings picture remains bright, meaning investors could still score a major win over time.

Prediction: These 2 Magnificent S&P 500 Growth Stocks Will Crush the Market Over the Next 5 Years

Looking to trounce the market over the next few years? These industry-leading AI stocks could serve up fantastic returns. The S&P 500 index includes the stocks of 500 of the largest U.S.-based companies, and it's frequently treated as the benchmark for overall stock market performance. The index has risen roughly 106% over the past five years (total return). That means that if you invested in a relatively low-risk exchange-traded fund (ETF) that tracked this benchmark index, you would have more than doubled your money over the last half-decade. Of course, some stocks in the index far surpassed the performance average. For example, Apple delivered a total return of 270%. Meanwhile, Nvidia managed to blow that impressive performance out of the water, posting gains of more than 2,500% across that five-year stretch. If you're looking for investments that have the potential to repeat such performance over the next five years, read on to see why these two Motley Fool contributors think that two artificial intelligence (AI) stocks are poised to be winners. This AI stock can keep roaring higher Keith Noonan: Thanks to accelerating sales growth, momentum in AI, and interest rate cuts, Palantir Technologies' (PLTR -1.80%) share price is up 343% in 2024. On the heels of this incredible performance, the company is now valued at roughly 62 times this year's expected sales and 201 times expected earnings. Despite this highly growth-dependent valuation, Palantir has avenues to significantly outperform the S&P 500 index over the next five years. Strong future performance is already baked into the company's valuation, but Palantir nonetheless is serving up great results. The company's revenue increased 30% year over year to hit $726 million in the third quarter, and revenue for its U.S. geographic segment increased 44% to $499 million. Adjusted free cash flow for the period came in at $435 million -- or 60% of overall revenue. That's an incredible margin. The business has continued to see strong momentum and impressive adoption for its Artificial Intelligence Platform (AIP) suite, and management issued encouraging commentary and guidance. AIP plays a key role in the growth acceleration, and the software specialist has early leadership in commercial services categories with massive room for long-term growth. The business has heavy exposure to the defense industry, which suggests that the stock could perform relatively well in the event of increased geopolitical instability. If major new conflicts break out in the world, most growth-dependent stocks will likely see dramatic valuation pullbacks. Palantir stock may not be completely immune to this sort of dynamic, but its leading role in AI defense services suggests the company's share price could bounce back relatively quickly or even rise in the event of new fighting. Using only traditional valuation metrics, it could be fair to say that Palantir looks richly valued compared to most other tech companies in the S&P 500. On the other hand, the company may have an inverse relation to typical geopolitical risk scenarios and looks uniquely well-positioned to benefit from commercial AI demand. Generative AI is a huge growth driver Jennifer Saibil: Amazon (AMZN -0.76%) has been outperforming the market for much of its existence, and it has done so by a wide margin over the past two years, up 174% versus 63% for the broader index (total return). Its generative AI business is just getting started, and that could be a massive growth driver over the next five years, leading to further outperformance. CEO Andy Jassy described generative AI this way: "I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the Internet." It has been heavily investing in a comprehensive and industry-leading AI business, launching a broad array of solutions to fit most every need and budget. It's the leading global cloud services provider, with 31% of the market, and the AI business is bringing in new clients that want to benefit from Amazon Web Services' game-changing capabilities. These include services like Amazon Bedrock, which gives developers access to the company's generative tools to create their own AI models, and Amazon Q, an AI assistant that helps businesses get work done faster. Its AI business is already generating billions of dollars in sales, but Jassy sees an enormous opportunity as businesses move spending on information technology (IT) from on-premises (where 90% of it still goes) to the cloud. He envisions a flip in that proportion, and his company is poised to benefit from that in a huge way. Jassy also said that the company has lots of opportunities even before taking into account new possibilities in AI. It has no match in e-commerce, a $4 trillion market and growing, and it's making moves to keep that status, incorporating new tech like robotics and drone deliveries into its operations. Then there's digital advertising, streaming, and healthcare, where the business is no slouch, either. The company is brimming with potential, and Amazon stock could crush the market over the next five years.

Artificial Intelligence (AI) Stocks Roared Higher This Year. Is It Too Late to Invest in This High-Growth Industry? | The Motley Fool

