AI Stock Market Volatility: Insider Activity and Investment Opportunities Amid Tech Sector Pullback

Insider Activity at Nvidia and Palantir Speaks Volumes -- but Are Investors Willing to Listen? | The Motley Fool

Despite some recent volatility in equities, Wall Street's major stock indexes -- the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite -- have been virtually unstoppable since bottoming out in October 2022. The bull market rally that's led all three indexes to numerous record-closing highs has been fueled by a confluence of factors. This includes excitement surrounding Donald Trump's return to the White House (stocks soared during Trump's first term), stock-split euphoria, and better-than-expected corporate earnings. But at the tippy-top of the list of stock market catalysts is the emergence of artificial intelligence (AI). AI empowers software and systems with the ability to reason, act, and evolve, without the need for human intervention. This capacity to become more proficient at assigned tasks, as well as evolve to learn new skills over time, gives this technology jaw-dropping reach and an almost unfathomable addressable market. Although dozens of stocks have benefited from the rise of AI, no two companies have been more direct beneficiaries than semiconductor colossus Nvidia (NVDA -8.69%) and data-mining specialist Palantir Technologies (PLTR -1.77%). At their respective peaks, Nvidia tacked on well over $3 trillion in market cap in under two years, while Palantir's stock jumped more than 1,500% on a trailing-two-year basis. While the operating results for both companies suggest plenty of promise, insider activity for Nvidia and Palantir speaks volumes. Thanks to the internet, the stock market is freer and fairer than it's ever been. Whether you're a Wall Street professional or an everyday investor putting your first $500 to work in the stock market, you have the ability to access income statements, balance sheets, and investor presentations at the click of a button. Something else that's readily available to investors, and can, on occasion, tell quite the story is insider trading activity. By "insiders," I'm primarily referring to high-ranking executives and a company's board of directors -- i.e., the people who would intimately know how well or poorly a company is performing -- but it also includes beneficial owners with a 10% (or greater) stake in a company. Insiders of a publicly traded company are required to file Form 4 with the Securities and Exchange Commission no later than two business days after a transaction. In other words, if someone on a management team or board acquires or disposes of their company's stock, investors are going to know about it relatively quickly. The insiders at Nvidia and Palantir Technologies have been creating a deafening roar with their trading activity -- and it's time investors paid closer attention. Over the trailing-five-year period, as of the end of February 2025, insiders sold more than $3.8 billion worth of Nvidia stock, and are closing in on $6.9 billion in cumulative sales of Palantir stock since its September 2020 initial public offering. What's even more eye-popping is that there hasn't been a single director or executive who's purchased shares of Palantir since it went public. Meanwhile, the last open-market purchase from an Nvidia insider came from Chief Financial Officer Colette Kress in December 2020. To be fair, insider selling isn't automatically a bad thing. Executive pay can sometimes be heavily weighted to stock-based compensation. In instances like this, insiders exercise options and/or sell common stock to raise the capital needed to pay their federal/state tax bill. But while there are a multitude of reasons to sell shares of a public company, there's only one viable reason to buy stock: an investor believes the price will head higher. A complete lack of insider buying from Palantir's management team and board of directors, along with a greater-than-four-year absence of open-market purchases from Nvidia's insiders, speaks volumes for both AI leaders. If there's a silver lining for shareholders invested in these companies, it's that there's clear evidence of stock options driving at least some of this selling activity. Options need to be exercised prior to their expiration, and selling shares is an easy way for insiders to raise the capital necessary to foot their tax bill. This type of selling is benign and shouldn't concern Wall Street or everyday investors. Perhaps the more pressing question to address is why aren't insiders making open-market purchases? One possibility is that history doesn't favor next-big-thing innovations during the early innings of their expansion. While orders for Nvidia's Hopper (H100) and Blackwell graphics processing units (GPUs) have been exceptionally strong, and Palantir's AI-driven Gotham platform has consistently won multiyear contracts from the U.S. government, no game-changing innovation has avoided a bubble-bursting event for three decades. Put another way, investors commonly overestimate the initial adoption rate and mainstream utility of potentially game-changing technologies and innovations. Regardless of how impressive the revenue ramp has been for Nvidia and Palantir to this point, all innovations, including AI, need ample time to mature. When lofty expectations for next-big-thing trends aren't met, the companies that led the charge tend to be hit the hardest. If the AI bubble bursts, as history suggests will happen, Nvidia and Palantir could see their respective share prices head notably lower. The other prevailing issue for Nvidia and Palantir is their respective valuations. Though the traditional price-to-earnings (P/E) ratio is the quick-and-easy tool relied on by most investors to judge value, it doesn't work particularly well for high-growth companies like Nvidia and Palantir. Instead, the price-to-sales (P/S) ratio demonstrates just how far outside of historic norms Nvidia's and Palantir's relative valuations have been. Last summer, Nvidia's trailing-12-month P/S ratio briefly tipped the scales at north of 42. As for Palantir, it's recent run-up to $125 per share put its P/S ratio on the doorstep of 100! Throughout history, public companies on the leading edge of a next-big-thing trend have commonly peaked with a P/S ratio in the neighborhood of 30 to 40. In short, neither company appears to offer a sustainable valuation premium. Insiders at Nvidia and Palantir Technologies are sounding a warning, but are any investors willing to listen?

2 No-Brainer Artificial Intelligence (AI) Stocks to Buy With $200 in March | The Motley Fool

Here's the bull case for these artificial intelligence (AI) stocks. Advanced Micro Devices (AMD) develops semiconductors across four main end markets: data center, client (personal laptops and desktops), gaming, and embedded processors. The chipmaker generates most of its revenue from central processing units (CPUs) and graphics processing units (GPUs), also known as AI accelerators. Last year, AMD gained about seven percentage points of market share in x86 CPU sales at Intel's expense. It gave a particularly strong showing in the client segment, where its Ryzen processors took over eight percentage points of market share from Intel Core processors. But AMD also kept its momentum in the data center segment, where its Epyc processors took four points of market share from Intel Xeon chips. AMD reported reasonably strong fourth-quarter financial results, exceeding estimates on the top and bottom lines. Total revenue increased 24% to $7.6 billion, and non-GAAP (generally accepted accounting principles) earnings increased 42% to $1.09 per diluted share. But the market punished AMD for missing data center sales estimates, which itself was due to worse-than-expected results in its AI business. The stock has tumbled 16% since the report. That creates an opportunity for investors. While AMD is unlikely to take much market share in AI accelerators from Nvidia, simply maintaining its position should still result in strong sales growth. Grand View Research expects AI accelerator spending to increase at 29% annually through 2030. Indeed, AMD CEO Lisa Su said on the fourth-quarter earnings call that AI accelerator sales will increase from $5 billion in 2024 to "tens of billions of dollars of annual revenue over the coming years." However, the market may be disappointed with AMD playing a distant second fiddle to Nvidia -- so much so that the stock looks downright cheap. Wall Street estimates AMD's earnings will grow at 35% annually through 2026. Yet, shares trade at 30 times earnings, which gives the company a price-to-earnings-to-growth (PEG) ratio below 1. This means that now is a good time to buy a small position. The Trade Desk is an adtech company that provides an independent demand-side platform (DSP) to media buyers. Its software leans on AI to help clients automate, optimize, and measure data-driven campaigns. Its independence (meaning it does not own media) is a key advantage because it eliminates the possibility of bias. Put differently, whereas Alphabet and Amazon have a clear incentive to steer media buyers toward platforms like Google Search and Amazon Marketplace, The Trade Desk avoids conflicts of interest by not owning ad inventory. That company has exploited that facet of its business to build mutually beneficial relationships with publishers. For instance, The Trade Desk sources data from many of the world's largest retail companies, which creates unique measurement opportunities for advertisers on its platform. Indeed, CEO Jeff Green says The Trade Desk has "the most advanced data-driven decision-making platform" in the adtech industry. Frost & Sullivan ranked The Trade Desk as the leader in its most recent DSP report, awarding the company better scores than competitors like Alphabet's Google and Amazon. One reason for the high rating was the company's strong presence in retail advertising market, which itself is due to its "growing roster of retail partners." The Trade Desk reported disappointing financial results in the fourth quarter. Revenue increased 22% to $741 million, missing the $756 million forecasted by management, and non-GAAP earnings increased 44% to $0.59 per diluted share. Green attributed the revenue shortfall to a "series of small execution missteps," and he detailed changes the company has made to address the issues, including injecting more AI features into the platform. However, the stock tumbled 42% since the company reported earnings, creating a no-brainer opportunity for patient investors. Wall Street estimates The Trade Desk's earnings will increase at 15% annually through 2026. That makes the current valuation of 42 times earnings look expensive. But I think analysts are wrong for two reasons. First, Wall Street underestimated earnings by an average of 8% during the last six quarters. Second, Grand View Research estimates adtech software spending will increase at 22% annually through 2030. As the largest independent DSP, The Trade Desk should be able to match that pace. That's why patient investors should buy a small position today.

Dan Ives Says These 2 Stocks Are in the "Sweet Spot" of the Artificial Intelligence (AI) Movement | The Motley Fool

Wedbush Securities analyst Dan Ives sees two cratering AI stocks as compelling opportunities right now. For the last two years, both the S&P 500 and Nasdaq Composite posted gains well in excess of 20%. This scorching hot momentum initially carried into 2025 too, but more recently, the markets have started to take a breather. First it was DeepSeek, a Chinese artificial intelligence (AI) start-up that brought shockwaves after it claimed to have built highly sophisticated models using older architecture compared to what big tech companies in the U.S. have deployed. Following on the heels of the DeepSeek drama came a series of tariffs instituted by the new Trump administration. Given the implications tariffs can have on trade negotiations and geopolitics, investors have been wary of how these new policies will impact economic growth. As stocks continue sliding off a cliff, it can be difficult to discern which dips may be buying opportunities hiding in plain sight. According to Dan Ives, who leads technology research at Wedbush Securities, two AI behemoths in particular are trading in the "sweet spot" right now. Let's explore what companies Ives recently called out as compelling opportunities and assess why scooping up shares right now could prove to be a savvy decision for long-term investors. The first company on Ives' list is Palantir Technologies (PLTR -1.77%), a developer of enterprise software solutions sold to both the private and public sectors. Since the company released its Artificial Intelligence Platform (AIP) suite in 2023, Palantir has witnessed an acceleration across both its top line and profitability profile. The successful launch of AIP has helped Palantir land on the radar of more institutional investors, and as such, the company has earned more coverage among Wall Street research analysts. While this is all good news for Palantir's business, investors have had little in the way of optimal buying opportunities. The reason I say this is because Palantir stock gained 340% last year -- making it the top performer in the S&P 500. And while shares had gained as much as 65% this year, the stock has recently dropped by a considerable margin. A combination of insider selling as well as changes to the Pentagon's budget are the primary culprits driving Palantir's sell-off right now. Despite these factors, Ives sees Palantir's current valuation levels as a benefit -- and I agree. Shares are now down more than 30% from all-time highs, yet nothing concrete has actually changed in the company's long-term growth prospects. While Palantir has emerged as an expensive name to own among AI growth stocks, dips of this magnitude are few and far between. The company is doing a nice job laying the groundwork for becoming an integral part of the AI software ecosystem, and in my eyes it's now a good time to scoop up shares as the company's valuation normalizes a bit. It probably shouldn't come as a surprise that Ives called out chip leader Nvidia (NVDA -8.69%) as a good name to own right now. For the last few years, it's been almost impossible to lose money owning Nvidia stock. Companies all around the world have been pounding the door to buy as much of the company's graphics processing units (GPUs) as they can. In fact, many of the company's "Magnificent Seven" cohorts, including Meta Platforms, Microsoft, Alphabet, Tesla, and Amazon, frequently shout out to Nvidia during their earnings calls -- signaling to investors just how integral the company's hardware and software is to the broader generative AI movement. Nevertheless, when DeepSeek made its grand entrance into the AI realm in late January, Nvidia stock started to slide. The driving force behind the sell-off was that DeepSeek claimed to have used older, less capable GPUs from Nvidia to build its models -- causing some investors to worry if the company's newer models, Hopper and Blackwell, were worth the price tag. Over the last few weeks, companies have been reporting earnings results for the fourth quarter and full year of calendar 2024. If the big tech companies I referenced above told us anything, it's that investment in AI infrastructure isn't going away. The reported $325 billion of AI capital expenditures allotted for 2025 alone should serve as a bellwether for Nvidia as the company scales its new Blackwell chipware and begins focusing on an even newer architecture called Rubin. Despite Nvidia's continuation of impressive data center growth, underscored by its market-leading GPU empire, shares are trading at levels incongruent with a high-octane growth stock. Right now, Nvidia's forward price-to-earnings (P/E) multiple of 26.7 is its lowest level in about a year. To me, this is an incredibly rare opportunity to scoop up shares of Nvidia as it trades at a meaningful discount to historical levels -- especially when you layer on the company's current growth rates and its trajectory given strong secular tailwinds.

