AI Stocks Gain Momentum: Billionaires and Investors Eye Potential Winners

3 Artificial Intelligence (AI) Stocks I Would Buy Over Nvidia Right Now | The Motley Fool

The market is full of AI stocks that don't have nearly the price tag of Nvidia. Nvidia has been the best artificial intelligence (AI) stock to own for the past year and a half. But investors are starting to profit from their huge gains and realize that some of the lofty projections will be difficult to reach. As a result, some might be looking elsewhere for top-tier AI investments. I have three that I think are worthy competitors that could outperform Nvidia. Taiwan Semiconductor Manufacturing (TSM 0.90%) is the world's largest contract chipmaker. If a high-tech device has a chip in it, chances are it originated from TSMC, as it's known for short. TSMC believes that AI-related chips will be a huge growth avenue. Management projects a 50% compound annual growth rate (CAGR) for these chips through 2027, by which time this emerging segment will make up more than 20% of its overall business. That's massive growth for a significant part of its business, making the company a fantastic AI stock pick. Management also believes its total revenue will have a CAGR between 15% and 20% over the next few years, which is strong for a company as large as TSMC. For just 25 times forward earnings, you can own one of the most dominant chip manufacturers available, one that will be a huge part of nearly every new innovation. Meta Platforms (META 0.28%) is probably better known by the social media companies it owns: Facebook, Instagram, Threads, WhatsApp, and Messenger. Nearly all of Meta's revenue comes from advertising on these platforms, allowing it to fund its AI research. Its generative AI model, Llama, is one of the best available and is currently being integrated throughout the company's various platforms, whether you are aware of it or not. Facebook has already launched generative AI features that allow advertisements to be tweaked depending on who is viewing them, which should make ads more effective. Meta's AI platform has many other uses, like integrating it with some of its augmented reality hardware. Management has the cash cow of its ad business to fund research that practically no other company (except Alphabet) can match. Yet, the stock trades for just 24 times forward earnings. Meta is a no-brainer buy right now. You get its established dominant ad business, as well as the upside of its AI offerings. Alphabet is in a similar position as Meta. Its ad platform funds its AI research, but it must play catch-up to the undisputed generative AI model: ChatGPT. The latest iterations of Alphabet's Gemini model have been fantastic and outperformed ChatGPT in several key tests. The company has a large cloud computing business, Google Cloud. Much of the business world was already moving toward cloud computing, but the push for AI integration has only accelerated this movement. Companies now need access to vast amounts of computing power to train their AI models, and renting it from a provider like Google Cloud is a great idea. Despite its dominance in these key areas, Alphabet's stock is pretty cheap. Alphabet is cheaper than the broader market, with a forward price-to-earnings ratio (P/E) of 21, compared to the S&P 500's 23. I don't think Alphabet is a below-average business, though, which makes it a fantastic buy, especially considering its AI tailwinds.