This has been a fantastic year for stocks, starting out on a bright note, with the S&P 500 (^GSPC -0.00%) confirming the market's presence in bull territory. The benchmark then went on to hit multiple record highs and today is heading for a 26% annual increase. The Nasdaq (^IXIC 0.12%) and the Dow Jones Industrial Average (^DJI -0.20%) advanced too, climbing 32% and 16%, respectively. This plus the fact that more than three-quarters of the 30 Dow Jones Industrial Average stocks are heading for gains this year shows that many industries contributed to this movement. But one particular area has stood out as the star of 2024, and that's artificial intelligence (AI). Companies that are helping develop the technology or those using it to improve their businesses have led stock market gains. For example, AI chip leader Nvidia (NVDA -2.25%) and AI-driven software company Palantir Technologies (PLTR 3.92%) have delivered the best performances in the Dow Jones and the S&P 500, respectively. Now, heading into 2025, you may be wondering if there's still time to get in on this hot growth area -- or if it's too late. Let's find out. First, let's talk about why AI has garnered so much attention from investors -- and inspired the world's largest companies to invest billions of dollars into the technology. Meta Platforms (META -1.65%) has said AI was its biggest investment area of this year and aims to increase AI spending next year too. Amazon's (AMZN -0.66%) cloud business, Amazon Web Services (AWS), went all-in on AI, offering customers everything from chips to a fully managed service. And Amazon itself uses AI to improve the efficiency of its e-commerce business -- one example is designing the fastest delivery routes for packages. AI has the ability to lower companies' costs by making their operations more efficient, as well as the potential to help customers develop game-changing products and services. All of this could translate into significant revenue growth for companies developing or using AI -- and that generally results in positive stock performance over time. So it's not surprising that companies and investors see AI as an area of great potential. In some cases, investment is already bearing fruit. AWS recently reached a $110 billion annualized revenue run rate thanks to the AI products and services it's been selling to its customers. And Palantir delivered its highest profit ever in the latest quarter as customers piled into its AI-fueled software to help them leverage the power of their data. But, as mentioned, many of these companies leading the AI revolution also have led market gains, and they've seen their valuations take off. Good examples of this are Palantir and Nvidia, as you can see in the chart. On top of this, the overall stock market has become expensive, with the S&P 500 Shiller CAPE ratio, an inflation-adjusted look at share price in relation to earnings over 10 years, at one of its highest levels ever. All of this may lead you to believe that the biggest AI-driven gains are over and it's too late to get in on this industry. But that's not necessarily true. Even though AI stocks exploded higher this year, this actually is a long-term investment opportunity -- not a short-term one. Meta chief Mark Zuckerberg earlier this year says he expects to see a "multiyear investment cycle" before scaling Meta's AI products and services into profitable ones. And Nvidia chief executive officer Jensen Huang says $1 trillion of outdated computer systems exist worldwide and need to be updated for this new phase of accelerated computing. Supporting that, analysts have said today's $200 billion AI market may reach $1 trillion by 2030. All of this suggests we're in the early days of the AI build-out -- and that means the revenue gains for companies involved are in the early stages, too. This is great news for investors because it means there's plenty of time for us to get in on this exciting industry, and even certain stocks that have soared in recent times still have room to run over the long term. So, this hot investing theme that's powered the stock market in 2024 isn't just a short-term fad, but instead could become a valuable part of your portfolio over the long haul.

What's Next for Five of 2024's Most Dramatic Tech Stock Stories

Tech investors will remember 2024 as a year in which the artificial intelligence trade gained even more steam and giants like Nvidia Corp. and Meta Platforms Inc. carried the S&P 500 for the second time in a row. But beyond the biggest tech names, there were plenty of other interesting trades. Heavy spending on AI by tech behemoths helped extend a rally beyond chip and server makers to select software stocks, power producers and even owners of vast caches of data used to develop AI services.

