AI Stock Trends: Beyond Nvidia, Promising Alternatives Emerge

3 Artificial Intelligence (AI) Stock-Split Stocks That Could Help Set You Up for Life | The Motley Fool

Stock splits are sweeping the AI sector. Here's how to take advantage. Back in the dot-com boom era, stock splits became commonplace in response to soaring share prices. Amid the current artificial intelligence (AI) boom, a similar pattern could be developing. Already, several AI companies have split their shares, and more splits could be on the way among the others that are trading at lofty prices. Investors should understand that stock splits don't fundamentally change the value of a stock or the underlying business, but they usually come in the wake of significant share price appreciation, and signal management's confidence that the stock can keep going higher. There's also evidence, according to a Bank of America study, that stocks outperform in the year after they split. While there's no guarantee that any given stock-split stock will beat the S&P 500, it does offer historical evidence that the average stock-split stock does. On that note, these three AI stock-split stocks look like long-term winners. Nvidia (NVDA 3.97%) needs little introduction at this point. The AI chip superstar has paced the sector, gaining roughly 700% since the start of 2023. Nvidia's most recent stock split -- a 10-for-1 split -- took effect after the market closed on June 7, and the stock is down since then. Nvidia continues to show a lot of upside potential even as its market cap is now hovering just shy of $3 trillion. The company has a huge lead in data center GPUs, the cutting-edge chips needed to power AI models like ChatGPT, and it seems likely that its lead will only get wider following the launch of chips built on its new Blackwell platform in the fourth quarter. Additionally, the company is on pace to keep growing rapidly; revenue rose 122% year over year in its fiscal 2025 second quarter to $30 billion. While some investors are concerned about the possibility of an AI sector bubble, there's still plenty of evidence that demand for Nvidia's components is soaring. The latest anecdote to support that theory: Reportedly, Oracle founder Larry Ellison and Tesla CEO Elon Musk recently took Nvidia CEO Jensen Huang to dinner so that they could beg him in person to sell their companies more GPUs. Given its entrenched competitive advantages, surging demand for its wares, and a long development path ahead in generative AI, Nvidia still looks like a smart buy. Super Micro Computer (SMCI 0.07%) is another breakout AI stock. Like Nvidia, its revenue has soared, up 144% in its most recent quarter to $5.31 billion. However, the company's gross margin declined, weighing on profits, and the market bid the stock downward. Later, Supermicro shares plunged after a short-seller attacked the company, and management said its annual 10-K would be delayed. CEO Charles Liang responded to the short-seller's charges, saying that business remains strong. Importantly, he also said that despite the filing delay, the company doesn't anticipate any material changes to its financial results from what it previously reported. Supermicro is known for manufacturing high-density servers that perform especially well in AI applications, and it's dominating the market for liquid-cooled AI servers, giving it a competitive advantage. A great reason to buy the stock now is Supermicro's valuation. It currently trades at a price-to-earnings ratio of just 22, which looks like a dramatic undervaluation, assuming neither of those two issues is material. Supermicro's 10-for-1 stock split is scheduled for Oct. 1. That event could be a catalyst for the stock's rebound. Broadcom's (AVGO 3.90%) business is diversified across cybersecurity, virtualization software, semiconductors, and networking infrastructure. It doesn't have the same level of exposure to AI that Nvidia and Supermicro do, but it's seeing growing demand due to the new technology thanks in part to its switches, networking solutions, and custom accelerators for AI data centers. CEO Hock Tan said he expected the company's revenue from AI to reach $12 billion this year -- roughly a quarter of its total sales. The tech giant also has a long track record of success in growing its business both organically and through acquisitions, in which it typically cuts costs to drive profits higher. In its most recent fiscal quarter, the company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $8.2 billion. That amounted to 63% of its total revenue, a ratio that's nearly as good as Nvidia's. Broadcom executed a 10-for-1 stock split on July 12, and its stock has edged down since then along with the rest of the AI sector. Currently, Broadcom trades at a price-to-earnings ratio of 37, a reasonable level for an AI leader whose profitability should improve as it completes the integration of its massive VMware acquisition. All three of these AI stocks have delivered strong results and look poised to continue doing so. With strong competitive advantages, huge growth opportunities, and affordable valuations, they all look like smart long-term buys.

Meet the New Stock-Split Stock That Outperformed Nvidia in the First Half and Wall Street Thinks Could Almost Double