1 Artificial Intelligence (AI) Semiconductor Stock to Buy on the Dip Hand Over Fist Right Now (Hint: It's Not Nvidia or AMD) | The Motley Fool

Chip stocks are sliding, and one critical player looks too cheap to ignore. Chipsets known as graphics processing units (GPUs) are perhaps the most important hardware in generative AI development right now. For the last couple of years, investing in semiconductor stocks has generally been a great idea -- as you're nearly guaranteed some form of exposure to GPUs or data centers. However, 2025 hasn't gotten off to the best start for chip stocks. Whether it was drama brought on by Chinese start-up DeepSeek, U.S. President Donald Trump's new tariffs, or lofty investor expectations, many names in the chip realm haven't fared so well this year. From a macro perspective, the VanEck Semiconductor ETF has dropped 4% so far in 2025 (as of March 3). When it comes to specific companies, take Nvidia and Advanced Micro Devices, which have seen their stocks decline by 7% and 17%, respectively, so far this year. While many investors can't seem to look away from Nvidia or AMD, there's another stock that's been caught up in broader selling in the semiconductor landscape -- and I think it's worth buying the dip right now. Let's explore why now looks like a lucrative opportunity to buy Taiwan Semiconductor Manufacturing (TSM 0.71%) stock hand over fist. When it comes to brand recognition in the chip market, investors don't need to look much further than Nvidia and AMD. These two juggernauts lead the charge in the GPU revolution. Meanwhile, Broadcom plays an integral role in outfitting data centers with advanced chipware, while Micron Technology's high bandwidth memory storage solutions are increasingly important as AI data workloads get bigger and more complex. With so many other names dominating headlines and talking points, I wouldn't be surprised if you aren't even aware of Taiwan Semi, or TSMC. The thing is that many leaders in the chip space -- including Nvidia, AMD, and Broadcom -- should credit Taiwan Semi for much of their success. TSMC specializes in foundry solutions, which is basically a fancy term that means it actually manufactures chips and integrated systems for semiconductor companies. In other words, without TSMC, Nvidia's chip architecture would be more of an idea than a tangible product. Given how much demand there's been for GPUs over the last couple of years, it shouldn't come as a surprise that Taiwan Semi's revenue and profits are soaring. With that said, I think the company's growth is just beginning to kick into gear. Although TSMC has already acquired nearly two-thirds of the foundry market opportunity, I think the advent of more custom silicon -- in addition to new architectures from Nvidia and AMD over the next couple of years -- will further strengthen the company's leadership position and lead to a prolonged phase of revenue and profit acceleration. Despite TSMC's strong market position and robust financial outlook, shares of the chip stock are shockingly cheap. Right now, the average forward price-to-earnings (P/E) multiple for the S&P 500 is about 21. As the chart above illustrates, Taiwan Semi's forward P/E is roughly 19. To me, this disparity suggests that investors may see an investment in the S&P 500 as less risky than TSMC -- and one that potentially carries more upside, too. In my eyes, the two main risks revolving around an investment in TSMC are the following: While I can understand those points in an academic sense, I think any fears around those topics are overblown. Chip demand isn't expected to slow down anytime soon, as the market is forecast to increase tenfold over the next decade and reach a size of nearly $1 trillion. On top of that, TSMC's operations are not exclusive to Taiwan. In fact, the company just announced in early March that it will be investing an additional $100 billion to expand its manufacturing footprint in the U.S. This seems like a logical decision given big tech is planning to spend more than $300 billion in AI infrastructure in 2025 alone. I think TSMC stock is a bargain right now. Long-term investors may want to consider buying this stock hand over fist, before the company's manufacturing operation witnesses even further scale as the AI revolution continues to move full steam ahead.

3 No-Brainer AI Stocks to Buy Right Now | The Motley Fool

Artificial intelligence (AI) appears to be a game-changing technology that is still in its early innings, and the tech sector's pullback in recent weeks has opened up opportunities for investors to scoop up some bargains among the players in that space. Here are three that look like no-brainer AI stocks to buy right now. Nvidia (NVDA 1.92%) has been the poster child of AI, and its industry-leading hardware has helped it become one of the largest companies in the world. However, its stock was also one of those that was most punished in the recent tech sell-off. Yet its strong attributes haven't changed, nor has the AI infrastructure buildout story. Nvidia is the dominant maker of graphic processing units (GPUs), which are the primary chips used to train AI models and run AI inference due to their impressive parallel processing power. These chips were originally designed to improve graphics rendering in video games, but the company created a free software platform called CUDA that allows developers to program GPUs -- but only Nvidia's GPUs -- to perform other tasks. As a result, most developers who learned to program GPUs did so with CUDA, which made switching to any other hardware provider difficult. The company has since built a collection of microservices and libraries specifically for AI. In sum, these moves have given the company a huge moat, as demonstrated by its 90% market share in the GPU space. Meanwhile, spending on AI infrastructure continues to rise. Cloud computing infrastructure providers are aggressively expanding AI processing capacities to keep up with demand, while companies developing AI models are demanding exponentially more computing power (and thus GPUs). This all suggests that Nvidia should have another strong year of growth in 2025. Meanwhile, the recent pullback in the stock has left Nvidia's shares at attractive valuations. It trades at a forward price-to-earnings (P/E) ratio of 25 times 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of under 0.5. Positive PEG ratios below 1 are generally viewed as indicating an undervalued stock. Trading at a forward P/E ratio of 18.5, Alphabet (GOOGL 0.88%) (GOOG 0.88%) is another AI stock that has been tossed in the bargain bin. Nonetheless, it owns a great set of leading businesses as well as some attractive emerging businesses. The company's cloud computing unit has been its strongest grower thanks to AI-related demand. The unit's revenue climbed 30% last quarter and its profitability has skyrocketed. Meanwhile, Alphabet has developed its own custom AI chips with the help of Broadcom, and says that hardware is helping improve inference times and lower costs. That's helping give Alphabet a nice cost advantage that should allow the company to continue to nicely leverage its massive cloud business. Alphabet is also beginning to incorporate its new Gemini 2.0 AI model throughout its business, including in Google search. This should allow it to serve up more useful search results as well as improve its AI Overviews. While some investors remain worried about the impact that the use of AI chatbots such as ChatGPT could have on the traditional search business, Google has historically only served up ads in connection to 20% of its queries. New ad forms attached to AI-generated results should allow it to better monetize the large percentage of searches for which it currently does not serve ads. In addition, the company has the most watched video platform in the world (YouTube), a strong digital ad network, and emerging business opportunities in quantum computing and robotaxis (Waymo). Salesforce (CRM -1.10%) is the leader in customer relationship management (CRM) software, and has also entered the automation, analytics, and employee communication markets through its acquisitions of Mulesoft, Tableau, and Slack. However, it expects agentic AI to be its next big growth driver. Agentic AI is the next evolution of AI beyond generative AI. With generative AI programs such as Gemini or ChatGPT, users enter prompts and the AI programs respond by creating content in the form of text, images, or video. Agentic AI will take the use cases a step further by creating AI agents that perform an array of tasks based on initial instructions with little human oversight needed. Salesforce is getting into agentic AI with its new Agentforce offering. It was only introduced in October, but the company already has 5,000 Agentforce deals in place, including 3,000 paying deals. The company offers out-of-the-box AI agents that can handle specific tasks, such as customer service interactions, while also offering no-code and low-code tools within its solution that can be used to customize its AI agents. Agentforce is a consumption-based product that costs $2 per interaction. As such, the more useful its agents become and the more its customers use them, the bigger the opportunity for Salesforce. It also just launched AgentExchange to help further expand use cases with more than 200 initial partners and hundreds of prebuilt apps, actions, integrations, and templates. The stock is attractively valued at a forward P/E of 26. Software-as-a-service businesses typically command high valuations due to the recurring and predictable nature of their revenue.

Should You Forget Palantir and Buy These 2 Artificial Intelligence (AI) Stocks Instead? | The Motley Fool