2 Spectacular Artificial Intelligence (AI) Stocks Primed to Beat the S&P 500 in 2025 | The Motley Fool

The S&P 500 (^GSPC -0.39%) is up 28% this year, which is almost triple its average annual gain going back to 1957. It follows an incredibly strong year in 2023, when the index jumped 26%. Those gains have driven the S&P to a relatively expensive valuation. It trades at a price-to-earnings (P/E) ratio of 27.8, which is a big premium to its long-term average of 18.1. That makes it very challenging to find value in this market. Technology stocks are leading the S&P higher at the moment, but those operating in the artificial intelligence (AI) space are generating particularly strong gains. That trend is likely to continue in 2025 as some of the world's largest tech companies spend record amounts of money to build AI infrastructure. While AI stocks are some of the most expensive in the entire market right now, a couple of them still have the potential to beat the S&P 500 in 2025. Last year, a Wall Street analyst used the term "Magnificent Seven" to describe a group of large-cap technology stocks that were leading the market higher. The group includes Nvidia, Microsoft, Apple, Amazon, Tesla, Alphabet (GOOG -0.53%) (GOOGL -0.63%), and Meta Platforms (META -0.77%). Each one of them is involved in the AI race in some capacity. However, in terms of value, Alphabet and Meta Platforms stand out because of their relatively cheap P/E ratios: Here's why both Alphabet and Meta have the potential to beat the S&P 500 in 2025. Alphabet is the parent company of Google, YouTube, self-driving car company Waymo, and more. The conglomerate built its own family of large language models (LLMs) called Gemini, which sit at the foundation of an AI chatbot by the same name. But the models also power several new AI features within Google Search. Most of Alphabet's revenue comes from the advertising dollars generated by Google Search. It's the world's largest internet search engine with a market share of 90%, but its dominance is under threat from third-party AI chatbots like OpenAI's ChatGPT, which are changing the way people access information online. The Gemini chatbot is one way Alphabet is tackling those threats, but the company understands it also needs to change the user experience on Google Search. It launched AI Overviews earlier this year, which are AI-generated responses that appear at the top of traditional Google Search results. Overviews can include text, images, and links to third-party websites in order to give users faster access to information. The feature is rolling out to 100 countries right now, where it will serve 1 billion users per month. Links within Overviews receive more clicks than the same links in traditional search results, so the feature could become a significant revenue driver for Alphabet. Monetization is likely to be a point of focus in 2025 because investors are seeking a payoff for the tens of billions of dollars companies like Alphabet have spent to develop AI so far. There is one dark cloud hanging over Alphabet, and it's the main reason its stock is so cheap compared to the rest of the Magnificent Seven. The U.S. Department of Justice (DOJ) won a major court case this year, finding that the company engages in monopolistic practices to protect its dominance in the internet search industry. The judge won't hand down Alphabet's punishment until mid-2025, but the DOJ wants the company to sell its Chrome internet browser, and maybe even its Android operating system, to eliminate some of the distribution channels it uses to maintain Google Search's market share. Those measures would certainly harm Alphabet, but on the flip side, it's also possible the company is hit with a simple fine instead. Many tech analysts predict this case will be tied up in the courts for years as Alphabet goes through the appeals process. As a result, it will be business as usual for now, so investors might be better off focusing on the company's efforts in the AI space. Wall Street's consensus forecasts (provided by Yahoo) suggest Alphabet will generate record-high revenue and earnings in 2025. I'm not suggesting its stock will rise enough to trade in line with the average P/E ratio of the Magnificent Seven (which is 50.4). But even if it aligns with the 34.9 P/E ratio of the Nasdaq-100 technology index, that implies an upside of 38% from here, which would almost certainly be enough to beat the S&P 500 in 2025. Meta Platforms stock is up by almost 80% this year, yet it's still cheaper than most Magnificent Seven stocks. I think it will carry its momentum into 2025 for a few reasons, but they mostly relate to the company's efforts in the AI space. The content feeds within Meta's Facebook and Instagram social networks are increasingly powered by AI. People will usually spend more time on those platforms if Meta can show them more of the posts they enjoy viewing, which means they see more ads and generate more revenue for the company. During the third quarter of 2024 (ended Sept. 30), CEO Mark Zuckerberg said AI-powered recommendations have driven an 8% increase in the amount of time users spend on Facebook this year and a 6% increase for Instagram. Meta also launched an assistant called Meta AI last year, and it's now available in each of the company's apps. It can answer complex questions, generate images, offer ideas for fun activities with your friends, and even settle debates in your group chat. It already has more than 500 million monthly active users, and while it's free to use, there will be opportunities to monetize it in the future. For example, businesses might pay money to place a product link within Meta AI's response to a relevant question. Meta AI is powered by Llama, a family of LLMs that Meta developed in-house. Llama is open source, so millions of developers regularly dig through the code, which allows Meta to rapidly identify bugs and ship improvements more quickly. So far, Llama has been downloaded more than 600 million times, making it the most popular family of open-source LLMs in the world. Meta plans to launch Llama 4 next year, which Zuckerberg hopes will be the most powerful in the industry. The company is on track to spend up to $40 billion on AI data center infrastructure this year in order to build enough computing capacity to bring Llama 4 to life. Simply put, bigger LLMs lead to smarter AI software, so Meta hopes its investments will pay off over the long term by creating new opportunities to generate revenue through features like Meta AI. Despite the strong gain in Meta stock this year, it would have to rise by another 19.5% in order for its current P/E ratio of 29.2 to match the 34.9 P/E ratio of the Nasdaq-100. Wall Street also thinks Meta will grow its earnings per share by 12% in 2025, which could pave the way for even more upside in its stock. With all of that in mind, I think it's a great candidate to beat the S&P 500 next year.

Will Artificial Intelligence Stocks Continue to Dominate in 2025? Here's What History Says. | The Motley Fool

Artificial intelligence stocks have helped propel the markets to all-time highs, but can the momentum really keep going? In the last two years, artificial intelligence (AI) has attracted more investment interest than any other theme. To me, the real start of the AI frenzy was November 30, 2022. That's the day OpenAI released ChatGPT to the world. Since then, the S&P 500 index (^GSPC -0.00%) has gained 49% while the tech-heavy Nasdaq Composite (^IXIC 0.12%) has surged by 75% (as of market close on Dec. 11). During times like these, it is easy for investors to fall into the trap of bubble psychology, believing that the market will continue to go up in perpetuity. A related topic for this phenomenon is called the Greater Fool Theory -- an idea that explores the notion of investors paying a premium for assets because they think prices will continue appreciating, causing someone else (the greater fool) to pay even more. In the piece below, I'm going to break down how influential megatrends have fared in years past. I will also examine historical capital market performance after similar periods of rapid growth. Could AI stocks be on the cusp of breaking out even further in 2025, or are you about to become the Greater Fool? Let's find out. In my opinion, the last big megatrend before AI mania was the introduction of blockchain technology. A simple explanation for blockchain is to think of it as a giant ledger for transactions. While there are myriad use cases for blockchain, two of the more common applications sit in the worlds of cryptocurrency and fintech. Although the idea of blockchain has been floating around for decades, I'd argue that the technology only became mainstream over the last 10 years or so. In the chart below, I've benchmarked a number of blockchain exchange-traded funds (ETF) against the S&P 500 and Nasdaq over the last several years. BLOK data by YCharts. As you can see, the Amplify Transformational Data Sharing ETF actually performed relatively on par with the Nasdaq and even outpaced the S&P 500 since 2018. Moreover, the First Trust Indxx Innovative Transaction & Process ETF's return of 59% is quite impressive in its own right. Let's take a look at what is actually in these ETFs before jumping to the conclusion that blockchain is a superior opportunity to that of the broader market. In addition to exploring megatrends, I think it would also be worthwhile to assess the historical performance of the capital markets in a broader sense. While AI is a ubiquitous technology that can serve all industries, the majority of stocks that have gained so far from the movement reside in the technology realm. For this reason, I will first be looking at how the tech-centric Nasdaq Composite index has fared over the years. Since its inception in 1971, the Nasdaq has only generated consecutive years of negative returns on two occasions. Of note, this has not occurred in over 20 years. This dynamic suggests that the Nasdaq should continue gaining in 2025. Below, I've shown the respective gains between the S&P 500 and Nasdaq Composite since the beginning of the current bull market (Oct. 12, 2022). With a chart like that, I wouldn't be surprised if you're at least considering trimming some exposure to equities. After all, how much higher can the markets actually climb? ^IXIC data by YCharts. Well, apparently the answer is much higher. Generally speaking, the S&P 500 continues to soar both in the near term and long term after reaching an all-time high (such as now). Given the details above, I'd say investing in any given megatrend is a mixed bag. While there have been some winners in blockchain, such cases were few and far between. And candidly, the two outliers I explored (AMD and MicroStrategy) are not inherently blockchain specialists. Moreover, timing was also a big factor in whether or not you made any money in these funds or the individual stocks that comprise them. Although I would not say that blockchain is a "bad" investment per se, I wouldn't necessarily encourage investors to buy shares in many of the stocks I specifically called out above. While past performance is not a guarantee of future results, history is giving us a pretty clear indication that the Nasdaq and S&P 500 should keep moving up throughout 2025. My takeaway from the analysis explored here is that while the markets will likely rise next year, not all megatrends or the companies involved with them are created equal. If you want to invest in AI stocks, I'd encourage buying shares in players that are already established or passive index funds that hold more mainstream opportunities as opposed to speculating on what stock could be the next to break out.