Nvidia has been a tough act to follow in recent years. The artificial intelligence (AI) chip giant has delivered triple-digit increases in earnings quarter after quarter, and the share price has followed. Nvidia stock has soared more than 2,400% over the past five years, and considering the company's focus on innovation, this stellar performance may continue. Though Nvidia has garnered the greatest share of investor attention in recent times, another tech player actually outperformed this AI powerhouse in the first half of the year. And this company followed in Nvidia's footsteps recently by announcing a stock split, a move to bring a high-flying share price down to earth -- and make the stock more accessible for a broader range of investors. Now, Wall Street predicts this player's gains may be far from over. Let's meet the new stock-split stock that analysts think could nearly double within the coming 12 months... A triple-digit first-half gain And this stock is Super Micro Computer (SMCI 0.07%), a company that saw its stock price soar 188% in the first half, surpassing Nvidia's 149% increase. Though individual forecasts vary, the average Wall Street estimate calls for the stock to climb 90% from today's level. It's important to note that this once high-flying stock has been wading through difficult waters in recent weeks. A short report released by Hindenburg Research, alleging troubles at the company, has weighed on the shares. In an unrelated move, Supermicro delayed the filing of its 10-K annual report, and this has represented an additional headwind. I see these as short-term pressures, but they don't change Supermicro's long-term story. And considering the 20% decline in the stock since the short report, it looks dirt cheap right now -- it trades for only 13 times forward earnings estimates, down from more than 45 times earlier in the year. In recent days, some analysts have highlighted the potential of Supermicro. For example, Needham rated Supermicro a buy in new coverage of the stock -- and Needham expects a gain of 37% in the months to come. Why should we be so optimistic about Supermicro? First, the company has proven its ability to dominate in the area of full rack scale solutions for data centers. Supermicro's servers and other products share many common parts so the company can more quickly build a particular item to suit a customer's needs. The equipment maker also works very closely with all of the top chipmakers -- including Nvidia -- so that it can immediately include their innovations in its products. This has helped revenue in one single quarter surpass annual revenue as recently as 2021. Supermicro's big opportunity Second, Supermicro now faces a major opportunity that could launch a whole new wave of lasting growth for the company. One of the biggest problems facing the data centers of today and tomorrow is the fact that AI workloads produce excessive heat. Supermicro's direct liquid cooling (DLC) technology, once a slow-growth business, now promises to offer explosive growth. The company predicts that within the coming 12 months, 25% to 30% of data centers will be equipped with DLC, and Supermicro will dominate this market. At the same time, Supermicro is preparing for demand for DLC and its equipment in general as it brings online its Malaysia facility -- one that will focus on volume and speed. Considering forecasts of an AI market to reach $1 trillion by the end of the decade, and the key role of data centers in all of this, Supermicro's revenue could continue to climb for quite some time. As for the stock split, Supermicro will trade at its new split-adjusted price as of Oct. 1. This won't change anything fundamental about the company or stock -- valuation and market value remain the same. So, it won't act as a catalyst for share performance, but it is a positive move as it will make it easier for more investors to buy the stock over time. All of this represents a lot of positive points for Supermicro, setting the stage for major growth potential -- and making it a fantastic stock to buy on the dip.

Forget Nvidia: Buy This Magnificent Tech Stock Instead | The Motley Fool

This tech player is on track to prosper in the artificial intelligence market. Nvidia (NVDA 3.97%) has been the stock everyone is talking about for quite some time -- and for good reason. The company dominates the artificial intelligence (AI) chip niche with a market share of about 80%, and this has translated into record earnings. Even better, Nvidia's focus on innovation means its dominance is likely to last. That said, Nvidia's stock isn't cheap, and it has lost some ground recently. It's down by about 7% over the past month, and is off by about 15% from the all-time high it touched this summer. I think that loss of momentum is temporary, though, and believe this top tech company still represents a fantastic long-term investment. But right now, there exists a stock that has recently picked up momentum, is at an earlier stage in its latest growth story, and is inexpensive. This player, too, represents a great long-term investment. That's why, today, I would forget Nvidia and buy this magnificent tech stock instead. So which company am I talking about? One that was long known for its database software, but now is on its way to becoming a key player in the world of AI: Oracle (ORCL 1.86%). The tech company put a focus on cloud infrastructure and services as the AI boom accelerated, and this has turned out to be a smart strategy. Today, the cloud services segment is the company's biggest business, and its operating income and earnings per share have taken off. Other financial metrics are showing amazing growth too. Cloud infrastructure revenue, for example, soared 45% year over year to $2.2 billion in its recently completed fiscal 2024 first quarter. Importantly, its remaining performance obligations surged 53% to $99 billion. This metric of yet-to-be-billed revenue offers visibility into its future growth. I also like the fact that Oracle's return on invested capital, which dropped in recent years, is starting to head higher again -- showing that the company is progressively benefiting from its investments in growth. Now, let's take a look at exactly why Oracle is seeing success. After all, it's a much smaller cloud player than market leader Amazon Web Services (AWS) or Microsoft Azure. Oracle wins on its versatility, allowing customers to use its services directly through Oracle as well as across other cloud services. The company recently struck a deal with AWS and already had similar agreements in place with Microsoft and Alphabet's Google Cloud -- deals that are helping Oracle boost the growth rate of its database business. Its cloud database services revenue rose more than 20% in its most recently reported quarter, and the company expects this area to be the third growth driver, along with cloud infrastructure and strategic software as a service. These agreements with the biggest cloud infrastructure providers mean that if you want to use Oracle products or services, you don't have to choose just one cloud service -- and this flexibility appeals to customers with diverse workloads. The AWS deal, in particular, is big because it offers Oracle exposure to a huge customer base, as AWS is the world's biggest cloud services provider. "AWS customers will get easy and convenient access to the Oracle database when we go live in December later this year," Oracle CEO Safra Catz said. It's also important to remember that we're in the early days of this AI build-out. According to one forecast from the research firm MarketsandMarkets, the AI market is worth about $215 billion this year and will grow to more than $1.3 trillion by the end of the decade. This suggests there's a long path of growth ahead for Oracle. Now, let's take a look at valuation. Oracle trades for 26 times forward earnings estimates, while Nvidia trades at 40 times forward earnings estimates. Considering Oracle's recent performance and future prospects, the stock looks reasonably priced even after its 2024 gains. Oracle stock has climbed by about 58% so far this year as investors applaud its progression in the AI market. All of this means that right now, if you're looking to buy one AI stock, you might want to temporarily forget about Nvidia and instead turn to this bargain player with plenty of room to run -- in the near term and the long term.

