Tech Giants Lead the AI Race: Microsoft, Alphabet, Meta, and Nvidia Dominate the Market

2 Trillion-Dollar Artificial Intelligence (AI) Stocks to Buy Now, According to Wall Street | The Motley Fool

Among the 68 analysts following Alphabet, the low price target is $170 per share. That forecast implies 5% upside from its current share price of $162. The median price target implies 26% upside. As a caveat, there is no such thing as a sure thing where the stock market is concerned. It is entirely possible that both stocks decline over the next year, but Wall Street's optimism is noteworthy. Here's what investors should know about Microsoft and Alphabet. Microsoft is the largest enterprise software company and the second-largest public cloud in the world. It has introduced artificial intelligence (AI) products in both areas, such as Copilots and autonomous agents for its office productivity (Microsoft 365) and enterprise resource planning (Dynamics 365) platforms. Think of Copilots as personal assistants, and autonomous agents as AI applications. Those products could become a material source of revenue in the future. Indeed, Morgan Stanley analysts believe they will help Microsoft extend its dominance in the enterprise software market. Microsoft 365 Copilot entered general availability less than one year ago, and already 60% of Fortune 500 companies have adopted the product to some degree, and the number of daily users nearly doubled in the most recent quarter. Meanwhile, Microsoft Azure is gaining share in cloud infrastructure and platform services, and its partnership with OpenAI has been an important selling point. Azure customers can customize OpenAI models, including the large language models that power ChatGPT, for the purpose of building generative AI applications tailored to their business needs. Microsoft delivered a reasonable financial performance in the fourth quarter of fiscal 2024 (ended June 30). Revenue rose 15% to $64.7 billion, and earnings under generally accepted accounting principles (GAAP) jumped 10% to $2.95 per diluted share. The discrepancy between the top and bottom lines can be explained by the Activision acquisition, which added about 3 points to revenue growth and subtracted 2 points from earnings growth. Looking ahead, Microsoft is one of the companies best positioned to monetize generative AI due to the reach of its software and cloud computing businesses. But Wall Street expects earnings to increase at 11% over the next 12 months. That makes the current valuation of 36 times earnings look expensive. Personally, I would wait for a cheaper price before purchasing shares of this stock. Alphabet is the largest digital advertising company and third-largest public cloud in the world. Analysts have recognized its leadership in several AI product categories, including AI infrastructure solutions, machine learning platforms, and foundational large language models. The company is bringing that AI expertise to bear across its advertising and cloud computing segments to boost revenue. Its dominance in digital advertising is a product of its ability to engage users and source data. For instance, Google Search users run 5.9 million searches per minute. Alphabet can use that information to help advertisers reach the right consumers with relevant content. The company has also been layering new AI features into its ad tech software to streamline workflows and boost clicks, and it added generative AI overviews in Google Search to boost engagement. Regarding Google Cloud, Forrester Research analysts recently wrote, "Google has enough differentiation in AI from other hyperscalers that enterprises may decide to migrate from their existing hyperscaler to Google or at least start a new relationship with Google Cloud." Indeed, while the company still trails Amazon and Microsoft in the cloud infrastructure and platform services market, its share increased by a percentage point in the second quarter. Alphabet reported encouraging financial results in the second quarter. Revenue rose 14% to $84.7 billion on strong sales growth in the cloud computing unit, alongside modest sales growth in the advertising segment. Meanwhile, GAAP earnings increased 31% to $1.89 per diluted share. Importantly, net profit margin expanded 325 basis points, driven by what chief financial officer Ruth Porat called "efforts to durably reengineer our cost base." Wall Street expects Alphabet's earnings to increase 15.5% over the next 12 months. That consensus estimate makes the current valuation of 23.5 times earnings look reasonable. Patient investors should feel comfortable buying a small position in this AI stock today.