While it's well off its recent highs, Palantir Technologies (PLTR 5.53%) was one of the best-performing stocks in 2024 and early 2025. However, those gains have led to an extreme valuation, with the stock trading at a forward price-to-sales (P/S) multiple of 52 times 2025 analyst revenue estimates. The company has been seeing accelerating revenue growth, with revenue climbing 36% last quarter, led by a 64% jump in U.S. commercial revenue. The company's success stems from its focus on the application and workflow layers of artificial intelligence (AI). Palantir aims to become an AI operating system for its users, creating a platform that can help organizations run AI applications in a real-world environment. It has been highly successful in bringing in new commercial customers through its use of AI boot camps to train and onboard customers, and now it has a big opportunity as it moves these customers from proof-of-concept work into production. However, the company is very closely tied to the U.S. government, its largest customer which accounted for more than 40% of its revenue in the fourth quarter, and the government is currently undergoing massive cost-saving measures and slashing budgets. This includes the White House telling the Department of Defense to reduce its budget by 8% a year over the next five years. It's unknown whether Palantir will be helped or hurt by these DOD budget cuts, but it's a big risk. Given its very high valuation and the risks associated with its largest customer, let's look at two alternative cheaper software AI names to consider. Salesforce (CRM -1.10%) is known as the leader in customer relationship management (CRM) software. Through the acquisitions of Mulesoft, Tableau, and Slack in recent years it has also gotten into the areas of automation, analytics, and employee communication. The company has always been at the forefront of innovation, being one of the first companies to adopt the software-as-a-service (SaaS) model, which revolutionized the entire software industry. Salesforce hopes to be a leader in the next evolution of AI, called agentic AI. Much of the early focus on AI has been on what is known as generative AI, where AI will create content, whether it be text, images, or video, based on user prompts. An example of this is using ChatGPT to help plan a wedding. ChatGPT can create a plan, including a task list, based on user inputs. Agentic AI goes beyond generative AI by going out and autonomously completing tasks with little human intervention. So in the case of planning a wedding, it could also rent the venue, hire the caterer and other vendors, and execute other necessary tasks. Salesforce is looking to be the leader in agentic AI with its Agentforce solution. The agentic AI platform offers a number of out-of-the-box AI agents and allows customers to build and customize their own AI agents using its no-code and low-code tools. The company says the AI agents can be equipped with any business knowledge in order to fill their role and complete necessary tasks while having guardrails of what the agents can and cannot do. Thus far, Agentforce has drawn a lot of interest from customers, with Salesforce saying it has 5,000 Agentforce deals (including 3,000 paying deals) since it was launched in October. Agentforce is a consumption product that costs $2 per conversation, so the upside for Salesforce is absolutely huge if it can prove its solution saves its customers money. It has also recently introduced AgentExchange, which includes 200 initial partners, including companies like Alphabet and Workday, and hundreds of ready-made app actions, integrations, and templates. This should help expand use cases and foster adoption. Meanwhile, the stock is reasonably priced, trading at a forward price-to-sales (P/S) multiple under 7 and a forward price-to-earnings (P/E) ratio of 26. SentinelOne (S -0.30%) is a fast-growing AI-powered cybersecurity company that has a nice catalyst ahead of it later this year. The company is focused on endpoint security, which is the protection of a network and its endpoints, such as smartphones and computers. Its main offering is its Singularity Platform, which uses AI to predict, monitor, and eliminate threats. The company competes with CrowdStrike (CRWD -4.09%) and has been looking to take advantage of its larger competitor's earlier outage that caused a lot of disruption. Its platform ranks highly in the Gartner Magic Quadrant for Endpoint Protection Platforms but trails CrowdStrike. However, one of its big selling points is that SentinelOne can automatically roll back any changes to return a client's system to where it was before an attack occurred, eliminating the time-consuming, manual fix that some CrowdStrike customers dealt with after its outage. Last quarter, the company said it saw a record number of competitive wins versus CrowdStrike, and a Fortune 50 company switched to its platform. Meanwhile, SentinelOne is seeing huge success upselling its Purple AI solution, which helps analysts hunt complex security threats through the use of natural language prompts. It said it is the fastest-growing platform in its history. Importantly, though, the company has a big catalyst later this year when enterprise PC vendor Lenovo will begin shipping all its PCs with SentinelOne's Singularity Platform on them. The two companies are also developing a new managed detection and response (MDR) service using AI and endpoint detection and response (EDR) capabilities based on the Singularity Platform. Lenovo is the world's largest PC vendor, selling nearly 62 million units in 2024, so this is a big opportunity for SentinelOne. At the same time, the stock is attractively priced, trading at a P/E ratio of under 5 times fiscal 2026 analyst estimates.

1 Unstoppable Artificial Intelligence (AI) Stock That I'm Buying Like There's No Tomorrow | The Motley Fool

Famed investor Warren Buffett once said, "Be fearful when others are greedy and be greedy when others are fearful." I think that's a perfect line to keep in mind as the market continues to sell off some of the big tech companies, as nothing has shifted in the investment thesis of these stocks. One of the stocks that has declined from its highs is Alphabet (GOOG 1.38%) (GOOGL 1.23%). At its current level, the stock looks incredibly cheap, and investors should pounce on this bargain opportunity while fear in the market still exists. Alphabet is the parent company of Google, YouTube, the Android operating system, and more. However, its wide-spanning portfolio has a focus on one thing: advertising. In the fourth quarter 2024, around three-quarters of Alphabet's revenue came from its various advertising sources, so this is a huge part of Alphabet's business. While many are worried about Alphabet's performance in the AI arms race, this isn't the main focus for Alphabet. Instead, the company is worried about integrating AI throughout its various advertising tools, which will improve clients' ads and users' experiences. Additionally, the company has made its generative AI model, Gemini, available to the public, and it can be used as the base model to build on. These large investments in AI training haven't impacted Alphabet's finances yet, but they don't need to. Investors need to understand that Alphabet's AI investments are table stakes to maintaining its place as a must-advertise location. Any ancillary revenue that comes from its Gemini model is icing on the cake. However, another division is benefiting from the massive AI spending spree: Google Cloud. Google Cloud is Alphabet's cloud computing division, providing the computing power necessary to train and run AI models. Because Google Cloud's clients rent this computing power, it provides a nice income stream to use Alphabet's vast computing resources. In Q4, Google Cloud's revenue rose 30% to $12 billion. While this pales in comparison to Alphabet's $72.5 billion in ad revenue, it provides some growth to Alphabet and is a segment to keep an eye on. Alphabet is still a dominant AI company with strong product offerings in multiple fields. However, despite the company growing revenue and earnings per share (EPS) at a 12% and 31% pace, respectively, in Q4, investors still consider it a below-average stock. From a valuation perspective, Alphabet's stock looks dirt cheap. At 21 times trailing earnings and 19 times forward earnings, Alphabet's stock has reached valuation levels it hasn't touched in some time. Now, if we compare these prices to the broader market, we'll get an idea of how cheap Alphabet's stock is. The S&P 500 trades for 24 times trailing earnings and 22 times forward earnings, so Alphabet has quite the discount to the broader market. If we compare Alphabet to more of its peers in the tech-heavy Nasdaq-100 index, the gap becomes even starker, as it trades for 32 times trailing earnings and 26 times forward earnings. This is quite the discrepancy between a company as dominant as Alphabet and these indexes, and it makes Alphabet a screaming buy at its current price point. Wall Street analysts project it will be able to provide double-digit growth this year and the next, so assuming their projections prove correct, investors don't need to worry about Alphabet shrinking to low-growth levels.

3 AI Stocks That Could Help Make You a Fortune | The Motley Fool

The artificial intelligence (AI) investing trend may seem a bit old to some, but the amount of money some of the biggest tech companies are pouring into this race makes it a must-invest-in space. There are many options, but I prefer to pick some stocks already seeing benefits from the AI arms race. Three AI companies that I think are no-brainer buys right now are Nvidia (NVDA 1.69%), Taiwan Semiconductor (TSM 4.06%), and Alphabet (GOOG 2.34%) (GOOGL 2.34%). Although these three are rather large businesses already, they are all experiencing strong growth and are fairly cheap for the performance they are putting up. As a result, they could increase your portfolio returns to market-crushing levels and accelerate your path to creating a fortune in the stock market. Few businesses have benefited as much from the AI arms race as Nvidia. The company makes graphics processing units (GPUs), which are incredibly useful for calculations that require massive computing power. GPUs compute multiple processes in parallel, an effect that can be further amplified by connecting thousands of GPUs in a cluster. This has made Nvidia's GPUs the top choice for any company building out a data center to train AI models, and it doesn't look like that growth is slowing anytime soon. While investors have heard language from the tech giants about how AI spending will ramp up in 2025, it wasn't known how much of that will flow to Nvidia. Investors now have their answer: A lot. In the fourth quarter of fiscal year 2024 (ended Jan. 26), Nvidia posted 78% revenue growth to $39.3 billion, with data center revenue totaling $35.6 billion, up 93% year over year. Furthermore, Nvidia expects Q1 revenue to come in around $43 billion, indicating 65% growth. Clearly, Nvidia isn't done growing yet, but the stock market seems to have gotten bored with Nvidia. Nvidia's stock trades for a cheap 27 times forward earnings, which is pretty reasonable considering how strong its growth has been. I think Nvidia has plenty of room for upside in 2025, and investors should take any chance they get to load up on more Nvidia shares while they are down. Taiwan Semiconductor is another massive beneficiary of the AI arms race. The chips that devices like GPUs use have to come from somewhere (as Nvidia doesn't own a chip foundry), and TSMC is the most popular partner for many of the big tech companies that want to incorporate the latest and greatest chip advancements. AI has been a huge boom for Taiwan Semi, and it seems set to continue. Because of TSMC's position within the industry, it has great foresight into the growth that this industry is expected to exhibit, as it receives orders for its chips years in advance. Over the next five years, TSMC's management expects AI-related revenue to grow at a 45% compounded annual growth rate (CAGR). That's massive and plays into the companywide CAGR of 20% over the next five years. It's rare for a company of TSMC's size to give 20% growth projections, let alone to do it over a five-year time frame. However, that's what TSMC's management is forecasting, and investors need to take note. With the stock trading for less than 20 times forward earnings, the market is giving investors a gift right now, and investors should take advantage of this dirt cheap stock. Although some may see Alphabet as a big spender in the AI arms race, it's also a huge beneficiary. Alphabet has an important business unit that is booming thanks to AI demand: Google Cloud. Google Cloud is Alphabet's cloud computing segment and is seeing a massive demand wave as clients rush to set up AI models. Because these clients don't continuously need enough computing power to train an AI model, they turn to cloud computing providers to rent what they need. However, Google Cloud (and its competitors) must spend money to make money, as this capacity needs to be built before the demand arrives. Otherwise, potential clients will go elsewhere. This will provide growth for years to come, but in the meantime, Alphabet's base business (the Google search engine) is doing well enough for the company to continue promoting market-beating returns. In Q4, Alphabet's revenue rose 12% year over year, with earnings per share (EPS) rising 31%. Wall Street analysts expect Alphabet's revenue to rise 11% in both 2025 and 2026, as well as post EPS growth of 12% and 14%, respectively. Considering that the market tends to grow at around a 10% pace on average, that indicates that Alphabet should beat the market based on growth alone. This should lead investors to the conclusion that Alphabet has a slight premium to the broader market's valuation, but you'd be wrong. The S&P 500 (^GSPC -1.22%) trades for 22.6 times forward earnings, a significant discount to the broader market. With Alphabet's growth and the long-term catalyst of AI spending in Google Cloud and its advertising wings, this is unwarranted pessimism and could drive Alphabet to vastly outperform the markets over the next five years.