Nvidia Is Yesterday's News: These 2 Artificial Intelligence (AI) Stocks Are Poised to Skyrocket Up to 1,050%, According to Select Wall Street Pundits | The Motley Fool

Are these two high-growth artificial intelligence (AI) stocks the next Nvidia? For much of the last two years, no trend has captivated the attention of investors quite like artificial intelligence (AI). The potential for AI-backed software and systems to learn over time without human intervention gives this technology the ability to improve productivity and alter consumer/enterprise consumption habits in most sectors and industries. It's why the researchers at PwC expect the global addressable market for AI to reach $15.7 trillion by the turn of the decade. Thus far, semiconductor behemoth Nvidia (NVDA -1.92%) has been the undisputed beneficiary of the rise of AI. But according to select Wall Street pundits, two other artificial intelligence stocks offer truly eye-popping upside -- up to 1,050%! Between the start of 2023 and shortly after Nvidia completed its historic 10-for-1 stock split in June 2024, its valuation soared from $360 billion to a peak of $3.46 trillion. Although it wasn't the first $3 trillion company, we've never witnessed a market-leading business tack on $3 trillion in value in less than 18 months. Nvidia's expansion has truly been textbook. The company's AI-graphics processing units (GPUs) rapidly became the preferred choice in enterprise data centers focused on running generative AI solutions and training large language models (LLMs). Based on estimates from the analysts at TechInsights, Nvidia has accounted for 98% of the GPUs shipped to data centers in back-to-back years. Plus, with its prized H100 backlogged, it'll likely maintain a near-monopoly like market share in 2024. Exceptional demand and otherworldly pricing power for Nvidia's AI-GPUs has been assisted by the all-important CUDA software platform. CUDA is the toolkit used by developers to build LLMs and get the most out of their Nvidia hardware. Think of CUDA as the hook that usually keeps clients loyal to Nvidia's ecosystem of products and services. But all periods of euphoria eventually come to an end on Wall Street, and Nvidia may very well be yesterday's news. One of the biggest advantages Nvidia possesses is its pricing power. With demand for AI-GPUs overwhelming supply, Nvidia's chips have often commanded a 100% to 300% price premium to rival hardware. But this could soon change. A number of rival companies, including Advanced Micro Devices, are ramping up production of their considerably cheaper AI-GPUs which are, for the moment, in supply. Businesses wanting to gain first-mover advantages may be strongly incented to use these rival chips. Furthermore, Nvidia's four-largest customers by net sales are internally developing AI-GPUs as either complements or eventual replacements to the AI-GPU hardware they've ordered from Nvidia. The writing certainly appears to be on the wall that access to AI-accelerated data center "real estate" will be harder to come by in 2025 and onward. As new chips become available and Nvidia's larger customers supplement their needs with internally developed AI-GPUs, Nvidia is very likely to see its pricing power and gross margin fade. In short, Nvidia's best days are likely in the rearview mirror. But based on the forecast of select Wall Street pundits, this isn't the case for two other potentially high-growth AI stocks. The first artificial intelligence stock that could blow investor's socks off, in terms of upside, is electric-vehicle (EV) manufacturer Tesla (TSLA -0.29%). The CEO and Chief Investment Officer of Ark Invest, Cathie Wood, has pegged Tesla's stock as heading to $2,600 per share by 2029. Based on its share price at the time of this writing, this would translate into eventual upside of a cool 1,050%! The primary thesis behind Ark's Monte Carlo analysis is that autonomous ride-hailing (i.e., robotaxis) will drive much of Tesla's growth. Ark's expected case is for Tesla to generate $1.2 trillion in sales by 2029, 63% of which would originate from its robotaxi operations. What's more, 86% of the $440 billion in forecast earnings before interest, taxes, depreciation, and amortization (EBITDA), would come from autonomous ride-hailing services. Although Tesla is North America's leading EV manufacturer, and the company has done something no other automaker had achieved for over a half-century -- build a new car company from scratch to mass-production -- there are a multitude of reasons to believe Wood's price target on the company won't come anywhere close to reality. The glaring flaw in Wood's Monte Carlo analysis is that it assumes rapid adoption of Tesla's robotaxi. However, Tesla has precisely zero autonomous robotaxis on public roads today, and hasn't surpassed Level 2 full self-driving autonomy for years. By comparison, Mercedes-Benz began selling vehicles with Level 3 autonomous self-driving technology in California and Nevada late last year, and has been developing hands-free Level 4 autonomous driving systems. Tesla has rapidly lost its lead when it comes to autonomous driving capabilities and is highly unlikely to achieve the sales and EBITDA targets Cathie Wood has laid out. To make matters worse, Tesla is losing its grip in the EV space with competition coming out of the woodwork. After kicking off a price war last year that saw Tesla slash the price of its EV models on more than a half-dozen occasions, its operating margin has, predictability, plummeted. The kick in the pants is that these price cuts haven't halted a rise in global EV inventory for the company. Last but not least, a progressively larger percentage of the company's pre-tax income can be traced to regulatory tax credits sold to other automakers and interest income on its cash position. These are unsustainable sources of income and not what you'd expect from a market leader. Suffice it to say, I don't believe Tesla is the "next Nvidia." The other AI stock with tantalizing upside that could make Nvidia yesterday's news is advanced driver assistance systems (ADAS) and autonomous driving technologies company Mobileye Global (MBLY -1.94%). Noticing the next-gen vehicle/EV trend yet? Evercore ISI global automotive and mobility analyst Chris McNally believes Mobileye stock can jump to $35 per share. Though this is below its record-closing high, it would represent a jaw-dropping 216% increase from where shares are trading at the time of this writing. The optimism surrounding Mobileye has to do with the ongoing addition of technology and driver safety features with each new generation of vehicles -- especially electric vehicles. The company's lineup of EyeQ chips is being leaned on to power SuperVision, an end-to-end ADAS system enabled by 11 cameras and autonomous vehicle maps that learn over time. While there's plenty of excitement surrounding this technology, the EV industry is running into challenges that typically plague early stage innovations. The lack of available EV infrastructure, among other factors, has weakened global EV sales in recent quarters and led to reduced demand for Mobileye's solutions. Mobileye Global also pointed to a key customer outside of China delaying the launch of its ADAS system, as well as new tariffs in Europe and the U.S., as added reasons it's had to temper its sales guidance of late. The company's full-year sales guide of $1.64 billion at the midpoint is well below the peak of $1.96 billion that had once been expected in 2024. If there's a silver lining for Mobileye Global, it's that the company closed out the second quarter with $1.2 billion in cash and cash equivalents and had no debt on its balance sheet. Even with lumpy near-term orders, Mobileye possesses exceptional financial flexibility. Though it could take some time for ADAS technology demand to mature, Mobileye's solutions look well-positioned for eventual success.