2 Unstoppable Tech Stocks You Can Buy With $500 | The Motley Fool

Companies with deep pockets to spend on AI technology will likely be around for decades growing your savings. Artificial intelligence (AI) is a generational investment opportunity, but you don't have to take unnecessary risks to profit from AI. One of the best ways to profit from the growth of this technology is to invest in the leading cloud service providers. The cloud market is valued at $297 billion, according to Synergy Research, and still growing at high rates. The cloud leaders, including Alphabet (GOOGL 1.57%) (GOOG 1.50%) and Microsoft (MSFT 0.80%), are driving returns for their investors that are outperforming the broader market and should continue that winning streak for many years. If you have $500 or more to invest right now, here's why you should consider buying at least one share of either these elite tech companies. Shares of Alphabet have more than doubled over the last five years, but the Google parent continues to report solid growth from its advertising and cloud businesses. The shares are up 23% year to date, outpacing the S&P 500. Many customers are choosing Google Cloud over the No. 1 cloud service provider, Amazon Web Services (AWS). Reasons for choosing one cloud provider over another can vary, but a few factors working in Google Cloud's favor are tools that make it easy for customers to migrate data from their on-premise servers and a more modern user interface. Google Cloud's revenue grew 28% year over year in the second quarter to $10.4 billion, outpacing the broader 22% growth of the cloud market, according to Synergy Research. Alphabet continues to ratchet up capital investment in its cloud business. The company's capital expenditures have accelerated to $44 billion over the last four quarters. Google is building more data centers and AI tools to meet surging demand in the cloud. Moreover, Google's Vertex AI platform is winning over major organizations, including the U.S. Air Force, that need to build generative AI-powered applications. The engine behind Vertex and other AI services is Gemini, the company's AI model that powers many of the features in Google Cloud and Google's consumer products like Search. Most importantly, Google Cloud's operating income jumped from $395 million in the year-ago quarter to more than $1.1 billion in Q2 2024. This shows Alphabet can make necessary investments in key technologies like AI while boosting margins to benefit shareholders. Alphabet will announce third-quarter financial results on Oct. 29. Over the long term, Wall Street expects the company to report double-digit growth in earnings. With the stock trading at a reasonable forward price-to-earnings ratio of 19 on 2025 earnings estimates, Google investors should expect the stock to hit new highs in the near term and for years to come. Microsoft stock has tripled over the last five years, with a 21% gain in 2024. Like Google, Microsoft offers software products that millions (if not billions) of people use every day, including Windows, which runs on 72% of desktop PCs, according to Statista. But the software giant continues to experience its greatest momentum in enterprise cloud services. It is currently the No. 2 cloud service provider behind AWS, but Microsoft is quickly narrowing Amazon's lead. The Microsoft Azure cloud service grew even faster than Google Cloud in the June-ending quarter, with revenue up 29% year over year. Microsoft is benefiting from its game-changing partnership with OpenAI, the company behind ChatGPT. OpenAI has brought significant improvements to Microsoft's software offerings, including Azure, where the Azure OpenAI service is now used by most of the Fortune 500. Microsoft continues to plow billions into more data centers. Coincidentally, Microsoft's capital expenditures were almost identical to Alphabet's -- $44 billion -- over the last four quarters. It's doing so while also growing net income by 10% year over year last quarter to $22 billion. Microsoft's capital investments have increased 79% since the end of 2022, compared to 40% for Alphabet. On the last earnings call, management said that the company is laying the groundwork to support growing cloud demand for the next decade and beyond. The opportunities in cloud computing and AI are clearly in the early innings. Microsoft will announce its first-quarter financial results for fiscal 2025 on Oct. 30. But analysts expect its earnings to grow 13% on an annualized basis. Investors should be well rewarded for holding this stock over the long term.

A Once-in-a-Decade Investment Opportunity: 2 Artificial Intelligence (AI) Stocks to Buy Now | The Motley Fool

Artificial intelligence (AI) stocks offer a compelling investment theme because we're at the beginning of what could be a game-changing story. It can potentially change how we manage our daily tasks, make companies more efficient, and lead to major discoveries in areas like healthcare. JPMorgan Chase chief executive officer Jamie Dimon has even likened AI to transformations such as the printing press and electricity. This means getting in on certain high-potential AI companies today -- when their shares are reasonably priced -- could represent a once-in-a-decade investment opportunity. The AI market is forecast to grow from $200 billion today to potentially $1 trillion by 2030, and these companies' stock prices may take off as more and more investors recognize the earnings potential. As a result, the stocks could become much more expensive than they are today. That's why now represents the perfect moment to shop around for solid AI players, and these two should be at the top of your buy list. Alphabet (GOOG -1.40%) (GOOGL -1.43%) is probably best known for its crown jewel, Google Search. The search engine is the world's No. 1, holding more than 90% share, and that has equaled a revenue powerhouse for Alphabet. Advertisers flock to the platform to reach Google Search users, generating billions of dollars in revenue for the company. Over the past few years, Alphabet has plunged into the world of AI, using the technology to improve Google Search and selling its AI tools to customers of Google Cloud, its cloud computing business. So, AI may help Alphabet attract more advertising dollars if Google Search becomes even stronger and we spend more time using it...and AI is already generating revenue for Alphabet through the cloud business. In fact, Alphabet said during its latest earnings report that its AI Infrastructure and Generative AI Solutions already brought in billions of dollars in revenue this year. The cloud business showed double-digit growth in revenue and triple-digit growth in operating profit in the quarter, with those figures reaching the milestones of $10 billion and $1 billion, respectively. Meanwhile, shares of Alphabet remain reasonably priced, trading at 21x forward earnings estimates, offering you a terrific opportunity to get in early on this potentially explosive AI growth story. Meta Platforms (META -3.15%) chief executive officer Mark Zuckerberg has been very straightforward about his AI ambitions. His goal is to make Meta an AI leader and he's poured investment dollars into developing large language models, training them, and using them to fuel products like AI assistants. Zuckerberg says he hopes one day Meta will offer users assistants for all their needs, from leisure to professional. We may expect other AI-based products and services from Meta, considering the company's commitment to exploring the technology. Meta has made AI its biggest investment area of this year, with the company bringing on board 600,000 graphics processing units. The tech giant is one of the main customers of top chip designer, Nvidia, and also has developed its own chips as it goes all in on this technology. It's also important to remember that as Meta invests in this high-growth area, the company continues to generate billions of dollars in earnings thanks to its ownership of Facebook, Messenger, WhatsApp, and Instagram. Like Alphabet, it makes most of its revenue through advertising, and also like Alphabet, if AI helps improve its product -- in this case social media apps -- advertising revenue could climb. Today, Meta shares trade for 27x forward earnings estimates, which looks like an absolute steal considering the company's position in the high-growth area of AI as well as its solid earnings track record and financial position -- this year Meta even started paying a dividend, showing it can afford to fund growth and reward shareholders. And all of this means that now may represent a valuable opportunity to get in on this top AI story.