Billionaire Stanley Druckenmiller Dumped Shares of Nvidia and Palantir and Is Piling Into His New Favorite Artificial Intelligence (AI) Stock | The Motley Fool

Duquesne Family Office's billionaire chief sent shares of the two hottest AI stocks to the chopping block in favor of another high-profile company. Less than three weeks ago, the most important data release of the first quarter occurred -- and you might have missed it. Amid a flurry of earnings reports and economic data releases, Feb. 14 marked the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. A 13F provides investors with an over-the-shoulder look of which stocks Wall Street's top money managers have been buying and selling. These snapshots can be particularly telling when it comes to next-big-thing trends, such as artificial intelligence (AI). One billionaire asset manager who hasn't been shy about purchasing and dumping AI stocks is Duquesne Family Office's Stanley Druckenmiller. Druckenmiller's fund closed out 2024 with more than $3.7 billion in AUM spread across 78 holdings. It's also an active fund, with an average holding time of less than seven months across all 78 positions. This propensity for turnover was readily apparent last year, with Druckenmiller sending shares of AI leaders Nvidia (NVDA 1.69%) and Palantir Technologies (PLTR 1.18%) to the chopping block. But while Duquesne Family Office's chief was dumping these highfliers, he was building a stake in what's become his new favorite artificial intelligence stock. When June 2023 came to a close, Druckenmiller's stake in graphics processing unit goliath Nvidia peaked at a split-adjusted 9,500,750 shares. This "split-adjusted" aspect has to do with Nvidia completing a historic 10-for-1 forward split in June 2024. In the 12-month stretch ending June 30, 2024, Druckenmiller dumped this entire position. Meanwhile, Druckenmiller's fund held 769,965 shares of Palantir at the end of March 2024. As of Dec. 31, just 41,710 shares remained, which means 95% of this position had been sold. While both companies are industry leaders with well-defined competitive advantages, there are a couple of catalysts that explain this aggressive selling activity. The first and most-obvious is that Druckenmiller is simply cashing in his chips. Nvidia and Palantir have both soared in value, and Duquesne is a relatively active hedge fund. The worry is that Druckenmiller was a seller for more than just benign reasons. Druckenmiller's actions might also reflect concern about an AI bubble brewing. Since (and including) the advent of the internet three decades, there hasn't been a next-big-thing innovation that's avoided a bubble-bursting event. All new technologies and innovations need adequate time to mature, and we're not at a point where businesses have a good handle on how to optimize AI solutions or even generate a positive return on their AI investments. In a CNBC interview in May 2024, Druckenmiller compared the early days of the internet to the current AI revolution. Specifically, he pointed to the internet being bigger 20 years later than anyone thought it would be in 1999, but it took time for this technology to evolve. Said Druckenmiller, "AI might be a little over-hyped now, but under-hyped long-term." The other issue for Nvidia and Palantir is their historically pricey valuations. Nvidia tipped the scales at a price-to-sales (P/S) ratio of 42 last summer, while Palantir's recent run-up to $125 per share put its P/S ratio at a peak of 99! Companies that were on the leading edge of the dot-com bubble saw their P/S ratios peak in the 30 to 40 range before losing 80% to 90% of their value. While it's unlikely Nvidia and Palantir would suffer losses this great, the historic writing is on the wall that valuation premiums of this magnitude are never warranted or sustainable. While Duquesne's CEO has been busy slashing his fund's stakes in Nvidia and Palantir, he's been piling into his new favorite artificial intelligence stock, Amazon (AMZN -0.59%). Duquesne Family Office's latest 13F shows that 328,400 shares of Amazon were purchased in the December-ended quarter, making it the fund's 11th-largest holding by market value -- and top AI stock. Most people become acquainted with Amazon by visiting its world-leading online marketplace. According to estimates from eMarketer, Amazon is expected to account for 40.9% of U.S. online retail sales this year. Although e-commerce accounts for a substantial percentage of Amazon's net sales, this is a reasonably low-margin operating segment that doesn't play a key role in cash-flow generation or net income. The segment that makes Amazon tick -- and likely encouraged Stanley Druckenmiller to be a buyer -- is Amazon Web Services (AWS). AWS is the world's top cloud infrastructure services provider, with a 33% share of cloud-service spending during the fourth quarter, based on estimates from Canalys. Companies are still very early in their cloud spending ramp, and the incorporation of AI solutions, including generative AI, into AWS should encourage businesses to boost their spending. As of the end of 2024, AWS was pacing more than $115 billion in annual run-rate revenue, with its growth rate on a constant-currency basis reaccelerating to nearly 20%. Even though AWS accounted for less than 17% of the company's net sales last year, it was responsible for 58% of Amazon's operating income. The juicy margins associated with AWS should allow Amazon's cash flow growth to handily outpace its sales growth for the foreseeable future. Druckenmiller may be looking beyond AWS, too. For instance, Amazon has nabbed the exclusive rights to stream Thursday Night Football, along with a package of NBA games. As its content library grows to include sporting events, so should its subscription (i.e., Prime) and ad-pricing power. Amazon's subscription and advertising services segments have respectively maintained a double-digit, constant-currency growth rate. The final lure for Stanley Druckenmiller might just be Amazon's valuation. While it's not cheap by traditional fundamental standards, the company's price-to-cash-flow multiple is historically inexpensive. Throughout the 2010s, investors regularly purchased Amazon stock for a median multiple of 30 times year-end cash flow. Shares can be purchased right now for less than 13 times forecast cash flow in 2026.

2 Artificial Intelligence (AI) Stocks to Buy on the Dip | The Motley Fool

Last year, artificial intelligence (AI) stocks went gangbusters. But even the biggest and most dramatic growth stories in history experienced occasional corrections. Over the first two months of 2025, many AI stocks saw a strong pullback in valuation. If you've been waiting to jump in, this looks like your chance. The two companies below look like great long-term buys. When it comes to AI stocks, few can match the might and growth potential of Nvidia (NVDA 1.69%). There is simply no better stock to play the AI revolution that is currently unfolding. That's because nearly every AI company relies on specialized graphics processing units (GPUs) to train and run their models. GPUs are a critical component for any AI application, and Nvidia has a stranglehold on the market. According to most estimates, it has somewhere between a 70% and 95% market share for AI GPUs. Of course, competition will heat up over time, but Nvidia has some impressive competitive advantages. It has the scale and reputation, of course. But the key to Nvidia's success is locking in developers and vendors. In 2006, it launched CUDA, a developer platform that allowed companies and individuals to essentially create customized environments to get the most out of Nvidia's chips. This led to immense performance improvements, but also enmeshed customers deeply into Nvidia's hardware. In essence, this allows it to control both the hardware and software ends of its product. Nvidia's dominance will likely continue for years to come, even as mounting competition takes away some of its market share. But have no doubt: If you want to invest in the core of the AI revolution, Nvidia remains a top pick, especially with shares losing 13% so far in 2025. Looking for even more growth? Give SoundHound AI (SOUN -5.86%) consideration. Unlike Nvidia, SoundHound does not have a stranglehold on its market. It does have a growing list of customers, including Applebee's, Jeep, and Vizio, plus an impressive patent portfolio with more than 200 patents. SoundHound is very early in its journey to AI dominance. SoundHound's business specializes in AI applications that deal with sound. Think ordering through an AI at a fast food drive-thru or being routed through an AI agent on a customer call, one you can hardly tell is run by a computer and not an actual human. SoundHound's management team thinks the voice AI space will eventually be worth $140 billion or more, though the current size is just a tiny fraction of that figure. The company has a great start piloting its technology with several dozen notable brands, but there will be steep competition over time, especially from better-financed big tech companies. It's this long-term competitive risk that leaves SoundHound with a diminutive $3.8 billion market cap. That's following a 51% fall in the share price since the year began. The drop stemmed from several factors: an overstretched valuation, a marketwide dip in AI stocks, deepening operating losses, and the complete liquidation of 1.7 million shares by Nvidia, a stake it purchased only last year. There's no doubt that SoundHound is a speculative growth investment right now. But if you're looking for maximum growth potential, the recent pullback may have provided you with a buying opportunity.

2 AI Stocks That Could Be Worth More Than Palantir by 2026 | The Motley Fool

Shares of Palantir Technologies (PLTR -10.73%) have had an incredible run the past few years. The stock has rocketed more than 1,000% since 2022, bringing its market cap (share price times total shares outstanding) to $195 billion at the time of writing. That market cap is high for a company with just $2.8 billion in trailing revenue and $462 million of net income. Artificial intelligence (AI) stocks have been all the rage on Wall Street, but even analysts can't overlook Palantir stock's expensive valuation. The consensus rating on the shares is currently neutral (hold). There is significant downside risk in Palantir shares. Investors are paying an astronomical multiple of the company's sales and earnings that it may not be able to justify. Meanwhile, other AI stocks trade at more reasonable valuations and may outperform Palantir over the next year. Here are two promising stocks in the chip and software markets that could be worth more than Palantir by next year. Advanced Micro Devices (AMD -2.77%) is a leading supplier of chips for consumer PCs, video game consoles, data centers, and other markets. It has a market cap of $158 billion and trades at a forward price-to-earnings (P/E) multiple of about 21. Wall Street analysts expect AMD's earnings to grow 42% annually over the next several years. The stock has fallen 56% from previous highs over mixed financial results across its business segments over the past year. Strong revenue increases in the data center and client segments (PC chip sales) more than offset declines in AMD's gaming and embedded chip businesses, which is causing some uncertainty around AMD's near-term momentum. However, AMD is well positioned to continue growing its data center business. Data center revenue grew 69% year over year in the fourth quarter to reach $3.9 billion, or 51% of the business. In addition to growing demand for its graphics processing units (GPUs) used for AI workloads, AMD's EPYC central processing units (CPUs) gained share in the server market. AMD's GPUs are being used by several leading tech companies, including Meta Platforms, Microsoft, DigitalOcean, and IBM. Management noted more AI design wins that will be deployed for its MI300 chip in the first half of 2025, while the new MI350 series should benefit from chip deployments to handle AI inferencing, where a trained model learns to make predictions on its own from new data. Inferencing will drive a lot of demand for AI chips going forward, and AMD could benefit tremendously. Moreover, investors shouldn't overlook the gains AMD is making on Intel in the PC chip market, with client segment revenue up 58% year over year, reaching a record $2.3 billion in the fourth quarter. It was the fourth straight quarter of market share gains for AMD's Ryzen processors. The company's smaller businesses in gaming and embedded chips will eventually rebound, but there's enough momentum in data centers and the client segment to fuel solid returns for investors. AMD stock trades at a low forward P/E for a growth stock that may undervalue its potential in a growing semiconductor industry. ServiceNow (NOW -5.32%) is a leading enterprise software company that has delivered consistent double-digit growth for several years. Corporations use ServiceNow to automate and streamline business processes. The stock has a market cap of $185 billion and a forward P/E of 56. Revenue grew at a compound annual rate of 32% over the last 10 years. It is gradually slowing as the business grows in size, but fourth-quarter subscription revenue growth was solid at 21% year over year. Management forecasts subscription revenue to increase between 18.5% to 19% year over year in Q1 2025. The company experienced expanding margins that are driving strong growth in adjusted earnings and free cash flow. On a non-GAAP (generally accepted accounting principles) basis, operating margin improved to 29.5% in 2024, and management is guiding for operating margin to reach 30.5% in 2025. The company should see margins continue to stretch higher as it achieves greater scale. A major catalyst that will fuel more revenue growth is adoption of AI agents, where software becomes smart enough to learn and complete tasks without human intervention. On that front, management noted a sharp increase of 150% year over year in the number of deals for its Pro Plus AI offerings recently. ServiceNow sees its addressable market growing from $200 billion in 2024 to $275 billion by 2026. More business leaders are looking to simplify business processes and save money with AI. This is fueling more momentum in large deals, where the company signed 19 deals worth more than $5 million in net new annual contract value in Q4. Analysts expect ServiceNow to grow earnings at an annualized rate of 32% over the next several years, which should support its current valuation. The stock should hold up better than Palantir shares in the near term, with the potential to deliver market-beating gains over the long term.