Despite Recent News, Analysts Still Say Artificial Intelligence Stock Nvidia Is a Buy. Here's Why. | The Motley Fool

Nvidia (NVDA -2.25%) has been one of the best performing stocks over the past few years, a run that catapulted it into the world's most valuable company. But over the last month or two, it slipped to second place and then -- briefly -- to third, behind two other big tech companies, Apple and Microsoft. But don't give up on Nvidia just yet, which rebounded to the No. 2 spot with a market cap of $3.41 trillion. Many Wall Street analysts think the best is yet to come for this crucial supplier of chips to power artificial intelligence (AI). Here's what they think about the company's most recent quarterly results. The stock has pulled back in recent weeks, but smart investors should recognize this as just noise. Looking back at the company's most recent quarterly results, announced on Dec. 6, pretty much everything is going right for Nvidia now. An analyst from Wedbush, Dan Ives, called the earnings report "flawless," adding that it "should be framed and hung in the Louvre." He then went on to call CEO Jensen Huang the "Godfather of AI" and called the company's latest Blackwell AI chip the LeBron James of semiconductors. Ives added, "We believe the path to $4 trillion market cap and beyond is now laid out by Nvidia, and this is bullish for the broader tech rally into year-end and 2025." After the earnings report, analysts from three other firms -- J.P. Morgan, D.A. Davidson, and Bernstein -- raised their price targets on the stock. Davidson's Gil Luria said, "Nvidia is well within its means to extend growth into next year given hyperscaler commentary around additional investments in AI compute and the company's ability to deliver even with production setbacks." And William Stein of Truist said that Nvidia "remains the AI company owing to its culture of innovation, ecosystem of incumbency, and massive investment in software, pre-trained models, and services." Although the chipmaker's stock has pulled back recently, Wall Street analysts remain very upbeat about its long-term prospects. Should you be buying the pullback? We'll discuss that next. There's a big difference between a business doing well and the stock price doing well. Nvidia is set to grow by leaps and bounds in the years and decades to come. But the stock price already reflects much of this potential. Even with the total company valued at more than $3 trillion, shares are priced at an astounding 30 times sales. Microsoft, for comparison, trades at just 13 times sales, while Apple trades at a relatively paltry 10 times sales. Of course, Nvidia's growth rates -- both current and projected -- are far ahead of either of these companies. And demand for AI infrastructure, while growing quickly, is likely still in its infancy. The stock has a high multiple, however, and with that reality typically comes plenty of volatility. Small shifts in industry or company growth prospects can heavily affect the valuation multiple, and thus the stock price. If you're a believer in AI over the long term, this could be your chance to start building a position in Nvidia. Just don't be shocked if you have some short-term opportunities to add to your investment at a lower stock price. And consider adding other chipmakers to diversify your position. Nvidia currently has a dominant lead in AI semiconductors, but as previous chip wars have proved, the top dog doesn't always stay there forever. Nvidia shares are a better deal today than a few weeks ago, but be sure to diversify your position accordingly, with fresh cash available to buy more if short-term volatility arrives again.

These Are the 5 Top-Performing Stocks in the Nasdaq-100 With 2024 Almost Over | The Motley Fool

Data source: Finviz and yCharts on 12/13/2024. Table by author. This eclectic group has a common thread that unites them: If you haven't guessed by now, the common thread is AI. The excitement surrounding this technology has been palpable over the past few years, which is understandable. Generative AI is expected to generate $1.3 trillion by 2032, according to Bloomberg Intelligence, with some estimates much higher. The most commonly used valuation metrics struggle with high-growth stocks, as they're generally focused on the past. However, using the more appropriate price/earnings-to-growth (PEG) ratio, which factors in accelerating growth, shows each of these highfliers with a multiple of less than 1 (as of this writing), the standard for an undervalued stock. Furthermore, each of these market leaders has earned an average analyst rating of "buy." If Wall Street is right (I think it is), there's still upside ahead.