2 AI Stocks to Buy in September | The Motley Fool

Investors can profit off the burgeoning AI market with these industry leaders. The market for artificial intelligence (AI) could reach $826 billion by 2030, according to Statista. Investors who stick with top suppliers in data center hardware and enterprise software should earn excellent returns, as AI investment ramps up in these mission-critical areas. Here are two outstanding AI stocks to buy right now. Nvidia (NVDA 0.69%) has long dominated the market for graphics processing units (GPUs), and it continues to show a market share lead in AI. Earlier this year, Tesla CEO Elon Musk said, "There is currently nothing better than Nvidia hardware for AI." Its GPUs are the gold standard for playing video games and training self-driving cars. Nvidia's gaming business has been pressured by weak consumer spending, but its data center revenue is exploding. The company just issued another blockbuster earnings report with total revenue up 122% year over year. It expects revenue to be up about 80% year over year in the next quarter. Nvidia said nearly half of its data center revenue was from large cloud service providers, including Amazon, Microsoft, and Alphabet's Google. These companies generated $182 billion in free cash flow over the last year, so they can afford to make long-term commitments to building out their data center infrastructure, which is good for Nvidia. And data centers need many components beyond GPUs to function properly, such as networking equipment, servers, and software. Nvidia is building a competitive advantage in offering everything a data center needs to build what are essentially "AI factories," as management likes to call them. Revenue from networking grew 114% year over year last quarter. While this business generated only 12% of Nvidia's total revenue, it could become a larger contributor to the business over the next few years. Management said its Spectrum-X ethernet platform is seeing broad adoption from enterprise customers and is on track to become a multibillion-dollar product line within the next year. The company is not just selling a chip. It's selling interconnect cables, software, and other services that require an understanding of customers' needs. This is leading to closer ties with AI researchers and data centers, and it should enable Nvidia to grow revenue over the long term and deliver outstanding shareholder returns. ServiceNow (NOW 0.42%) is an enterprise software supplier that takes all of a company's data across different departments and creates a single portal to build apps and workflows. The company has consistently delivered year-over-year revenue growth of 20% or more in recent years. Even in a difficult business environment that is pressuring enterprise spending on software this year, ServiceNow continues to post strong growth that speaks to the opportunity ahead. In the second quarter, the company signed 88 deals worth more than $1 million in customer account value, an increase of 26% over the year-ago quarter. It is seeing strong growth for its Now Assist generative AI platform, its fastest-growing new product in its history. Companies are signing up because of the tremendous value the platform offers through streamlining business processes and increasing worker productivity. For example, the city of Los Angeles used ServiceNow's platform during the pandemic to build a COVID test-appointment app within days, which highlights how its platform can help significantly reduce software development time. Overall, ServiceNow has 1,988 customers paying more than $1 million in customer account value, but it's noteworthy that the largest deals -- over $20 million in account value -- grew 40% year over year. It's a great sign that the company is seeing rapid adoption of generative AI services. Companies in banking, healthcare, semiconductors, and more industries are showing interest. This bodes well for ServiceNow's competitive position as more companies integrate AI in their operations. The generative AI market specifically is estimated to be worth $34 billion in 2024 and grow to $356 billion by 2030, according to Statista. ServiceNow is well positioned to benefit from this opportunity. The stock is up 1,200% over the last 10 years, but it's not too late to buy shares. ServiceNow estimates its long-term addressable market at $275 billion, compared to its trailing revenue of just under $10 billion. It should be able to grow revenue by double digits for many years and deliver market-beating shareholder returns.

These Billionaires Made Big Bets on These AI Stocks, but Should You Buy Them? | The Motley Fool