Attention, Bargain Hunters: These Top AI Stocks Are on Sale. | The Motley Fool

Artificial intelligence (AI) stocks have soared over the past couple of years, helping the S&P 500 roar into bull territory. The reason for all of the excitement? AI could be a game-changer, helping companies reduce costs, become more efficient, and even make major discoveries -- for example, in healthcare, pharma players might create better drugs faster. All of this could result in significant earnings gains for companies that got in on this story in its early chapters. Investors recognize this and realize that they, too, could set themselves up for a win by piling into the strongest players as the technology develops. That's why they've bought shares of companies making critical tools to power AI development or selling these products to others -- and players already applying AI to their businesses. The one negative point, though, is valuations of many surged, pushing them to levels considered expensive. As a result, some investors wondered if the AI buying opportunity was over. But I've got some good news for you today, especially if you're a bargain hunter. While recent market declines haven't been fun for anyone, they have accomplished one thing: They've pushed certain quality AI players into dirt cheap territory, creating a buying opportunity you won't want to miss. It's unlikely that even a period of headwinds such as economic troubles or government policies could derail the long-term prospects of these companies. After all, today's $200 billion AI market is expected to reach more than $1 trillion by the end of the decade. Let's take a look at two AI giants that are on sale. You might not expect star AI stock Nvidia (NVDA -5.74%) to be on this list. In fact, after the long series of quarterly blowout earnings reports, including the most recent, and years of spectacular stock performance, you might expect Nvidia to be quite pricey. But Nvidia never got into ridiculously expensive territory, and today, it's actually fallen into ridiculously cheap territory. More on that in a minute, but first let's talk about why this player belongs in your portfolio. Nvidia's a market leader, and its focus on innovation is likely to keep it in that position -- and the company has delivered strong profitability on sales over time, including during the recent product launch period, a time when it's not easy to keep costs down. As the company launched its new Blackwell architecture, gross margin remained above 70%. It's important to remember Nvidia plays a key role in the AI world, selling the fastest chip -- a product that powers crucial and essential AI tasks like the training of models. Customers include the biggest tech companies -- from Microsoft to Meta Platforms -- and they are eager to go for the best chips and related products since they aim to win in the area of AI. They also have the financial strength to continue this investment. All of this bodes well for Nvidia. So how cheap is Nvidia right now? The stock is trading at a shockingly low level, at 25 times forward earnings estimates -- down from as much as 48 back in January. Considering all of the points above, Nvidia is a no-brainer buy for any AI investor right now. You may know Alphabet (GOOG -0.45%) (GOOGL -0.39%) for something many of us use daily -- Google Search. It's the world's most popular search engine, and this has helped Alphabet generate billions of dollars in revenue through offering advertising across its platform. But Alphabet also has another revenue driver, one that's growing in the double digits. This is Google Cloud, a business that posted a 30% gain in revenue to $12 billion in the most recent quarter. And much of Google Cloud's recent success stems from the company's investment in AI. Through this unit, Alphabet offers customers a variety of AI products and services, and the company even has developed its own large language model (LLM), Gemini, that customers can leverage for their AI needs. Alphabet itself uses Gemini to improve its own business, for example supercharging Google Search to produce better and more complete results than in the past. Alphabet plans on making $75 billion in capital expenditures this year to further expand its technical infrastructure for AI, setting itself up to benefit through the next chapters of AI growth. And now makes a great time to get in on this present day and future AI winner because the stock is trading for only 19 times forward earnings estimates, down from more than 24 in December, which, even at that level, looked reasonable. This offers bargain-hunting investors an opportunity to get in on an AI market leader at a price that's right up their alley.

3 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run | The Motley Fool

The stock market has cooled off just a bit in the past few weeks after its torrid pace over the past two years, but it is still solidly in bull market territory. The S&P 500 is off its all-time high set in mid-February by about 6.4%. Meanwhile, artificial intelligence (AI) continues to be a driving force behind this market's movements, with recent advances in this technology looking like they could have game-changing applications for the companies implementing them. If this bull market is to continue, AI will likely play a role. Let's look at three AI infrastructure stocks well worth considering in this bull market. As long as spending on AI infrastructure continues unabated, Nvidia (NVDA -5.74%) remains the company best positioned to benefit. Its graphics processing units (GPUs) have become the backbone of AI infrastructure due to their strong processing power, which makes them great chips for training AI models and inference. Meanwhile, the company's CUDA software platform, which was long ago created to allow developers to program its chips for tasks outside of their original purpose of speeding up graphics rendering, has created a wide moat for the company. Since then, Nvidia has only widened its moat through CUDA X, a set of libraries and microservices designed for AI. This has allowed Nvidia to take a dominant 90% market share in the GPU market. Meanwhile, AI infrastructure spending only continues to ramp up. The big three cloud computing companies have budgeted over $250 billion in capital expenditures (capex) this year, with the vast majority of that going directly toward AI infrastructure. Meta Platforms plans to spend up to $65 billion on AI infrastructure, while a consortium of companies led by OpenAI and Softbank has pledged to spend $500 billion on building out AI data centers in the U.S. as part of Project Stargate. While not all of this capex money will go toward Nvidia's GPUs, the company will get more than its fair share. At the same time, the stock is not expensive, trading at forward price-to-earnings (P/E) ratio of 26.5 times 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of 0.5. PEG ratios under 1 typically indicate a stock is undervalued. Another chipmaker set to benefit from increased AI infrastructure spending is Broadcom (AVGO -6.33%). While Nvidia is the leader in mass-market GPUs, Broadcom is carving out a nice niche as a maker of custom AI chips. Its application-specific integrated circuits, or ASICs, are designed for very specific tasks. As such, its custom AI chips outperform GPUs for those specific tasks and tend to have more efficient power consumption. However, they do not have the flexibility of GPUs. Broadcom's first custom AI chip customer was cloud computing giant Alphabet, whose Trillium tensor processing unit (TPU) is designed specifically to work within Google Cloud's TensorFlow (a software library for AI and machine learning). Alphabet has said that using a combination of TPUs alongside GPUs has resulted in improved inference times and cost savings. Since then, Broadcom has been adding other customers, which are believed to be Meta Platforms, TikTok owner ByteDance, OpenAI, and more recently, Apple. It has said its three oldest customers (Alphabet, Meta, and ByteDance) could each deploy 1 million AI chips by its fiscal 2027 (ending October 2027), representing a $60 billion to $90 billion opportunity. Its newer customers could add to those totals. It took about 15 months for Alphabet's chips to be designed and then deployed in its data centers, which was considered very fast. Trading at 30 times forward P/E, Broadcom is well-positioned to benefit from increased AI infrastructure spending. Another company set to continue benefiting from increased AI infrastructure spending is Taiwan Semiconductor Manufacturing (TSM -4.58%), or TSMC for short. The company is the leading semiconductor contract manufacturer in the world. Due to the cost to build out manufacturing plants (foundries), the need for them to be run near full capacity to be profitable, and the technological expertise needed to continually innovate and push chip sizes lower, most semiconductor companies today just design chips and let third parties manufacture them. TSMC counts both Nvidia and Broadcom among its top customers, along with its largest customer Apple. TSMC has become the leader in making advanced chips, such as those used for AI, while other foundry competitors such as Intel and Samsung have struggled. As such, it has become an integral part of the semiconductor value chain. The company is continuously advancing its manufacturing technology and lowering the size of its chips, which makes them more powerful and energy-efficient. TSMC's market-leading position, meanwhile, has led to strong pricing power and expanding gross margins. At the same time, the company is building new facilities to try to keep up with demand. The combination of adding capacity, pricing power, and improving margins bodes well for TSMC moving forward. At the same time, the stock is inexpensive, trading at a forward P/E of just above 19 times and a PEG of 0.67 times.

2 Top AI Stocks to Buy in the Nasdaq Correction

Artificial intelligence (AI) stocks have roared higher over the past couple of years as investors piled in, aiming to invest early in the next big game-changing technology. Through AI, companies may become more efficient and develop exciting new products faster -- and all of this could mean a major earnings boost over time. Some players already are generating significant revenue from this technology, from chip designers to cloud service providers, and investment in the area remains strong. Yet in recent weeks, AI stocks have stumbled, leading declines in the three major indexes. On Thursday, the Nasdaq Composite (^IXIC 0.69%) entered correction territory, marking a 10% decline from its peak on Dec. 16. This is amid investors' concerns that certain U.S. policy decisions and tariffs on imports from China, Canada, and Mexico may weigh on economic growth -- and even directly on earnings of companies that produce their goods outside the U.S. Though we could see some pressure in these areas now, it's important to think long-term when investing. Strong companies have a track record of overcoming short-term challenges and going on to win over time. So, with that in mind, let's check out two top AI stocks to buy in the Nasdaq correction. 1. Meta Platforms You may know Meta Platforms (META 0.87%) best for something you or people all around you use every day: social media. The company owns Facebook, Messenger, Instagram, and WhatsApp, and more than 3.3 billion people use at least one of these apps daily. This has helped the company build a mighty revenue stream through advertising across these platforms. Advertising, driving the lion's share of revenue, brought in $160 billion last year, and Meta's revenue and profit have steadily advanced over time. The company even announced its first-ever dividend last year. But Meta isn't only about social media. The company aims to become a powerhouse in AI, and it's on the way. Meta has made AI its investment priority over the past few years, and just recently announced as much as $65 billion in investment this year, and part of this will go toward building a massive data center. How will all of this translate into growth? The company has developed its own large language model, Llama, to power its AI efforts. Meta aims to use AI throughout its apps -- for example, it already has introduced an AI assistant -- and the more time we spend on these apps, the more advertisers will keep coming back to reach us there. We also may expect more AI-driven products and services from this tech giant down the road. After a one-month drop of 11%, Meta trades for 24 times forward earnings estimates, down from 28 times just a few weeks ago, making it a bargain AI buy right now. 2. Broadcom Just to give you an idea of what a giant Broadcom (AVGO 6.08%) is, consider this: Broadcom's networking technology handles more than 99% of all Internet traffic. The company makes thousands of products involved in connectivity from data centers all the way down to your own home. And today, Broadcom is seeing explosive demand from cloud service providers as they ramp up their AI capabilities. In the quarter that ended Feb. 2, Broadcom's AI revenue jumped 77% to more than $4 billion, and infrastructure software revenue climbed 47% to more than $6 billion. That helped overall revenue increase 25% to a record of nearly $15 billion. All of this is thanks to demand from big cloud service providers for connectivity systems and Broadcom's XPUs, or chips to accelerate workloads. Broadcom is responding to this demand by creating next-generation accelerators, and it's also preparing to send out samples of its next-generation Tomahawk switch. Looking further into the future, the situation seems promising. Three large cloud customers that Broadcom is working with right now represent a serviceable addressable market of $60 billion to $90 billion in fiscal 2027. And this doesn't even include four additional cloud players that are asking the company to help them create their own accelerators. Broadcom stock slipped 26% from late January through March 6, before it reported these latest earnings figures. Before new earnings came out Thursday, it was trading for 28 times forward earnings estimates. While analysts may still be digesting the news, the stock would still be safely below its valuation of more than 37 times earlier this year. So now, on the dip, is a fantastic time to get in on this stock that's well positioned to roar higher in the AI boom.