1 Top Artificial Intelligence (AI) Stock That's a No-Brainer Buy | The Motley Fool

This company was a longtime mover and shaker in AI (and may still be a leader). When it comes to stocks driven by the increased interest in all things having to do with artificial intelligence (AI), investors have gravitated to Nvidia. In a sense, this is understandable, as Nvidia's vision brought about an early lead in the AI chip industry amid the sudden demand for generative AI capabilities. The problem with this focus is that the AI industry extends far beyond Nvidia. That might lead one to overlook opportunities that could potentially match or even outshine that stock going forward. Given the dynamics of the AI industry, it might be time for investors to pivot to AI leaders like Google parent Alphabet (GOOGL 0.40%) (GOOG 0.45%). AI investors should stay aware of Alphabet as it is one of the original AI stocks. The company first began utilizing AI back in 2001 when it began applying spell checks to Google searches. Its AI technology advanced from that point, and for years, most industry analysts saw it as an AI leader. However, that changed in the spring of 2023 when OpenAI released its latest version of the generative AI chatbot ChatGPT. That company partnered with rival Microsoft and ran its servers on Nvidia chips, appearing to leave Alphabet and its companies out of the mix. Despite the perception the Microsoft/OpenAI deal created, it is unclear whether Alphabet is "behind" in AI. The company responded quickly by launching its own updated generative AI chatbot Bard in the spring of 2023, following that up with Google Gemini in December of that year. Moreover, it has taken a different approach to AI, leveraging its Google Research and Google DeepMind teams to emphasize the development of every layer of the AI stack. It focuses heavily on the ethics and safety issues that may come with AI. Additionally, it has developed one of the more popular AI libraries with TensorFlow, a free, open-source library for machine learning. That perspective could help Alphabet stand out as the awareness of AI's potential grows. Investors should also remember that the Google parent holds almost $101 billion in liquidity. This gives it tremendous resources to succeed with AI. Furthermore, in the first half of the year alone, Alphabet generated more than $30 billion in free cash flow, bringing added flexibility to help the company address any technical gaps. Indeed, the financials show it is not as bad off as some investors might assume. In the first half of 2024, Alphabet's revenue grew 14% yearly to $165 billion. Also, since the company held cost and expense growth to just 7%, net income rose to $47 billion during that period, a 42% yearly increase. Also, one number in the financials highlights the importance of AI in the company's growth trajectory -- namely, the performance of Google Cloud. It accounted for $20 billion of the company's revenue in the first two quarters of 2024 and experienced a 28% annual increase, roughly double Alphabet's overall revenue growth rate during that time. Moreover, while Google Cloud lags Amazon and Microsoft in that industry, its market positioning shows it plays a critical role in the cloud industry, emphasizing its need to succeed in AI. To that end, many investors appear to still hold faith in Alphabet stock, which is up by almost 20% over the last year. Additionally, a pullback in the stock price has left it with a P/E ratio of 24, the lowest among its "Magnificent Seven" peers. That lower valuation could lead investors back into the stock as more come to appreciate the company's competitive position in the AI industry. Given the company's position and stock performance, it is likely time for investors to come back to Alphabet stock. Indeed, some of its competitors have made significant strides in AI, leaving many to wonder whether the Google parent is still a market leader in this technology. However, the company was quick to respond with its own generative AI offerings. Also, since the cloud plays a critical role in implementing AI, Google Cloud has helped invigorate the company's growth. Ultimately, it is likely too early to write off Alphabet in the AI race. With a rising stock price and a low valuation among its mega-tech competitors, investors should consider following the Google parent more closely.