2 Artificial Intelligence (AI) Stocks to Buy Hand Over Fist Amid the Sell-Off | The Motley Fool

AI stocks are still down from their July peak. Here are two worth buying while they trade at a discount. There's no question that artificial intelligence (AI) stocks have led the charge in the current bull market, but in recent months, that leadership seems to be fading. Some investors even see a potential AI bubble emerging as valuations have arguably gotten ahead of business growth. Plenty of AI stocks trade down from their recent peaks, and the Nasdaq Composite, the tech-heavy index, hit an intraday peak on July 11. The index is down 5.5% from that peak after a recent recovery. Similarly, the VanEck Semiconductor ETF, which is led by the chip stocks that are key in the AI rally, is down 18% from its peak on the same day. Investors got rattled by concerns that big tech companies are overspending on AI, fears of a recession, and questions about when AI will truly breakthrough into mainstream technology, in a similar way to the past transformations like the internet and mobile technology. Despite those concerns, sell-offs like these can offer opportunities to investors. On that note, let's take a look at two AI stocks to buy on the dip. Nvidia (NVDA -1.92%) is an obvious choice at this early stage of the AI boom. And yet Nvidia stock has pulled back 17% from its peak in June, even as the company delivered another round of strong results in its second-quarter earnings report at the end of August. Additionally, there are plenty of other signs that show that demand for Nvidia's products continues to surge. CEO Jensen Huang said just last week that the company is under tremendous pressure to deliver for its customers, as so many businesses are relying on its technology. Additionally, big tech companies continue to insist that they're prepared to spend whatever it takes to be a leader in generative AI technology, which means continuing to buy from Nvidia. Oracle founder Larry Ellison recently told investors that he and Tesla CEO Elon Musk spent a dinner begging Nvidia CEO Jensen Huang for more graphics processing units (GPUs), saying, "Please take our money." Nvidia stock might look expensive at a price-to-earnings ratio of 55, but the business is still growing rapidly, with revenue more than doubling year over year in its most recent quarter. With strong growth expected to continue over the coming quarters, it's worth buying Nvidia at a discount. One of the strongest economic moats in AI belongs to ASML (ASML -2.21%), the leading lithography equipment manufacturer. In other words, ASML makes the machines that chip manufacturers like Taiwan Semiconductor Manufacturing and other foundries use to make chips. ASML is the only company that currently makes extreme ultraviolet lithography systems (EUV), the most advanced chip manufacturing technology, which is used to make chips with nodes as small as 2 nanometers. The company's results tend to be volatile from quarter to quarter as it sells a small number of very expensive machines. It expects a cyclical rebound in demand for its machines in the second half of 2024 and into 2025, calling 2024 a transition year with "investment in both capacity ramp and technology." It also expects AI to drive the industry's recovery. For the third quarter, ASML management sees revenue improving sequentially from 6.2 billion euros to 6.7 billion-7.3 billion euros, which represents a return to year-over-year growth. While concerns about export controls restricting shipments to China have weighed on the stock in recent weeks, the future of the chip fab industry looks brighter than ever, with new foundries planned in the U.S., Europe, and Japan. The CHIPS Act is also allocating tens of billions of dollars to new chip plants in the U.S. so chip production can be diversified away from areas where China can potentially disrupt production (like Taiwan). ASML is likely to be one of the biggest beneficiaries of the CHIPS Act. ASML stock trades down 28% from its peak in July. However, with revenue growth on the rebound and a boom in chip manufacturing shaping up, ASML looks like a smart buy, even with new China chip export restrictions in place.