Meet the Supercharged Growth Stock Poised to Hit $20 Trillion by 2030 According to 1 Wall Street Analyst | The Motley Fool

Strong secular tailwinds and multiple opportunities should conspire to drive this artificial intelligence (AI) pioneer higher. Artificial intelligence (AI) has been around in some form or another for more than five decades. However, the advent of generative AI early last year took the technology to the next level. These constantly improving and self-learning algorithms have the potential to streamline and automate many time-consuming tasks. Experts believe the resulting boost in productivity and efficiency will usher in the "fourth industrial revolution." Arguably, the biggest beneficiary thus far has been Nvidia (NVDA -2.25%). The company pioneered the graphics processing units (GPUs) that originally rendered lifelike images in video games. These chips delivered the horsepower needed for this computationally intensive task. GPUs proved equally adept at powering AI, sending Nvidia into the stratosphere. The stock has gained more than 800% since early last year, leaving some investors to wonder if its simply too late to buy. Fear not, for Nvidia has what it takes to be the world's first $20 trillion company, at least according to one Wall Street analyst. That implies additional upside for the stock of nearly 500% from its current level. Is that realistic? Below, I'll outline Nvidia's path to success and what could drive the stock to these admittedly lofty heights. When Nvidia introduced the GPU in 1999, the secret to its success was parallel processing, which can conduct a multitude of mathematical computations simultaneously. This involves using various processor cores to work on different parts of a computationally intensive task, thereby completing it much more quickly. Nvidia soon applied this same process to handling AI, ushering the technology into the 21st century. While Nvidia's GPUs stole the spotlight, there's much more to its success than just the processor itself. The company developed the Compute Unified Device Architecture (CUDA), a software architecture and programming platform that helps developers speed up applications by tapping into the power of the GPU. An entire generation of developers uses this software ecosystem, which has become the industry standard. Nvidia offers over 400 libraries that help developers "build, optimize, deploy, and scale applications across PCs, workstations, the cloud, and supercomputers using the CUDA platform." Nvidia's chips are the gold standard across numerous use cases, including gaming, cloud computing, machine learning (an earlier branch of AI), and data centers. Additionally, CUDA is deeply entrenched in the computing industry. That combination creates a moat that's hard to beat. Nvidia currently sports a market cap of roughly $3.63 trillion. That means it would take stock price gains of 495% to drive its value to $20 trillion. According to Wall Street, Nvidia is poised to generate revenue of nearly $129 billion in fiscal 2025, giving it a forward price-to-sales (P/S) ratio of roughly 26. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $768 billion annually to support a $20 trillion market cap. Wall Street is currently forecasting revenue growth of 50% annually over the next five years for Nvidia. If the company can maintain its robust growth rate, it could actually achieve a $20 trillion market cap by 2030. While that might seem ambitious, if we've learned anything over the past couple of years, it's that AI adoption can certainly surprise to the upside. I think a lot of things would have to go right for Nvidia to hit this benchmark, and I have to admit -- it might be a stretch to keep up that growth rate for five years. However, there's one Wall Street analyst who's pounding the table. Phil Panaro, founder and former CEO of Boston Consulting Group Platinion, said categorically, "I believe Nvidia will hit $800 by 2030." That would result in a market cap of $19.59 trillion, or about $20 trillion. The analyst cites three drivers that could push Nvidia over the $20 trillion finish line: The rapid adoption of AI, the transition to Web 3, and potential uses by the U.S. government add up to a massive opportunity, one that Panaro believes will support the 50% annual revenue growth necessary to support a $20 trillion market cap. The analyst lays out a compelling case, but it ignores the harsh reality of the real world. Don't get me wrong; I've been a Nvidia investor for years, and the chipmaker is my second largest position, accounting for 11% of my portfolio -- so I'm rooting for the company to win. I also know the path ahead will be rocky. Remember last summer when Nvidia stock lost 27% of its value in just six weeks, as news reports suggested the release of its next-generation Blackwell chip might be delayed? It ultimately turned out to be much ado about nothing, and the stock ultimately climbed to new heights. Nvidia also suffered a 66% decline a little more than two years ago -- during the economic downturn -- shaking loose many fair-weather investors. Nvidia stock isn't for the faint of heart, so investors should be prepared to hold for the long term and have the fortitude to ride out the tumultuous ups and downs that are part of the cost of admission. Nvidia is currently trading for roughly 31 times earnings for its fiscal 2026 (which begins in January). While that's a slight premium, I'd suggest it's an attractive price to pay for a company with so much potential.