2 Incredible AI Defense Stocks Worth Buying and Holding Forever | The Motley Fool

Artificial intelligence (AI) has transformed from a behind-the-scenes technology to an essential part of our daily experience. While earlier AI milestones -- like DeepMind's AlphaGo victory over the world Go champion in 2016 -- created temporary public interest, they didn't fundamentally change how most people interacted with technology. The emergence of generative AI has changed this dynamic completely. Tools such as OpenAI's ChatGPT and image generators like Stable Diffusion have made AI's capabilities immediately accessible and visibly impressive to everyday users. These technologies produce sophisticated outputs and tackle problems that were once considered exclusively within human capability. This technological evolution represents more than just scientific progress. According to McKinsey & Co., generative AI could generate between $2.6 trillion and $4.4 trillion in annual economic value across numerous industries in the decades ahead. For investors seeking to capitalize on this transformative trend, two AI-powered defense stocks stand out for their exceptional growth potential. Read on to find out more about these ultra-high-growth AI stocks. BigBear.ai (BBAI -12.50%) stands out in the defense and security sector with its deep domain expertise in AI-powered decision intelligence. In March 2024, the company expanded its capabilities by acquiring Pangiam, a leader in vision AI, which strengthened its portfolio in facial recognition, anomaly detection, and biometrics -- key technologies for modern security operations. BigBear.ai's strategic edge lies in its high-caliber leadership and close ties to the U.S. military. Newly appointed CEO Kevin McAleenan, a former Acting Secretary of Homeland Security, brings critical national security expertise to the helm. Further cementing its role in defense, BigBear.ai will deploy its AI orchestration platform, ConductorOS, at Exercise Talisman Sabre 2025, a multinational military exercise in Australia. ConductorOS enhances real-time model updates and improves military decision-making, reinforcing the company's position at the forefront of AI-driven defense innovation. As the global push for AI integration in military operations accelerates, BigBear.ai is exceptionally well-positioned to lead the next evolution of autonomous defense systems. Simply put, this company is a key player in next-generation military technology and poised to help shape tactical capabilities for decades. With proprietary platforms that enable optimized decision-making for governments and enterprises, Palantir Technologies (PLTR -10.73%) occupies a central position in the AI revolution. The company's impressive Q4 2024 performance demonstrated remarkable growth amid an intensifying global AI arms race, with U.S. revenue increasing 52% year over year to $558 million and U.S. commercial revenue surging 64% to $214 million, compared to the same period last year. Palantir's competitive edge derives from its core "ontology framework," which uncovers hidden data relationships and fuels advanced decision-making capabilities. In detail, Palantir operates through two primary channels -- the government-focused Gotham platform and the commercial-centric Foundry platform. Furthermore, the 2023 launch of its Artificial Intelligence Platform added a critical layer to its offerings by enabling non-technical users to harness large language models and fully leverage Palantir's technology. Thanks to its potent business model, Palantir continues to solidify its presence in both government and commercial sectors. Specifically, U.S. government revenue grew by a robust 45% year over year to $343 million in Q4 2024, while the company's innovative boot-camp-style sales approach helped to drive a whopping 73% increase in U.S. commercial customers over the past year. CEO Alexander Karp declared in the company's latest quarterly press release that "a software juggernaut has indeed emerged." Thus, Palantir appears uniquely positioned to capture significant economic value downstream for software companies that enable AI-driven productivity gains in enterprises. Its robust financial performance and favorable strategic positioning underscore its potential as a compelling lifelong investment opportunity. For investors seeking long-term stakes in the AI revolution, BigBear.ai and Palantir Technologies deliver a healthy dose of value and growth potential. Their specialized focus, proven execution, and expanding market opportunities make these stocks quintessential buy-and-hold candidates in an increasingly AI-driven global economy. As AI becomes ever more integral to defense and enterprise operations, these companies' robust strategies and innovative capabilities position them to benefit immensely from this paradigm shift.

Better Artificial Intelligence (AI) Stock: Nvidia vs. Palantir | The Motley Fool

Nvidia (NVDA 1.92%) and Palantir Technologies (PLTR 5.53%) delivered terrific gains last year as shares of both companies shot up remarkably thanks to the fast-growing demand for their artificial intelligence (AI)-focused hardware and software solutions. But 2025 is turning out to be different for these red-hot growth stocks. While Nvidia stock has retreated nearly 14% in 2025, Palantir has lost a lot of ground in recent days after a solid start to the year. However, it cannot be denied that both companies are on track to benefit from lucrative end markets. While Nvidia's recent results suggest that the fast-growing demand for AI hardware continues to be a key growth driver for the company, Palantir continues to witness an improvement in its growth profile thanks to the expanding need for generative AI software. However, if you had to buy one of these two AI stocks right now, which one should you be putting your money on? Let's find out. The market has been doubting Nvidia's ability to sustain its healthy growth thanks to a variety of reasons ranging from export controls on its AI graphics processing units (GPUs) to a potential slowdown in AI infrastructure spending to threats from other types of chips such as custom processors that are being adopted by tech giants in a bid to lower their AI expenses. However, the company's latest quarterly results make it clear that the demand for its AI chips remains healthy. Nvidia's revenue in the fourth quarter of fiscal 2025 (which ended on Jan. 26) increased a terrific 78% year over year to a record $39.3 billion. Adjusted earnings also increased by an impressive 71% to $0.89 per share. Both numbers were ahead of Wall Street's expectations. The guidance indicates that Nvidia is on track to sustain its healthy momentum. It is expecting $43 billion in revenue in the current quarter, which would translate to a 65% increase from the prior-year period. However, Nvidia could exceed its own expectations as it ramps up the supply of its latest generation Blackwell processors to support the fast-growing customer demand. More importantly, Blackwell can help Nvidia maintain its dominant position in the AI chip market thanks to its versatility. Management pointed out on the latest earnings conference call that "Blackwell addresses the entire AI market from pretraining, post-training to inference across cloud, to on-premise, to enterprise." Nvidia further points out that the arrival of low-cost reasoning models such as DeepSeek's R1 is likely to increase computing demand substantially. This bodes well for the company's Blackwell architecture, which Nvidia claims is capable of processing requests 25 times faster at a 20 times lower cost when compared to the previous generation H100 processor. As such, it won't be surprising to see Nvidia maintaining its dominant share of around 85% in the AI chip market going forward. This is also probably the reason why analysts have increased their revenue growth expectations for the company for the current and the next two fiscal years. The company's earnings, meanwhile, are expected to increase by 50% in the current fiscal year despite the near-term margin pressure it is going to face while ramping up the output of its Blackwell processors. Nvidia points out that its adjusted gross margin will head back to the mid-70% range later in the fiscal year from the low-70% range right now once Blackwell production is fully ramped up. So, don't be surprised to see Nvidia's earnings growing at a faster pace and exceeding analysts' expectations as the year progresses. Palantir Technologies is one of the leading vendors of AI software platforms, a market that's expected to become massive in the long run. Market research firm IDC estimates that the global AI software platforms market could grow from $28 billion in 2023 to $153 billion in 2028 at an annual rate of more than 40%. This fast-growing market is already having a positive impact on Palantir's performance. The company's revenue growth accelerated to 29% in 2024 from a 17% increase witnessed in 2023. Given that Palantir's top line came in at just under $2.9 billion last year, it is easy to see that the company still has a lot of room for growth in the future considering the potential size of the AI software platforms market. What's worth noting here is that the pace at which Palantir is now signing new contracts is equaling the pace at which the AI software platforms market is expected to grow, as per IDC. The company reported a 40% year-over-year increase in its remaining deal value (RDV) in the fourth quarter of 2024 to $5.4 billion. That was a significant improvement over the 22% year-over-year increase in this metric in the third quarter. Palantir's RDV refers to the total value of the company's unfulfilled contracts at the end of a quarter. So, the faster growth in this metric is proof that the company is now signing contracts at a faster pace than it is fulfilling, paving the way for stronger revenue and earnings growth in the future. There is a good chance that Palantir's revenue pipeline will continue to improve in the future as the new customers that the company brings on board tend to sign bigger contracts eventually, thanks to the efficiency gains delivered by its Artificial Intelligence Platform (AIP). Palantir's overall customer count was up by 43% year over year in the previous quarter. As these customers start deploying Palantir's AIP into more areas, the company should witness an improvement in its RDV. Also, the higher spending by existing customers is contributing toward an improvement in Palantir's margins. Its adjusted operating margin increased by 11 percentage points year over year last quarter. Not surprisingly, Palantir's adjusted earnings shot up an impressive 64% in 2024 to $0.41 per share. Analysts are expecting Palantir to sustain strong double-digit earnings growth going forward, though don't be surprised to see it exceed those expectations thanks to its fast-improving revenue pipeline and margin improvements. While Nvidia allows investors to benefit from the lucrative AI hardware market, Palantir enables them to make the most of the rapidly improving adoption of generative AI software. So, both companies could find a place in a diversified portfolio. However, the problem with Palantir is that it trades at a huge premium when compared to Nvidia, a company that's growing at a faster pace. Palantir's expensive valuation has created concerns that the stock may have gotten ahead of itself and is one of the reasons why it has pulled back significantly of late. Not surprisingly, analysts are expecting Palantir to deliver just 15% gains in the next year as per its median price target of $97. Nvidia, on the other hand, is expected to jump 51% over the next 12 months, according to analysts. That won't be surprising as Nvidia's cheaper valuation and the faster earnings growth that it is expected to deliver this year could lead the market to reward it with more upside as compared to Palantir, making it easier for investors to decide which one of these two AI stocks is a better buy right now.

AI Chipmaker Stock Sell-Off: Here Are My Top 2 Semiconductor Stocks to Buy Now | The Motley Fool