2 Top Tech Stocks to Buy Right Now | The Motley Fool

Historically, technology has been a ripe field to look for monster winners in the stock market. The Nasdaq-100 Technology Sector index returned 411% over the last 10 years (including dividend reinvestment), blowing away the blue chip-heavy Dow Jones Industrial Average's return of 205%. There are exciting opportunities in technology as enterprises scramble to implement artificial intelligence (AI) in their operations. Here are two profitable tech companies that can deliver outstanding returns. The data center market is exploding. Dell'Oro Group forecasts spending on AI-related infrastructure in the cloud and data center markets to grow 24% per year over the next five years. This is a monster opportunity for Nvidia (NVDA -1.92%), the leading supplier of AI chips. Nvidia's revenue more than doubled over the last year. Its graphics processing units (GPUs) are used by every major cloud service provider, and it has a large base of millions of developers and AI researchers using its accelerated computing platforms to build AI applications. Nvidia has built a reputation for high performance in the GPU market over the last 20 years, and that should serve the company and its shareholders well in the AI era. Nvidia is profiting big time off its AI chip lead. It generated $46 billion in free cash flow on $96 billion of revenue over the last year, which has sent the stock soaring, but the company's run is not over just yet. Data centers are turning to Nvidia's chips to speed up the training of AI models. Faster training means lower computing and energy costs, which is why data center spending is not showing signs of slowing down. The power these data centers require could increase by 160% by 2030, according to Goldman Sachs. Nvidia could see more growth in its data center segment as it addresses this need. Nvidia's Blackwell computing platform launching later this year will help companies bring generative AI applications to market faster while reducing energy consumption up to 25 times over the previous generation. Analysts expect Nvidia to grow earnings at an annualized rate of 36% over the next several years. That's more than enough for shareholders to double their money by 2029. Alphabet's (GOOGL 0.31%) (GOOG 0.33%) Google is one of the most valuable brands in the world, and it is rolling out AI across all its products which could benefit its growth prospects. Alphabet reported strong financial results over the last year as the digital ad market recovered. Revenue grew 14% year over year in Q2, up from the year-ago quarter's 7% growth rate. Google continues to invest in improving its products with new versions of its Gemini AI models while still posting a solid 25% year-over-year increase in operating income. Google's dominance in Search helped it bring in $64 billion in advertising revenue last quarter -- a year-over-year increase of 11%. AI should drive more usage of Google's products and grow its ad revenue over the long term. For example, the new AI Overview feature has already helped millions of users get answers to topics. Google has found that people who use AI Overview tend to use Search more frequently. While analysts expect earnings to grow at double-digit rates over the long term, the stock continues to trade at a relatively low price-to-earnings ratio against those growth expectations. One reason for this is government scrutiny over Alphabet's dominance. The company recently lost an antitrust case over anticompetitive behavior. But this doesn't take away from Alphabet's advantages in having quality data to train AI models, in addition to enormous cash resources and billions of users across its products. The stock's modest valuation is too attractive to pass up. Analysts expect the company to post 14% earnings growth in 2025, which is more than enough to justify a modest forward P/E of 18. Investors should earn magnificent returns over the next five years.

2 Top Tech Stocks to Buy in September | The Motley Fool

With the artificial intelligence (AI) market expected to triple in size through the end of the decade, investors who choose the right tech stocks should do very well. Statista projects the AI market to climb to $826 billion by 2030. Here are two stocks that will help you profit from this opportunity. The rapid adoption of AI is driving phenomenal growth for leading AI chip supplier Nvidia (NVDA -1.92%). The stock soared over the last year, but Nvidia continues to see growing interest from enterprises using cutting-edge AI models and applications, which spells more revenue growth and new highs for the shares. Data centers are still in the process of shifting from traditional computing using central processing units (CPUs) to accelerated computing for AI workloads using the far more powerful graphics processing units (GPUs). Nvidia's data center revenue grew 154% year over year last quarter, driven by strong demand for GPUs and networking products. Nvidia posted strong growth for many years, but the shift to AI has accelerated the company's growth. Companies choose Nvidia because it is available in every cloud. Importantly, customers can access a library of software programming models to get the most out of the GPUs across a variety of use cases, whether for AI workloads or running 3D graphics. The added value is one reason why Nvidia generates high margins on these chips, which helped drive a year-over-year increase of 168% in earnings per share last quarter. Management expects to see continued growth in the data center business in the near term, driven by its next-generation Blackwell AI computing platform and growing interest in generative AI software development. Analysts expect Nvidia to report earnings growth of 41% next year, which is enough to justify the stock's forward price-to-earnings (P/E) ratio of 40. The growing interest in AI software is a huge opportunity for ServiceNow (NOW 0.52%). The stock is hitting new highs following the company's latest financial results that showed strong demand for its AI-powered Now Assist software. Companies are increasingly looking for ways to improve productivity, and that benefits ServiceNow. It helps companies build applications that simplify tasks and save time with automation. The company consistently grew its revenue at double-digit rates for several years, but a 23% year-over-year increase in subscription revenue last quarter shows a big opportunity ahead. ServiceNow is having success closing large deals. Enterprises are clearly seeing value in ServiceNow's software, particularly its AI-powered Now Assist, and how it can help them improve profitability. Demand for Now Assist is booming, with net new annual contract value doubling over the previous quarter. It's been adopted by several companies, including Merck, Adobe, and Dell Technologies. The stock trades at a high forward P/E of 64. But the high valuation reflects ServiceNow's recurring revenue from subscriptions and expectations for profitable growth over the long term. The Wall Street consensus calls for earnings to grow 32% on an annualized basis over the next several years. The stock should be a long-term winner for shareholders.

A Bull Market Is Here: 2 Incredibly Innovative Growth Stocks Down 14% and 59% to Buy Right Now | The Motley Fool