Blackwell May Be Nvidia's Hottest Ticket in 2025, but This Other Opportunity Could Be Even Bigger in the Long Run | The Motley Fool

Over the last two years, semiconductor designer Nvidia (NVDA -2.25%) has become a household name thanks to its lead position in the artificial intelligence (AI) revolution. The company's bread and butter is a unique piece of hardware called the graphics processing unit (GPU). To use a metaphor, GPUs are essentially the engine powering the AI vehicle overall. Nvidia's deep roster of GPUs has been the biggest spark for the company's rapid ascent to being one of the world's most valuable businesses. This newfound growth helped Nvidia generate billions in profits and free cash flow on a consistent basis over the last several quarters. The company has been investing relentlessly into enhanced research and development (R&D) initiatives and is on the cusp of its next big opportunity. Of course, I'm talking about Nvidia's long-awaited next-generation GPU architecture, known as Blackwell. Let's look at why the Blackwell launch is such an important moment for Nvidia in 2025. I'll also be revealing one other asset that Nvidia has up its sleeve that is currently receiving little coverage. In the long run, this other product could be even bigger than Blackwell. Blackwell is expected to offer a new host of capabilities and features geared toward training and inferencing data workloads for more sophisticated generative AI applications. One of the biggest products of the AI movement over the last couple of years is the rise of large language models (LLM). Meta Platforms, Amazon, Alphabet, and Microsoft have all invested or developed proprietary LLMs. Moreover, each of these "Magnificent Seven" members is a customer of Nvidia, heavily relying on the company's GPUs and data center services. With this in mind, it should come as no surprise that big tech catapulted to the front of the line for Blackwell purchase orders. In fact, demand is so high that Blackwell is reportedly sold out for the next 12 months. Research analysts from Morgan Stanley and Piper Sandler are modeling sales from Blackwell to fall anywhere between $5 billion to $8 billion in the fourth quarter. At the high end of this forecast, that would represent 45% of Nvidia's entire sales from compute and networking products during its fiscal fourth quarter last year -- and it's coming from just one product. While it's clear Blackwell is a big deal, Nvidia has something else in store that I think deserves a bit more attention. One of the more in-the-know technology media personalities is Beth Kindig, the CEO of I/O Fund. A few days ago, Kindig posted on X (formerly Twitter) that a Blackwell successor named Rubin "is rumored to be six months ahead of schedule, with a roll out as early as the first half of 2026." That's right. Nvidia is already working on a successor product to Blackwell. If the demand themes explored above are any indication for what could be in store for Nvidia, I'd say there's a good chance that the launch of the Rubin architecture will be a smash. Wedbush Securities research analyst Dan Ives recently suggested that investment in AI infrastructure could eclipse $1 trillion in just the next three years. I think it's fair to say that Nvidia is well-positioned to capture incremental market share, thanks to Blackwell and now Rubin, too. While anything could happen during the manufacturing or quality assurance processes for Rubin, I am encouraged that the timeline is ahead of schedule (for now). The one-two punch of Blackwell and Rubin could help further separate Nvidia from an intense competitive landscape while also reaccelerating top-line growth and profit margins. Although competition is rising from the likes of Advanced Micro Devices and even from some of Nvidia's own customers, I think Nvidia is laying the necessary groundwork for sustained growth. In the long run, I still see Nvidia as one of the foundations supporting the overall AI narrative, and I'm optimistic due to the company's continued investments in strategic innovation.

After Gaining 2,300%, Is Nvidia Stock Done? | The Motley Fool

The past few years have witnessed an unprecedented expansion of artificial intelligence (AI) into various aspects of life. Cashing in on this expansion, companies involved in this space are most certainly at the forefront of the next big thing in AI applications. Of all the key players, Nvidia (NVDA -2.25%) has clearly been the one to watch, gaining a jaw-dropping 2,300% increase over the past five years (at the time of this writing), cementing its position as one of the most remarkable growth stories in the technology space. Importantly, investors have been eager to capitalize on its success as the company rides the AI wave with chips for data centers and graphics. The stock's 199% one-year return is a testament to its continued relevance in the artificial intelligence space, fueled by the explosive demand for GPUs (graphics processing units) that help power AI models. These are now integral to industries ranging from cloud computing to finance and healthcare. With companies scrambling to integrate AI into their operations, Nvidia's products are in high demand, and the company has positioned itself well to be the key supplier for the graphics side of infrastructure. But with its stock now trading near all-time highs, and at a decent premium, the question is whether Nvidia stock's rally is done for a while, or is there still plenty of room left to run? As fellow Fool writer Adria Cimino pointed out, Nvidia is sitting on 80% market share for its products. That's a pretty pleasant spot to be in. Nvidia's graphics cards are the backbone of many AI systems, and as demand for AI technology surges, the need for these graphics cards becomes even more useful. Digitaltrends.com has warned that there is likely to be a GPU shortage, especially for gamers. This supply and demand imbalance creates a unique opportunity for Nvidia. As long as the demand for AI and machine learning chips continues to grow and supply remains constrained, this stock should remain strong. This is heavily demonstrated by how quickly Nvidia's revenues took off in fiscal 2024 compared to fiscal 2023. Companies need their GPUs. The company's most recent stats are what you dream of in a growth stock. On a GAAP basis, Nvidia's most recent quarter saw year-over-year revenue growth of 94% to $35.08 billion. Nvidia also had earnings growth of 111% year over year to $0.78 per diluted share, equal to roughly $19.3 billion. I often put a big emphasis on earnings, and rightfully so, as they are the backbone of long-term stock performance. In the instance of Nvidia, I certainly still care about the earnings potential and overall revenue growth potential, as the two coincide over the long term. The below chart confirms that: Over the last five years, Nvidia's stock price actually grew almost lock step with its GAAP earnings per share. NVDA data by YCharts. But one of the big things I loved about Nvidia's third-quarter results was its fourth-quarter GAAP estimates on margins, which the company anticipates to be 73%. This is a high-margin business, and I love it! The short answer? No way. To reiterate my earlier point, the unprecedented expansion of AI means it's not going anywhere. The factors here are many. If you look in Nvidia's third quarter press release, you'll see announcements in new areas of growth including launching a supercomputer in Denmark that run on over 1,500 Nvidia GPUs, the introduction of an AI aerial platform that has already begun working with T-Mobile, Ericsson and Nokia, along with Nvidia computing being used in things like new Volvo SUVs. That's just to name a few of a very broad list of areas in which Nvidia's resources are being allocated. Looking ahead, Wall Street analysts are expecting Nvidia to finish fiscal 2025 with $2.95 per share. That would give it a forward P/E ratio of 47.2 times fiscal 2025 earnings. Now, when you consider that something like Tesla trades at almost 100 times earnings, or Cava, a stock I love by the way, trades at over 300 times earnings, a premium of 47 times earnings for Nvidia shares doesn't seem that extreme given the long-term potential and its current dominance within its space. This is a company that is far from done. In fact, the best years for Nvidia are very likely in the future. My recommendation is to not be afraid to buy at current levels.