Right now could be a great opportunity to get in on AI chip stocks before they return to growth. In January, China's DeepSeek AI sparked a sell-off in artificial intelligence (AI) stocks after sharing breakthroughs in developing highly efficient training and inference algorithms for large language models. In other words, DeepSeek's AI models showed maybe big tech companies don't have to spend hundreds of billions of dollars on the most advanced GPUs available for their data centers. The sell-off accelerated recently after Nvidia (NVDA 1.92%) reported earnings and President Donald Trump imposed additional tariffs on China with new tariffs on Mexico and Canada. While Nvidia's earnings results beat analysts' published expectations, investors weren't fully reassured that DeepSeek's efforts and the uncertain economic environment wouldn't slow down Nvidia's rapid growth. Many other semiconductor stocks have seen their share prices decline along with Nvidia's recently. A couple of those stocks look particularly appealing at these lower prices. These are my top two semiconductor stocks to buy now. Taiwan Semiconductor Manufacturing (TSM 0.71%), known as TSMC, is the largest chip manufacturer in the world. When Nvidia needs its latest and greatest GPUs printed and packaged, it contracts with TSMC because, as Nvidia CEO Jensen Huang said, "It's the world's best by an incredible margin." Indeed, TSMC's technology lead is a huge advantage that helps it attract the world's biggest customers like Nvidia and Apple. As a result, it captures over 60% of the spending on semiconductor fabrication, and that percentage is growing as companies demand more high-end AI chips that only TSMC can produce. With such a large revenue base, TSMC is able to reinvest much more than its competitors in research and development, ensuring it maintains and extends its technology lead. TSMC is also able to invest ahead of the growth it sees in the market. It announced a big step up in capital investments for 2025 in January, forecasting $38 billion to $42 billion in spending this year. That's up 34% from 2024 at the midpoint. Management is historically very good at forecasting demand and investing appropriately to meet those expectations. However, semiconductor manufacturing is inherently a cyclical business. If demand drops significantly, TSMC still has a lot of overhead to keep its manufacturing facilities running. The company recently announced plans to invest $100 billion in the United States. That's on top of its plans to expand its facilities in Arizona, the first of which entered high-volume production in late 2024. The new facilities will include TSMC's most advanced technology. It's possible TSMC's investment plans will help it avoid targeted tariffs impacting its business and those of its customers. After the recent sell-off, shares trade for less than 20 times earnings. That's a great price for a company with the competitive moat of TSMC that should benefit from strong growth in demand for chips, whether from AI or other computing needs. Advanced Micro Devices (AMD 1.48%) is a distant second when it comes to developing valuable GPUs for AI training. The vast majority of big tech spending goes to Nvidia for its general-purpose chips. In fact, AMD may have lost market share over the past year, as Nvidia grew its data center revenue considerably faster than AMD despite operating from a much bigger base. AMD also disappointed investors with its outlook for the current quarter, guiding for a 7% sequential drop in sales. When asked for clarification on the components of that drop during the earnings call, CEO Lisa Su said the data center business would be down in line with that figure. By comparison, Nvidia guided for a 10% sequential increase in revenue for its data center business. However, the potential for AMD remains extremely high. Management expects the total addressable market for AI accelerator chips to climb to $500 billion by 2028. Even if it manages just 10% of the market, that would roughly double its data center revenue from 2024. AMD could be the beneficiary of big tech companies looking to keep Nvidia's pricing in check or optimizing their spend for performance over time by using less expensive chips. Its growing relationships with tech companies could also benefit its share of x86 CPU servers, where it's consistently gained in the market in recent years. Importantly, AMD trades for just 21 times earnings expectations after the sell-off in chip stocks. While future earnings expectations have come down since its most recent financial report, the drop in the stock price is severe enough that shares are worth snatching up at this point. Even after the adjustments, analysts still expect earnings growth averaging 38% over the next two years. To get that growth at this price is a great opportunity.

2 AI Chip Stocks to Buy in March | The Motley Fool

Artificial Intelligence (AI) promises to generate wealth-building returns for investors, and the companies that provide the powerful chips to enable this technology are in a great position to deliver monster returns. Using history as a guide, that winners tend to keep on winning, here are two stocks to buy now. Shares of Nvidia (NVDA 3.97%) have had an incredible run in recent years. The company supplies graphics processing units (GPUs) used for playing video games, autonomous driving, and 3D animation, but it's the strong demand in the data center market that has sent the stock up 1,800% over the last five years. Nvidia's recent financial results for the fiscal fourth quarter should put to rest the fears of slowing momentum in the data center market. Revenue grew 78% year-over-year, and management guided for record revenue of $43 billion next quarter. The chip industry is inherently cyclical, and data center spending is no different. The recent news that China's DeepSeek built a lower-cost AI model raised concerns that Nvidia might experience slowing momentum in the near term, but those fears appear to be overblown based on Nvidia's guidance and outlook for demand. "AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionize the largest industries," CEO Jensen Huang said. Sure enough, Nvidia's new Blackwell platform, designed for the most advanced AI workloads, surpassed management's expectations last quarter, as it generated $11 billion of revenue with more to come as it continues ramping production. For the full year, Nvidia's data center revenue more than doubled to $115 billion, but much of the demand has been driven by investment for the consumer space, such as generative AI chatbots, search, and recommendation systems. Nvidia sees the next wave of demand coming from enterprise investment in AI agents and robotics. Dell'Oro Group forecasts data center spending to reach $1 trillion by 2029, representing a compound annual growth rate of 21%. As the dominant supplier of chips for data centers, this should fuel more returns for Nvidia investors. Taiwan Semiconductor Manufacturing (TSM -0.31%) makes the chips for Nvidia and many other chip companies. It has an outstanding reputation for building cutting-edge processing nodes and helping chip suppliers meet demand. As the leading global foundry, TSMC is a highly profitable business that has delivered excellent returns to shareholders. It's a solid stock to ride the growing demand for advanced processing technologies. Strong demand for AI chip technologies lifted TSMC's revenue 37% year-over-year in the fourth quarter. This was driven by demand for its 3-nanometer and 5-nanometer chip technologies. The company is already ramping up production of 2-nanometer process nodes, which will allow for lower power consumption and better chip performance. While TSMC has experienced dips in demand, given the cyclical nature of the industry, the company's revenue and earnings have grown at an annualized rate of 18% over the last 30 years, and the stock has followed, climbing more than 6,000%. An investment in TSMC is a bet on the continued innovation in chip technology. Over the long term, management sees AI accelerators, such as GPUs and custom AI chips, driving most of the company's revenue growth in the coming years. The company's outlook calls for 20% annualized revenue growth through 2029. With the stock trading at 20 times 2025 earnings estimates, and analysts expecting annualized earnings growth of 33%, investing in Taiwan Semiconductor could deliver spectacular returns through the end of the decade.

Prediction: 2 Artificial Intelligence (AI) Stocks That Will Be Worth More Than Palantir by 2026 | The Motley Fool

The AI darling has high expectations built into its stock price, but these two offer great value today. The S&P 500 has been on an incredible bull run over the last 28 months, and one of its biggest driving force has been the artificial intelligence (AI) industry. Recent advances have led to a lot of investor excitement about the potential for the technology to change nearly every business in the economy. Few companies have benefited as much from the increases in AI spending and investor excitement as Palantir Technologies (PLTR 0.18%). The company helps government agencies and business enterprises make sense out of the mountains of data they generate and collect. When data science tools are more accessible to more decision-makers, they can make better decisions. The premise is that paying for Palantir's software can pay for itself quickly. While Palantir has long served U.S. government agencies and the military, the release of its Artificial Intelligence Platform (AIP) accelerated its growth, particularly among commercial customers. Its revenues have increased 50% over the last two years. But Palantir's stock price has climbed a whopping more than tenfold in that same period, giving it a $204 billion market cap and a sky-high valuation. And that's after a more than 30% drop from the peak it hit earlier this month. Given that high expectations for the business are now baked into the stock price, Palantir could continue to drop with even the slightest hiccup in its financial results. Meanwhile, two other AI stocks look poised to overtake the AI darling in value by 2026. Here's what investors need to know. Qualcomm (QCOM 1.77%) isn't the semiconductor stock that comes to most people's minds first when they think of artificial intelligence. It doesn't make GPUs or network switches like some of the most hyped chipmakers. However, it could play a crucial role in supporting the artificial intelligence trend in the coming years. Qualcomm operates two business segments. Its high-margin licensing segment, QTL, holds a raft of important patents for wireless communication, including 3G, 4G, and 5G. It charges device makers a percentage of the price of each device sold that uses its patented technologies. Qualcomm currently faces a significant headwind as Apple is shifting away from using tech built on Qualcomm's patents. Instead, the iPhone maker is developing its own baseband chips, The recently released iPhone 16e was the first device it brought to market that uses its in-house chips. Still, the bulk of Qualcomm's revenue and profits come from its chip business, QCT. And that business could see a big bump in the near future as tech companies embed more AI processing power and capabilities into PCs, smartphones, and other personal computing devices. Qualcomm makes the leading smartphone chip for high-end Android devices -- the Snapdragon mobile system-on-chip line. It has adapted that platform for PCs and automotive applications as well. With consumers seeking ever more capable devices and more smart features in their vehicles, Qualcomm has seen strong sales growth. The QCT segment's revenues climbed 20% in Qualcomm's last fiscal quarter, and its earnings before taxes increased 25%. As developers create new AI software designed to run on devices like smartphones, those devices will need more powerful processors. Apple has shown that advanced on-device AI requires more powerful computing capabilities, which is why it has limited its Apple Intelligence features to its newer PCs and most recent iPhones. As other device makers and software developers keep pace, the demand for high-powered Snapdragon processors could increase even faster. Qualcomm stock trades for just 14.3-times expected forward earnings as of this writing. That makes it an absolute bargain of a stock, especially given that the company could benefit so much from growing demand for AI on devices. The stock has traded at an average trailing P/E ratio of about 18 since 2021, which implies about 25% upside from the current share price. A rise of that magnitude would push its market cap to about $230 billion, exceeding Palantir's current value. Adobe (ADBE 0.31%) has invested a lot in artificial intelligence over the last few years, but investors are still wary about the impact that recent advancements in generative AI could have on its business. Many see new AI-powered creative tools as threatening to make Adobe's Creative Cloud applications unnecessary. But Adobe's competitive advantages remain strong. Its tools are the industry standards, so it's unlikely professional creatives will shift away from them anytime soon. Businesses expect deliverables in Adobe's file formats, and they expect designers and other creatives to be proficient (at least) with its software. Few professionals will want to take on the switching costs involved in leaving Adobe. What's more, the creative capabilities unlocked by generative AI could ultimately benefit Adobe, as it makes it easier for more people to make designs, images, or videos. That's why Adobe has leaned into its Firefly AI model, giving users access to it through its entry-level Adobe Express software. Management says it has seen strong user acquisition from Express, which could lead to greater adoption of its premium software later. Meanwhile, it implemented price increases, charging a premium for more Firefly access. All of that led to an 11% increase in annual recurring revenue for Adobe's digital media segment in 2024. Perhaps the bigger opportunity for Adobe with AI comes in its marketing solutions business. While its Creative Cloud business often goes hand in hand with its marketing software (for creating ad campaigns), AI could help supercharge ad campaigns by helping businesses gather more data, make sense of it, and optimize their ad spending. Adobe launched GenStudio for Performance Marketing to pursue that massive opportunity, and integrated Firefly Services into the broader GenStudio product in the fourth quarter. Management says the early responses have been very promising. Adobe stock trades for less than 22-times analysts' expectations for 2025 earnings. That's well below its historic average, suggesting significant upside potential for shares that have largely moved sideways over the last few years. A 25% increase in the share price would push its trailing P/E into the high 20s, which is closer to its historic average, but still presents a cautious outlook for the future growth of the company. Such growth would push Adobe's valuation above $240 billion, exceeding Palantir's current value.