These two companies are at the edge of innovation, which should help their stocks deliver market-crushing returns. Technological innovation has been one of the biggest catalysts for stock market growth over the last century, and that's unlikely to change anytime soon. For investors who back the right companies and allow growth trends and competitive wins to stack up over the long term, incredible returns are possible. With that in mind, read on to see why two Motley Fool contributors think that buying these two stocks right now while they're still down significantly from previous highs looks like a good move. Keith Noonan: Nvidia (NVDA -1.92%) is the company responsible for the advanced graphics processing units (GPUs) that are at the heart of the artificial intelligence (AI) revolution. It's also the market's most influential and intensely monitored battleground stock. Even after a 14% pullback from an all-time high reached in June, the company's stock is still up roughly 136% in 2024. Spurred by incredible demand from large data center customers, including Microsoft and Meta Platforms, Nvidia's sales and earnings growth has been nothing short of incredible. But some investors also wonder how long the company can sustain its stellar sales momentum and margins. With a market capitalization of roughly $2.86 trillion as of this writing, Nvidia's valuation has soared more than 2,480% over the last five years, and it stands as the world's third-most valuable company. There should be little doubt that it's a high-risk stock, but I also think that it's still one worth owning for long-term investors. In the second quarter, Nvidia posted a gross margin of 75.1% -- down from the record margin of 78.4% it posted in Q1. The company also guided for a gross margin of roughly 74.5% in the current quarter. The company is still posting fantastic margins, but it's not unreasonable to think that the business's gross margin may have hit a peak for now. On the other hand, Nvidia's outlook remains very promising. After growing sales 122% year over year in Q2, Nvidia expects Q3 sales to jump 79% compared to 2023's Q3. It also has a major performance catalyst on track to begin contributing in Q4 and then be an even bigger performance driver in the next fiscal year. Nvidia will launch its next-generation Blackwell chips in this year's final quarter, and the hardware is poised to deliver major AI performance improvements and huge revenue for Nvidia. CEO Jensen Huang has said he expects the Blackwell processors to be the company's most successful products ever. While Nvidia could price its Blackwell processors at levels that significantly boost gross margins, it doesn't necessarily have to go that route. The company is crushing the competition in the market for advanced GPUs and accelerators for AI, and a relatively small sacrifice on the margin front could help it secure advantages that shore up its long-term positioning in today's most important tech trend. For long-term investors looking for ways to play AI trends, Nvidia stock remains a worthwhile portfolio addition. Lee Samaha: There's no way to sugarcoat the situation; machine vision company Cognex's (CGNX -1.23%) end markets are struggling in 2024. Still, much of that struggle is already reflected in the share price (down 60% from its all-time high). But long-term investors aren't buying stocks for a few quarters' earnings but rather for their long-run earnings potential. Cognex and its machine vision solutions continue to have substantial growth opportunities. Using automated machine vision in manufacturing or logistics (such as e-commerce fulfillment) helps improve quality, consistency, efficiency, costs, and safety. It also creates digital information used in data analytics to improve processes. Management sees its end markets growing at 13% annually for the next several years, with Cognex slightly outgrowing its markets by 15% annually. Over the near term, Cognex is dealing with a lowering of growth expectations in two of its three key end markets: automotive and consumer electronics. Raised interest rates over the past few years dampened expectations for automotive sales this year, including electric vehicles (EVs), and Cognex's technology is utilized in EV battery production. Relatively high interest rates also challenged consumer discretionary spending (for example, on smartphones, where Cognex's machine vision helps layer screens). The result is a dampening of growth prospects in 2024. Given that the company tends to report larger orders in the spring and summer (as its customers gear up for rising production in the fourth quarter), it's unlikely that Cognex will have overly positive newsflow on orders before the spring of 2025. Still, these trends won't last forever, and a lower interest rate environment in 2025 could spur a release of pent-up investment spending in automotive and consumer electronics. Meanwhile, Cognex's logistics end market is already in recovery mode. That suggests that the weakness in the share price offers an ideal buying opportunity for a company with an excellent track record of growth.

Meet the Supercharged Growth Stock Headed to $10 Trillion by 2030, According to 1 Wall Street Analyst | The Motley Fool

Numerous growth drivers and strong tailwinds should combine to drive this artificial intelligence (AI) pioneer higher. There's no denying that artificial intelligence (AI) has generated a lot of buzz since early last year. Recent technological advances have taken these algorithms to the next level, enabling them to generate original content of all stripes, improve productivity, and streamline processes. Companies on the leading edge of this trend have profited from these advances in technology. In fact, six of the world's seven most valuable companies, when measured by market cap, have embraced the paradigm shift of generative AI and staked their claims to profits from these next-generation systems. Topping the charts are Apple and Microsoft, the only two companies that currently boast a market cap of more than $3 trillion. However, one company that appears ordained to make a name for itself as a founding member of the $10 trillion club is Nvidia (NVDA 3.97%). The pioneer in graphics processing units (GPUs) is nipping at the heels of the current leaders with a market cap of $2.8 trillion but seems destined to break new ground. Let's look at the numerous growth drivers that could send Nvidia stock to new heights. Nvidia revolutionized gaming a quarter of a century ago when the company pioneered the GPU, which produced lifelike images in video games. The secret to its success is parallel processing, or the ability of these advanced chips to process a multitude of mathematical calculations simultaneously. It wasn't long before Nvidia realized the vast potential of this discovery and pivoted to tailor this technology to a host of other applications. The company has since adapted GPUs to power cloud computing, data centers, machine learning, autonomous driving, generative AI, and more. Over the past 10 years, Nvidia's revenue has grown by 2,350% (as of this writing), while its net income has surged 9,490%. While it hasn't all been in a straight line, the company's consistently strong performance has driven impressive growth in its stock price, which has soared 23,110%. In its fiscal 2025 second quarter (ended July 28), Nvidia delivered record revenue of $30 billion, up 122% year over year and 15% sequentially. This drove diluted earnings per share (EPS) of $0.67 up 168%. The star of the show was the data center segment, which includes processors used for cloud computing, data centers, and -- of course -- AI. Revenue for the segment surged 154% to $26.3 billion, driven by insatiable demand for AI. There's likely much more demand ahead. Analysts at Goldman Sachs Research estimate the economic impact of AI at $7 trillion by 2030. Furthermore, the improving macroeconomic backdrop could help accelerate adoption, which would be a boon to Nvidia. There's no question that AI is currently Nvidia's biggest opportunity, but it's far from the only one. Let's not forget that, until recently, GPUs for gaming were the company's cash cow, while AI played second fiddle. During the economic downturn, many gamers made do with their existing processors, waiting for the specter of inflation to subside. As the economic outlook continues to improve and graphics cards come to the end of their useful lives, there's plenty of pent-up demand that could fuel a long overdue upgrade cycle, and Nvidia stands to benefit the most. In the first quarter, Nvidia controlled 88% of the discrete desktop GPU market, according to Jon Peddie Research. Furthermore, demand is expected to soar over the coming five years, jumping from $3.6 billion in 2024 to $15.7 billion by 2029, a compound annual growth rate (CAGR) of 34%, according to Mordor Intelligence. The market for gaming processors is ripe for a recovery, a trend that benefits Nvidia. There's also the data center market, which will be driven by the growing adoption of cloud computing. Many businesses are moving their data to the cloud, foregoing on-site storage, another trend that favors Nvidia. It controls an estimated 95% of the data center GPU market, according to Angelo Zino, senior equity analyst at CFRA Research. It's estimated that the data center market will climb from $302 billion in 2024 to $622 billion by 2030, a compound annual growth rate of 10%, according to data provided by Prescient and Strategic Intelligence Market Research. Nvidia's supremacy and the growing market puts the company in the pole position of another opportunity. Generative AI isn't the only game in town. The company has a virtual monopoly in the machine learning market, an established branch of AI. The company controls an estimated 95% share of that market, according to New Street Research. There are other areas that aren't material to Nvidia's growth but could eventually make a meaningful contribution. Self-driving cars aren't yet ready for prime time, and quantum computing is still largely experimental, but either could be a catalyst for the next stage of Nvidia's growth. This helps illustrate the point that while generative AI is at the heart of Nvidia's recent run-up, other opportunities abound. Nvidia currently sports a market cap of roughly $2.78 trillion, which means it will take stock-price gains of 260% to drive its value to $10 trillion. According to Wall Street, Nvidia is poised to generate revenue of nearly $113 billion in fiscal 2025, giving it a forward price-to-sales ratio (P/S) of roughly 24.7. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $405 billion annually to support a $10 trillion market cap. Wall Street is currently forecasting revenue growth for Nvidia of 47% annually over the next five years. If the company reaches that watermark, it could achieve a $10 trillion market cap as soon as 2029. But don't take my word for it. Beth Kindig, CEO and lead tech analyst of the I/O Fund, has an estimate that's eerily similar: We believe Nvidia will reach a $10 trillion market cap by 2030 or sooner through a rapid product road map, it's impenetrable moat from the CUDA software platform, and due to being an AI systems company that provides components well beyond GPUs, including networking and software platforms. Given the company's multiple avenues for growth and the accelerating adoption of AI, I think Kindig hit the nail on the head. There's a caveat, of course. Given Nvidia's parabolic rise since early last year, any weakness by the company -- real or perceived -- could crush the stock price, at least temporarily. We've seen an example just recently when Nvidia lost nearly a quarter of its value over six weeks between June and July, as investors became skittish about rumors of a delay in the release of its next-generation Blackwell platform. That said, I would submit that 36 times forward earnings is a reasonable price to pay for a company at the cutting edge of one of the biggest paradigm shifts in technology in a generation.