Where Will Nvidia Stock Be in 5 Years? | The Motley Fool

While it's still undoubtedly the most watched stock in tech, some of the heat surrounding Nvidia (NVDA -2.25%) seems to have cooled over the last few weeks. At this point, it's not enough for the company to post great numbers. It's not even enough to handily beat Wall Street's sky-high expectations. For Nvidia to really move the needle, it has to blow them out of the water. Although many investors may be disappointed with the nearly 8% slide from before it reported earnings through Dec. 10, short-term price movements are of little importance in the scheme of things. So, zooming out, where will Nvidia stock be in five years? Maybe it's old news at this point, but it bears repeating. The artificial intelligence (AI) arena is enormous, growing rapidly, and is likely to dominate markets for years to come. You don't have to buy in completely to the loftiest promises of the industry -- and there are many -- to see that the technology has immense potential. PwC -- one of the "Big Four" accounting firms -- anticipates AI could contribute $15.7 trillion to the global economy by 2030. Nvidia is at the center of it all, and it's not just through its chips. As new industries boom, they're led by companies with real vision that help to show what's possible. Thus far, Nvidia is that company. Under founder and CEO Jensen Huang's leadership, Nvidia has remained ahead of the curve for years. That's the sort of intangible that doesn't show up in an earnings report. Still, the tangibles matter too, and Nvidia continues to dominate there as well. The company's chips power the industry, and demand for its newest iteration, Blackwell, couldn't be stronger. With the rollout of Blackwell, Nvidia appears poised to continue the double-digit quarter-over-quarter growth of the last year. The only real blemish in its Q3 guidance was the expectation for gross margin to decrease slightly over the course of the next year as Nvidia ramps production of Blackwell. It really is a nitpick, though -- Nvidia's gross margin last quarter was an incredible 74.6% and the company's CFO stated in the earnings call it would drop to the "low 70s" for a time before returning to the "mid 70s" later in the year. It's clear things are going about as well as they could at the moment. As investors look to the future, however, Nvidia faces some challenges. On a more macro level, the question still looms over the industry of whether the return on investment is really worth it. While this question seems less potent than it may have a few months ago -- observers have seen some more evidence of real-world value -- skepticism hasn't gone away. Companies like Alphabet and Microsoft are spending record amounts -- more than $50 billion -- on capital expenditures this year, and most of that is going to AI infrastructure. The industry is in the midst of an AI arms race and no one wants to be left behind, but shareholders of these companies can only stomach these spends for so long before a proven return is made clear. If this spending dries up, Nvidia's bottom line will suffer. I think the industry is quite a ways out from when this could prove to be a real threat, but keep an eye out to see if there's a shift in sentiment from leadership at these companies. Zooming in, Nvidia faces competition from other chipmakers who want a piece of the action. With a new line of chips that almost rival Nvidia's offerings, AMD is the obvious No. 2, but it's far from the only threat. At this point, however, Nvidia's hardware is still the best and while that's important, the company's real moat is CUDA, the software that accompanies its hardware. Nvidia has created an ecosystem in which using its products is easier and more efficient. A lot can happen in five years, especially in the market, and while no one can predict the future, investors can make an educated guess. There will be some road bumps along the way, but I believe that Nvidia's place in the market, its technical advantages, and the vision of its leadership means that the company will continue to outperform the market during the next five years.