2 Artificial Intelligence (AI) Stocks to Buy Before They Soar | The Motley Fool

Artificial intelligence (AI) is a once-in-a-generation investment opportunity. Leading AI stocks have soared over the last few years, as the AI market is projected to grow 27% annually to reach $826 billion by 2030, according to Statista. Here are two stocks that could soar over the long term. The cost of building advanced AI models is decreasing, and this could translate to explosive demand for AI software in the coming years. C3.ai (AI -1.80%) is the dark horse in the AI software market right now, with Palantir taking the spotlight. However, C3's accelerating growth over the last year shows that it is poised to deliver monster gains for shareholders. Organizations are using C3.ai's AI applications for predicting demand, managing supply chains, and streamlining operations. It has customers across several industries, including the U.S. military. In the January-ending fiscal second quarter, the company closed 66 agreements, representing a year-over-year increase of 72%. C3.ai's revenue grew 26% year over year last quarter, up from 17% in the year-ago quarter. It's driving more sales momentum through its strategic alliance with Microsoft Azure. The partnership led to 28 new agreements last quarter with customers across nine industries. Despite strong top-line growth, the stock is currently down 28% in 2025 at this writing, as the company continues to report losses on the bottom line. It recognizes revenue over the subscription term with customers but accounts for the majority of costs as incurred, which means an acceleration in sales can lead to large losses early on. As revenue continues to grow, higher margins should follow. On that score, management expects the business to generate positive free cash flow by fiscal Q4 2025. This has been a volatile stock, but C3.ai's growing revenue and strategic partnerships signal a bright future for the company. Investors that hold shares for five years could be well rewarded. Most people know Dell Technologies (DELL -4.70%) as a PC company, but it's also a leader in servers. Its infrastructure solutions business is booming, as demand for AI-optimized servers takes off. The stock is up almost 400% over the last five years, but it still looks undervalued based on recent financial results. Dell's business is roughly split between PCs (client solutions) and servers (infrastructure solutions). The PC business continues to slowly recover from a recent slump, but infrastructure solutions revenue continues to grow at high rates, up 22% year-over-year in the fourth quarter. An investment in Dell is a bet on the growing demand for AI. Dell offers the PowerEdge XE9712, an Nvidia-powered AI factory that is built for large-scale AI deployments and large language model training. Dell just signed a deal to supply servers for Elon Musk's xAI, bringing its AI server backlog to $9 billion. Another catalyst that should benefit the stock is the PC refresh cycle, where the end of life for Microsoft's Windows 10 could create a strong incentive for businesses and consumers to upgrade over the next few years. Given the opportunities, management recently raised the annual dividend by 18% to $2.10. This is based on strong earnings, which grew 14% year-over-year in 2024 on a non-GAAP basis. Analysts expect long-term annualized earnings growth of 13%, yet the stock trades at just 12 times 2025 earnings estimates. For a leading supplier of servers, a market that should continue to grow in the coming years, the stock's valuation looks attractive and could set the stage for significant gains.

Prediction: 2 AI Stocks Will Be Worth More Than Palantir Technologies Within a Year | The Motley Fool

Jim Kelleher at Argus has set Advanced Micro Devices with a target price of $160 per share. That implies 60% upside from its current share price of $100. It also implies a market value of $259 billion. Those forecasts may be too aggressive, but I do believe Shopify and AMD can achieve $200 billion market values within 12 months, topping what Palantir is currently worth in the process. Here's why. Shopify offers a turnkey solution for retail. Its software helps sellers run their businesses across physical and digital stores. Shopify also provides adjacent financial services for payments processing, bill payments, tax filing, and account management. And it supports merchants with solutions for marketing, logistics, wholesale, and cross-border commerce. The company two years ago introduced Shopify Magic, a suite of artificial intelligence (AI) tools that can draft product descriptions, edit images, and surface business insights. Shopify also uses AI internally to support its sales, customer service, and human resources teams. President Harley Finkelstein on the fourth-quarter earnings call told analysts, "Shopify will very much be one of the major beneficiaries in this new AI era." Anthony Chukumba at Loop Capital views Shopify as an underappreciated AI stock. "We believe Shopify will be able to grow its revenue at a much faster rate than its operating expenses for the foreseeable future, which will result in operating and free cash flow margin expansion and a higher valuation," he wrote in a note to clients in December. Shopify reported mixed results in the fourth quarter, missing estimates on the bottom line. Revenue increased 31% to $2.8 billion, the second consecutive sequential acceleration, and non-GAAP earnings increased 29% to $0.44 per diluted share. Also, Shopify reported a 10-basis-point increase in take rate, meaning merchants are engaging more deeply with its adjacent services. Importantly, Shopify accounted for 12% of retail e-commerce sales in the U.S. last year, up from 10% in the prior year, meaning it gained two percentage points of market share. That makes Shopify the second largest domestic e-commerce company behind Amazon, and management expects further market penetration in the coming year. Wall Street thinks Shopify's adjusted earnings will increase 20% in 2025. That makes the current price-to-earnings (PE) multiple of 88 looks expensive. But management guided for mid-20% sales growth in the first quarter, which makes the consensus estimate look low. And the company beat the consensus earnings estimate by an average of 24% in the past six quarters. If that pattern continues, Shopify could attain a $200 billion market value while its PE multiple fell to a slightly more reasonable 82 times. That implies a share price of $154, which implies 37% upside from its current price of $112. Admittedly, there are high expectations baked into my prediction, but it's less aggressive than Radke's target of $175 per share. Advanced Micro Devices (AMD) is a semiconductor company that designs chips in four end markets: data centers, client (personal laptops and desktops), gaming, and embedded processors. The company is best known for central processing units (CPUs) and graphics processing units (GPUs), both of which support AI workloads. AMD in recent years has gained substantial CPU market share in personal computers and data center servers. Those market share gains have come at Intel's expense, and investors should expect more of the same in the coming years as AMD continues to bring new Ryzen chips (personal computers) and Epyc processors (data centers) to market. However, AMD has struggled to compete with Nvidia in the data center GPU market. In fact, Nvidia accounted for 98% of data center GPU shipments in the last two years. However, while AMD has no chance of catching the leader, it may gain market share as production of its latest Instinct GPU (MI350) ramps in mid-2025. Those chips are purpose-built for AI. AMD reported reasonably good financial results in the fourth quarter. Revenue increased 24% to $7.6 billion and non-GAAP earnings increased 42% to $1.09 per diluted share. CEO Lisa Su told analysts data center AI sales would grow from $5 billion in 2024 to "tens of billions of dollars of annual revenue over the coming years." The market is currently too pessimistic where AMD is concerned. Jim Kelleher at Argus wrote in a recent note, "In our view, AMD's beaten-down share price does not fully reflect the company's long-term revenue and margin growth potential, and its ongoing market share gains at Intel's -- and potentially Nvidia's -- expense." Wall Street expects AMD's adjusted earnings to increase 37% in 2025. That makes the current PE multiple of 30 times look downright cheap. If earnings align with expectations and the market affords AMD a slightly higher valuation multiple, the stock could certainly return 60% in the next year. But AMD could achieve a market value of $220 billion (which implies 37% upside) even its PE ratio remains unchanged.

3 No-Brainer Artificial Intelligence (AI) Stocks to Buy With $200 Right Now | The Motley Fool

There's a lot of growth left in artificial intelligence, and these three stocks still offer great value. One trend has dominated the market for over two years now: artificial intelligence (AI). Companies have collectively added trillions of dollars to their market caps thanks to the massive spending on AI and the investor excitement around its potential. Despite the massive run the market is currently on, there could be a lot more AI spending yet to come. Research firm IDC expects businesses to spend $307 billion on AI solutions this year, and that number is projected to more than double to $632 billion by 2028. Of course, not every company will be a winner from all that spending on AI. And even if a company has great prospects, its stock must still present attractive value, which is increasingly difficult among the run-up in stocks. But investors with just $200 can still find great opportunities among AI stocks in today's market. Here are three no-brainer buys right now. Alphabet (GOOG 1.18%) (GOOGL 1.06%) is the parent company of Google, and it plans to spend a massive amount on building AI infrastructure in 2025. Management expects to spend $75 billion on capital expenditures this year, primarily for servers. That speaks to the opportunity management sees in AI, and it's already showing strong signs of capitalizing on that opportunity. The company started incorporating AI-generated responses to search queries in 2023. By the end of 2024, those AI Overviews were available in 100 countries and drive higher satisfaction and engagement than traditional search results. Importantly, Google isn't cannibalizing its advertising business. "We actually see monetization at approximately the same rate," SVP of Google Philipp Schindler said on Alphabet's fourth-quarter earnings call. AI is also behind advances in products like Google Lens and the Circle to Search feature on Android devices. Generative AI has the potential to improve Google's advertising business, making it easier for marketers to develop new creatives and test ad campaigns. Google Cloud has been a big beneficiary of the increased AI spending from other businesses. Its revenue grew 30% last year while its operating margin expanded to 14%. It could see significant growth in the years to come as management noted it remains capacity-constrained and its competitors sport higher operating margins. While Alphabet is spending heavily on AI, it's seeing strong returns on its investment. Earnings per share grew 39% last year and analysts expect 12% further growth this year. Still, shares trade for just $170 as of this writing, less than 19 times analysts' 2025 consensus earnings expectation. That's an incredible bargain for investors and well-deserving of your $200. Producing high-end AI chips requires a lot of specialized equipment, and one of the largest equipment manufacturers in the world is Applied Materials (AMAT 0.91%). Unlike most other semiconductor equipment manufacturers, Applied has a broad portfolio of equipment that can serve a range of customers. As chip production expands and becomes increasingly complex, the demand for Applied's products will continue to grow. And there are a couple of factors that ensure Applied will win the majority of new contracts with foundries. First, it benefits from a virtuous cycle, whereby foundries spend more money with Applied than any other equipment maker, giving the company more to invest in R&D. It spent $3.2 billion on research and development to create more advanced equipment in 2024 capable of high-end chip production and lowering error rates in that production. That budget absolutely dwarfs its competitors, ensuring it can continue to offer better equipment than anyone else in the market for years to come. Second, foundries can't afford the downtime required to switch equipment providers. On top of that, there's risk that other equipment won't be able to keep up with advances in technology, which is an unnecessary risk for any manager to take. In other words, the switching costs to move away from Applied's equipment are very high. Applied also operates a high-margin service business to ensure its equipment operates as expected. That business is expected to grow quickly as the complexity of chip manufacturing increases and foundries ramp up production of their next-generation chips. With the stock trading for just $158 as of this writing, it looks like a great bargain for anyone looking to get started investing in AI stocks with just $200. That stock price translates into a forward PE of about 17 and an enterprise-value-to-sales multiple of less than 5. Whichever way you look at it, it's a great value for a company with the competitive position of Applied Materials. Advanced Micro Devices (AMD 0.35%) is often seen as playing second fiddle to Nvidia (NVDA 3.97%) when it comes to making all-important GPUs for AI servers. Indeed, AMD disappointed investors when it forecasted a 7% sequential decline in revenue for 2025's Q1, and affirmed its data center business would experience a similar decline. By comparison, Nvidia forecasts a 9% sequential increase in revenue in its comparable quarter. Still, investors may be discounting the value of AMD's GPU business alongside its progress in taking market share in the x86 CPU market for both servers and consumer PCs. While Nvidia has a significant advantage over AMD with its CUDA software and advanced hardware, AMD provides an important resource for hyperscalers as a secondary source of compute power. Management expects the total addressable market for AI accelerator chips will be more than $500 billion in 2028. Even a small share of that market would be huge for AMD, which generated $12.6 billion in revenue from its data center segment last year. Importantly, AMD has a lot of upside to its margins right now. It increased its gross margin from 45% to 53% in 2024. And while it might not have the pricing power of Nvidia, it should benefit from scaling its operations. That should lead to meaningful operating margin expansion over the next few years toward management's long-term target in the mid-30s from 24% last year. At a price of about $100 per share, investors with $200 could pick up two shares of AMD, and it's certainly worth the price. Shares currently trade for just 21 times analysts' estimate for this year's earnings. On top of that analysts expect earnings to grow another 34% in 2026. With the potential growth ahead for the company, it deserves a higher multiple, and it could end up being a great investment for anyone just getting started with AI stocks.