Prediction: Nvidia Stock Is Going to Soar in the Remainder of 2024 | The Motley Fool

Nvidia (NVDA 3.97%) stock jumped 150% in the first half of 2024, but it has been in a slump since mid-July as investors digested some potential headwinds. There was a rumored delay with the company's latest artificial intelligence (AI) chips for the data center, which are responsible for the majority of the company's revenue. Analysts have also questioned how long Nvidia's top customers will continue spending billions of dollars on their AI aspirations. However, those concerns might have been put to rest over the last few weeks. Here's why Nvidia stock could soar to new highs before the end of 2024. Nvidia's flagship H100 graphics processor (GPU) for the data center set the benchmark for the AI industry last year. GPUs are designed for parallel processing, which means they can handle multiple tasks at once while maintaining a high throughput. They also have built-in memory so they are ideal for processing large volumes of data, which is critical when training AI models and performing AI inference. According to Nvidia CEO Jensen Huang, data center operators could spend $1 trillion building GPU infrastructure over the next few years. That presents a substantial opportunity, which is why the company continues to design new chips with more processing power and better energy efficiency to stay ahead of the competition. Nvidia is now shipping its new H200 GPU, which can perform AI inference at almost twice the speed of the H100, while consuming half the amount of electricity. But the company recently unveiled an entirely new GPU architecture called Blackwell, which promises an even greater leap in performance. The new Blackwell-based GB200 NVL72 system, for example, will perform AI inference at a staggering 30 times the pace of the equivalent H100 system. Each individual GB200 GPU will be priced between $30,000 and $40,000, which is similar to what many customers originally paid for the H100, so it's going to drive an incredible improvement in cost efficiency. As a result, demand is likely to significantly outstrip supply. In fact, Huang says Blackwell GPUs will bring in billions of dollars in revenue in the fourth quarter of fiscal 2025 (which begins in November) as the company ramps up shipments to customers, squashing previous rumors that the new chips could be delayed by months. Huang says data center operators can earn $5 in revenue over four years for every $1 they spend on GPUs, by renting the computing power to AI developers. That's why the world's largest cloud providers, like Microsoft, Amazon, and Oracle, are clamoring to get their hands on as many chips as possible. Other technology companies also want more chips to develop AI for their own purposes. Tesla is aiming to bring a cluster of 50,000 GPUs online by the end of 2024 to further train its AI-based self-driving software. Meta Platforms wants to have a whopping 600,000 H100 equivalents in action by the end of the year to train the next iteration of its Llama large language models (LLMs), which will power new AI features on Facebook and Instagram. Unfortunately for them, Nvidia can't keep up with demand. Oracle chairman Larry Ellison said he recently went to dinner with Huang, alongside Tesla CEO Elon Musk. He and Musk apparently begged Huang to take more of their money for additional GPUs. It's no surprise supply is tight. Microsoft alone spent over $55 billion on capital expenditures (capex) in fiscal 2024 (ended June 30), most of which went toward AI data center infrastructure and chips. Similarly, Amazon says its capex spending will top $60 billion in calendar 2024. That's how Nvidia was able to generate a record $26.3 billion in data center revenue during its recent fiscal 2025 second quarter (ended July 28) alone, which was up 154% from the year-ago period. The result could have been even stronger if not for supply constraints. Nvidia stock is currently trading 15% below its record high, but I think it will recover that ground (and then some) in the coming months. Based on the company's trailing-12-month earnings per share of $2.20, its stock trades at a price-to-earnings (P/E) ratio of 52.5. That's considerably more expensive than the tech sector as a whole, as represented by the 30.8 P/E ratio of the Nasdaq-100. However, the stock market is a forward-looking machine and Nvidia's fiscal 2026 begins at the end of January 2025, which is only a few months away. I think investors will soon start pricing the stock based on its potential earnings in the new year. Wall Street expects Nvidia to deliver $4.02 in earnings per share during fiscal 2026, which places its stock at a forward P/E ratio of just 28.7. From that perspective, it actually looks quite cheap! Microsoft, Oracle, and Meta Platforms are just some of the companies that have explicitly said they will increase their capex spending on AI in the coming year. Since they are among Nvidia's biggest customers, it reduces some of the uncertainty surrounding Nvidia's potential financial results next year. Therefore, I predict Nvidia stock will surpass its record closing high of $135.58 by the end of 2024.