These elite growth stocks are down after reporting strong financial results last quarter. With the major market indexes sitting close to new highs, some of the most prominent billionaire investors continue to favor well-entrenched industry leaders that are involved in artificial intelligence (AI). Chase Coleman's net worth is estimated at more than $5 billion, according to Forbes. His firm, Tiger Global Management, continues to hold a stake in Nvidia (NVDA 3.54%), the leading supplier of AI chips, which has delivered a 447% return to shareholders over the last 18 months. Andreas Halvorsen is CEO of Viking Global Investors and has a net worth estimated at more than $7 billion. The firm oversees a multibillion-dollar stock portfolio, and its largest investment in the second quarter was Amazon (AMZN 2.34%). These stocks are showing weakness following their latest earnings results, but their lower share prices might be setting up more gains in 2025. Here's why. Chase Coleman's firm disclosed an equity portfolio worth over $21 billion at the end of the second quarter. The sixth-largest position in the portfolio was leading AI chip supplier Nvidia, a stake worth $1.1 billion. Shares of Nvidia recently pulled back off their highs following its latest earnings results. The company posted another strong quarter, with revenue up 122% year over year, but the stock's advance over the last year left investors looking for better guidance for near-term growth. Nvidia is gearing up for the launch of its next-generation Blackwell graphics processing unit (GPU). Management expects the chip to start generating billions in revenue in the fiscal fourth quarter, but next quarter's guidance calls for revenue to be approximately $32.5 billion. While that represents an impressive year-over-year increase of about 80%, Wall Street analysts were looking for more. Nvidia's near-term guidance was not as strong as investors wanted, but it's a positive sign that the company continues to experience strong demand for the current generation of GPUs, while the upcoming Blackwell chip should drive strong revenue next year. With the stock down, investors have a great opportunity to buy shares at a better value point. The stock is now trading at a price-to-earnings (P/E) ratio of 27, which is an average valuation for the S&P 500 index. The stock's recent dip could be setting up for another run next year. Looking into 2025, the biggest risk to Nvidia's momentum would be a slowdown in spending across the data center market, but Tiger Global seems to see more upside potential in the stock. The firm maintained its position and didn't sell any shares in the second quarter. In the recent earnings call, Nvidia said that demand for both the H200 and Blackwell GPUs is already running ahead of supply, which points to another year of robust growth that could send the stock to new highs next year. Andreas Halvorsen's Viking Global Investors disclosed a stock portfolio worth more than $26 billion at the end of Q2. Its largest holding was Amazon, with a stake worth $1.7 billion. Amazon shares are down for reasons similar to Nvidia. The stock entered the second-quarter earnings report trading at a higher valuation, which meant investors had high expectations for the company's outlook. Amazon continued to show significant increases in operating profit and accelerating revenue growth in cloud services, but third-quarter guidance was lower than expected. Amazon expects third-quarter operating profit between $11.5 billion to $15 billion, which doesn't show improvement over the previous quarter's operating profit of $14.7 billion, but managers said during the earnings call they still see "a number of opportunities to further reduce costs," which signals more profitable growth to come. Amazon typically sees headwinds to operating profit during Prime Day deals when retail prices are discounted. However, the company continues to invest in areas that should see further margin improvement in the retail business over the long term, such as automation and robotics, expanding same-day delivery capabilities, and further optimizing inventory placement at regional facilities. Amazon is also ramping up investments in generative AI and cloud computing infrastructure to support growth in Amazon Web Services. Most global IT spending is still on-premises, which provides a long runway of growth for Amazon's most profitable business. The shares are worth buying on the dip. The stock is trading at a fair forward P/E of 30 based on 2025 earnings estimates. Analysts expect Amazon's earnings to grow 23% per year over the next several years. Assuming the stock continues to trade at the same P/E, the stock should be worth a lot more in another five years.

Forget Nvidia: Billionaires Are Seemingly Infatuated With These 2 Hypergrowth Stocks Instead | The Motley Fool