Where Will Nvidia Stock Be in 10 Years? | The Motley Fool

Long-term investment is the key to life-changing returns in the stock market, and few companies highlight this concept better than Nvidia (NVDA -2.25%). If you bought $1,000 worth of the chipmaker's stock 10 years ago, you would have roughly $267,000 today -- a return of 26,600%. That said, past returns don't guarantee future results -- especially in an incredibly speculative new industry. Let's examine the pros and cons of Nvidia stock to determine whether the legendary technology giant still has multibagger potential over the long term. Nvidia's core business has always been designing and selling graphics processing units (GPUs), a type of computer chip capable of parallel processing (running multiple calculations simultaneously). This tech proved crucial in rendering video game graphics, helping Nvidia dominate the custom PC and gaming laptop markets in the 2000s. When Bitcoin launched in 2009, GPUs found another use case in cryptocurrency mining, leading to Nvidia's second boom cycle. At the time, many blockchains used GPU computing power to validate their networks and mint more coins in a process called proof-of-work (PoW). This market declined substantially in 2022, erasing billions from Nvidia's market cap. Video gaming and crypto mining hardware are both represented in Nvidia's gaming segment, which posted third-quarter sales of just $3.3 billion or just around 9% of total sales. Generative artificial intelligence (AI) has become the company's latest boom cycle, causing its data center business to soar to represent 88% of total sales. The company is very nondiversified and vulnerable to another rapid change in its fortunes. Over the next 10 years, Nvidia's AI hardware business could face threats to its growth and profitability. And it isn't hard to see why. With a gross margin of 75%, Nvidia is selling hardware at software-level margins. For context, software-as-a-service (SaaS) giant Microsoft has a gross margin of just 69%, selling mainly digital products and services. Nvidia's market dominance will naturally encourage customers to replace its products wherever possible. While Nvidia seems to be able to keep direct competition (from other AI chipmakers like Advanced Micro Devices) at bay, it can't stop "hyperscaler" clients like Alphabet and Amazon from designing their own custom chips or simply holding on to their old Nvidia hardware instead of upgrading to the latest models every year. Nvidia's sky-high margins may also come under increasing pressure from suppliers like Taiwan Semiconductor, which helps manufacture its highest-end AI chips. In June, analysts at Morgan Stanley reported that the fab is considering raising production fees for Nvidia. And if this is true, it could eventually eat into the company's margins. To be fair, however, Nvidia's third-quarter operating income soared 174% to $18.6 billion. And its forward price-to-earnings (P/E) of just 33 seems quite low compared to this growth rate, suggesting a possible slowdown in earnings growth may already be partially priced in. Generally, time in the market is better than timing the market. And even if you bought Nvidia stock at the peak of its previous boom cycles, you would still have come out ahead if you held shares long enough. That said, with a market cap of $3.5 trillion, Nvidia has become the second-largest company in the world. So, things may be different now. Newton's second law of motion states that the larger an object is, the more force is needed to move it. And while the 18th-century physicist probably didn't have financial markets in mind, the concept can hold true for stocks. Investors who buy Nvidia now are making some very optimistic assumptions about the future of the AI industry. And it may make more sense to wait until the hype dies down before buying shares.

Will Nvidia Be a $5 Trillion Company in 2025?

Nvidia (NVDA -1.41%) has been one of the hottest stocks on Wall Street over the past two years and performed well enough that it's vying for the title of the world's largest company against Apple. It currently has a $3.4 trillion market cap, well over halfway to the $5 trillion market-cap figure that's estimated by Wall Street. Nvidia performed so well in years past that a rise to $5 trillion doesn't seem all that far away, as the stock only needs to grow by 47% to get there. Can Nvidia hit $5 trillion by 2025? It has a lot of work to do. Nvidia has a few new tailwinds in 2025 Nvidia's rise hasn't been all fluff. Since the start of 2023, its revenue rose by 320%, and its profits skyrocketed by 1,340%. Alongside that incredible business performance came impressive stock returns, which is why the stock price is up 600% since 2023. Over the long term, stock price movements and profit growth are usually highly correlated, so expecting further upside from Nvidia isn't out of the question, especially when you look at how 2025 is shaping up. Nvidia's current Hopper architecture is leading all graphics processing unit (GPU) manufacturers. However, its next-generation Blackwell Architecture is ramping up production and primed to be a massive boost for the company. Blackwell architecture offers a four times increase in speed over Hopper when training AI models, so it's not out of the question to think some of the largest AI trainers are waiting to get their hands on this cutting-edge product. Language from Nvidia's largest clients also predicts that it will see its revenue rise in 2025. Although Nvidia doesn't give specific names, four customers make up around 40% of revenue each quarter. One of these could potentially be Meta Platforms, which informed investors that they should expect increased capital expenditures in 2025 as it builds out its AI computing-power network. But Meta isn't alone. All of the major cloud computing players, including Microsoft, Amazon, and Alphabet, are seeing major demand for their AI computing power, so they'll also be spending more in 2025 with Nvidia. As a result, Nvidia's business is expected to continue growing well throughout next year. But is it enough for Nvidia to attain a $5 trillion market cap? 2025 projections make it seem like like $5 trillion is attainable Looking ahead toward Nvidia's FY 2026 (ending January 2026, which encompasses most of 2025), Wall Street analysts expect 51% revenue and 50% earnings-per-share (EPS) growth. Those are impressive figures and could easily translate to the stock rising an equivalent amount. However, at 45 times forward earnings, the stock isn't cheap. NVDA PE Ratio (Forward) data by YCharts. Nvidia's growth is likely to slow throughout the year, so this valuation may become a bit of a premium as the year goes on. However, given Nvidia's growth rates and how strong of a business it has become, it's a reasonable price to pay for the stock if demand persists through 2026. If Nvidia can deliver these projected results plus indicate that demand in 2026 will be just as strong as demand in 2025, it's entirely reasonable that Nvidia could achieve a $5 trillion market cap by the end of 2025. As a result, the stock looks like a strong buy now.