Prediction: This $80 Billion Market Could Be the Next Big Growth Driver for Nvidia Stock | The Motley Fool

Nvidia has built a solid position for itself in this fast-growing data center niche that could help generate sizable revenue for the company in the long run. Graphics processing units (GPUs) have been Nvidia's (NVDA -1.59%) bread-and-butter business for a long, long time. The company initially made its name producing GPUs meant for deployment in personal computers (PCs) for gaming and content creation, before eventually striking gold with its data center GPUs that are now in red-hot demand thanks to artificial intelligence (AI). As it turns out, data center compute chips now produce the majority of Nvidia's revenue. The company sold $22.6 billion worth of data center GPUs in the second quarter of fiscal 2025 (which ended on July 28). The segment's revenue shot up 162% year over year, accounting for 75% of the company's top line. However, there is another niche within the data center business where Nvidia is now gaining impressive traction. This particular business segment is now bigger than Nvidia's gaming business, and it could turn out to be a key growth driver for the company in the long run. Here's a closer look at this emerging business that could supercharge Nvidia's growth. Nvidia sells two types of data center chips. The first are the GPUs, which are already generating several billion dollars in revenue for the company each quarter. The second type of Nvidia's data center chips is its networking chips, which are also selling like hotcakes as the company's latest quarterly results show. Nvidia sold $3.7 billion worth of networking chips in the previous quarter, up 114% from the same quarter last year. The company's networking revenue in the first half of the fiscal year stood at $6.8 billion, translating into an annual revenue run rate of nearly $14 billion. The global data center networking market is estimated to generate $37.6 billion in revenue this year. If Nvidia indeed ends fiscal 2025 with $14 billion in data center networking revenue, it would end up controlling 37% of this market. What's worth noting here is that Nvidia is reportedly growing at a faster pace than the data center networking space, which has received a major shot in the arm thanks to the advent of AI. According to market research firm Dell'Oro Group, the size of the data center switching market is likely to expand by 50% thanks to the growing need for switches deployed in back-end AI server networks. The researcher sees spending on switches used in back-end AI servers hitting $80 billion over the next five years, which would be nearly double the size of the current data center switch market. We have already seen that Nvidia is enjoying a solid share of this market, and Dell'Oro points out the same. The research firm says that the InfiniBand networking platform is currently dominating the market for AI back-end networks, and it is worth noting that Nvidia offers networking products based on this networking communications standard. Nvidia sells InfiniBand adapters, switches, data processing units (DPUs), routers, gateways, cables, and transceivers to customers. Dell'Oro, however, points out that the Ethernet-based networking standard could eventually overtake the InfiniBand standard in the next few years. The good news for Nvidia investors is that Nvidia has already set its sights on the Ethernet AI networking platform. It claims that its Spectrum-X networking platform is the world's first Ethernet networking platform for AI and is capable of accelerating AI networking performance by 1.6x when compared to traditional Ethernet. Nvidia management's comments on the August earnings conference call suggest that Spectrum-X has gained terrific traction among customers. According to CFO Colette Kress: "Ethernet for AI revenue, which includes our Spectrum-X end-to-end Ethernet platform, doubled sequentially with hundreds of customers adopting our Ethernet offerings. Spectrum-X has broad market support from OEM and ODM partners and is being adopted by CSPs, GPU cloud providers, and enterprises, including xAI to connect the largest GPU compute cluster in the world." Kress says that Spectrum-X is "well on track to begin a multibillion-dollar product line within a year." So, it won't be surprising to see Nvidia eventually cornering a sizable portion of the data center networking market. The rate of growth of Nvidia's networking business means it is growing at a faster pace than the data center networking market right now, which is why it won't be surprising to see it capture a bigger share of this space in the future. But even if the company holds on to its current market share of nearly 40% after five years, its annual networking revenue could hit $32 billion (based on the $80 billion market size projected earlier). That would be a nice jump from the current annual revenue run rate of $14 billion in the networking business. Throw in the rosy prospects of the overall AI chip market, which is expected to clock $311 billion in annual revenue in 2029, and it won't be surprising to see Nvidia's data center business becoming even bigger in the long run than it is right now. Not surprisingly, analysts are expecting Nvidia's earnings to increase at an annual rate of over 52% for the next five years. That's why investors looking to add an AI stock to their portfolios should consider buying Nvidia right away as it is currently trading at 42 times forward earnings, a discount to the U.S. technology sector's average price-to-earnings ratio of 45.