Wall Street's artificial intelligence (AI) darling was sent to the chopping block in the second quarter, with billionaire investors favoring two other supercharged growth stocks. Between a steady stream of economic data releases and thousands of companies lifting the hood on their operating results every three months, it can be easy for investors to miss an important announcement. Last month, one of the most-critical announcements of the quarter likely went under the radar for some investors. On Aug. 14, institutional investors with at least $100 million in assets under management were required to file Form 13F with the Securities and Exchange Commission. A 13F gives investors a concise snapshot of which stocks Wall Street's brightest investment minds purchased and sold in the latest quarter. Even though this information can be up to 45 days old when filed, 13Fs still offer valuable clues about which stocks, industries, sectors, and trends are piquing the interest of top money managers -- including billionaire investors. Perhaps the biggest surprise of the June-ended quarter is that, while artificial intelligence (AI) is still a popular trend, billionaires weren't shy about parting ways with shares of Nvidia (NVDA 3.54%). But while Nvidia was shown to the door, 13Fs make clear that billionaire investors were seemingly infatuated with two other hypergrowth stocks. The June-ended quarter marked the third consecutive quarter that at least seven prominent billionaire asset managers were sellers of Nvidia stock. The latest round of sellers included (total shares sold in parenthesis): Considering that Nvidia's shares have gained 603% since 2023 began, through the closing bell on Sept. 6, profit-taking is a valid reason that likely explains some of this selling activity. But there's more to this story than just billionaires cashing in their chips for tax or diversification purposes. To start with, investor expectations for the AI revolution are probably too lofty. For 30 years, every highly touted innovation and technology has endured a bubble-bursting event early in its existence. This has been a reflection of investors consistently overestimating the uptake of new technologies/innovations by consumers and businesses. Since most companies lack a clearly defined plan for how they'll monetize AI, it's looking likely that artificial intelligence is simply the next in a long line of hyped bubbles. Rapidly growing external and internal competition represents another reason for billionaire investors to fade Nvidia. Despite Nvidia's AI-graphics processing units (GPUs) having clear computing advantages over external competitors, the company's extensive chip backlog, coupled with the considerably cheaper price point for non-Nvidia AI-GPUs, is liable to coerce at least some businesses to turn to its competitors. What's more, Nvidia's four-largest customers by net sales, which are all members of the "Magnificent Seven," are internally developing AI-GPUs that'll be used in their data centers. The writing is on the wall that Nvidia's chips are going to miss out on valuable data center real estate moving forward. But while billionaire money managers were busy dumping shares of Nvidia in the second quarter, they were actively piling into the following two supercharged growth stocks. The first high-octane growth stock that billionaire investors were drawn to in the June-ended quarter is e-commerce leader Amazon (AMZN 2.34%). Form 13F filings show that five top-tier billionaire investors were buyers, including (total shares purchased in parenthesis): Although most people are familiar with Amazon because of its world-leading online marketplace, this operating segment isn't why these five billionaires purchased shares of Amazon during the second quarter. The primary lure for Amazon as an investment is its globally leading cloud infrastructure service platform. Tech analysis firm Canalys pegged Amazon Web Services (AWS) worldwide market share at 33%, as of June 2024. AWS has a sustained double-digit growth rate, is pacing more than $105 billion in annual run-rate sales, and is consistently responsible for between 50% and 100% of Amazon's operating income. AWS is also Amazon's vessel to take advantage of the rise of AI. The company plans to deploy generative AI solutions to help AWS clients improve their business and better reach consumers. The enterprise cloud and AI revolution are still in their early innings, which bodes exceptionally well for AWS' future. But there's more to Amazon than just AWS and its e-commerce platform. Amazon is drawing more than 3 billion visits each month, which makes it a magnet for businesses wanting to advertise. Advertising services revenue has grown by at least 20% on a year-over-year basis for two years. Furthermore, its growing content library and exclusive sports partnerships -- an 11-year streaming rights deal with the NBA and the streaming rights for Thursday Night Football -- should afford the company exceptional pricing power with its Prime subscription. The second hypergrowth stock that billionaires appear to be infatuated with in lieu of Nvidia is China-based electric-vehicle (EV) manufacturer Nio (NIO 10.96%). In spite of its diminutive nominal share price, which hovered around $5 for much of the second quarter, a half-dozen billionaires piled in, including (total shares purchased in parenthesis): On one hand, we've certainly witnessed a cooling in EV demand throughout 2024. Competition has picked up in the EV arena, and consumers have been a bit leery to take the plunge given the lack of available EV charging infrastructure. But in spite of these challenges, we've witnessed meaningful sales growth and a sizable production ramp from Nio. Since China lifted its cumbersome COVID-19 mitigation measures in December 2022, Nio has enjoyed a fairly steady production expansion. The absence of supply chain constraints has allowed the company to produce around 20,000 EVs per month. Through August, deliveries were up nearly 36% from the comparable period in 2023. Nio also wins with its innovation. It's been introducing at least one new EV annually for years, and has taken advantage of an increase in demand since rolling out its NT 2.0 platform, which incorporates an assortment of new driver assistance features. To add, Nio introduced its ONVO brand to the world in May. Whereas Nio has traditionally focused on premium EVs, the ONVO brand is more family oriented and will provide a potentially more palatable price point for Chinese consumers. Lastly, the efforts of management to keep costs under control while improving margins are beginning to pay off. Vehicle margin jumped six percentage points in the June-ended quarter to 12.2% from the prior-year period, while adjusted net loss shrank close to 17%. Though Nio still has a lot of work to do to reach profitability, it's taking steps in the right direction.