2 No-Brainer Artificial Intelligence (AI) Stocks to Buy Right Now | The Motley Fool

There's a lot to choose from, but these are both great companies. When OpenAI's ChatGPT-3 was released to the public in late 2022, it started a firestorm of interest in all things artificial intelligence (AI). Although companies had been developing the technology for years -- Alphabet acquired the pioneering AI start-up DeepMind in 2014 -- ChatGPT and modern generative AI felt like a quantum leap forward. Since that time, markets have exploded, rewarding companies that bring the technology to market or that supply those who do with critical hardware. While there is plenty of hype, it's more than possible that the technology lives up to it. This could be truly revolutionary stuff, and it's not just the companies who sell AI products that are saying so. PwC -- one of the "big four" accountants -- estimates the technology could add $15.7 trillion to the global economy by 2030. With all that's happened since late 2022, here are two AI stocks that can deliver. Of all the major players in big tech, Meta Platforms (META -0.04%), despite a 66% gain this year, is still one of the cheapest stocks (by tech's standards). The only company trading at a lower forward price-to-earnings ratio (P/E) is Alphabet, likely from some combination of antitrust actions and the threat AI competitors pose to its search business, the lifeblood of the company. While Meta has its own antitrust concerns -- no one in big tech seems safe at the moment -- its stock is still surprisingly cheap given the state of the business. A relatively low valuation is hardly a reason in and of itself to invest in a business, but it doesn't hurt, and Meta is delivering the goods where it counts. Maybe Facebook has lost some of its shine, but you'd be surprised at how popular it continues to be. It is by far the most popular social media platform today with a very active user base and it is only one of the company's many platforms. In fact, Meta owns the first, third, fourth, and seventh most popular social media platforms in the world. According to the company, 3.3 billion people use one or more of its platforms daily and that user base is growing, up 7% last quarter year over year. That kind of audience means Meta's ad business is very profitable; the company netted nearly $20 billion last quarter from ads, up a whopping 47% year over year. With the release of Meta AI and the company's heavy investment in the space -- it's on track to spend $40 billion in capital expenditures (capex) this year, a significant portion of which is going toward supporting its "ambitious AI research and product development efforts" -- it is in a prime position to continue to grow its user base along with ad revenue. I'm sure this one didn't surprise you. Nvidia (NVDA -0.32%) is undoubtedly a paragon of the AI boom, seeing its stock rise more than 1,000% from late 2022. Here's the crazy thing: Its P/E is still roughly the same as it was then, meaning its earnings growth has kept pace. Can the ride continue? It sure seems that way. Just like Meta, the rest of Silicon Valley is also investing heavily in AI -- and a huge portion is directed toward Nvidia. Take Alphabet. The company expects to spend roughly $50 billion this year in capex, up from $31 billion the year before. And judging from what they said on the last round of earnings calls, these big tech behemoths intend to keep the money flowing. AI is their No. 1 priority and Nvidia is the No. 1 supplier of AI hardware. While the company's current iteration of its flagship AI chip, Hopper, is still selling like crazy -- Elon Musk just bought 100,000 for his company xAI -- Nvidia is about to begin shipping the new Blackwell iteration. It's already sold out for at least a year. All this is great news for Nvidia investors. While unforeseen developments can always happen and believing anything is a "sure thing" in the market is a recipe for disaster, all indications are that Nvidia should continue to see solid growth for some time. It is trading at a premium that is high even for tech stocks, but the market has consistently shown it is willing to pay that or more for Nvidia, even before the AI boom took off.

2 Artificial Intelligence (AI) Stocks Billionaire Money Managers Are Choosing Over Nvidia | The Motley Fool

More than a half-dozen prominent billionaire investors are selling shares of Wall Street darling Nvidia in favor of two rapidly growing artificial intelligence (AI) stocks. Wall Street has been waiting decades for the next game-changing innovation to rival what the internet did for corporate America in the mid-1990s. After a long wait, artificial intelligence (AI) looks to have answered the call. The ability for AI-driven software and systems to become more proficient at their tasks over time, as well as learn new skills without human intervention, gives this technology almost limitless potential. According to Sizing the Prize, the analysts at PwC see AI adding $15.7 trillion to the global economy through various production improvements and consumption-side effects by 2030. But while no company has benefited more directly from the rise of AI than semiconductor titan Nvidia (NVDA 0.61%), quarterly Form 13F filings with the Securities and Exchange Commission show billionaire money managers are consistently choosing two other AI stocks over Wall Street's darling. Nvidia has been able to ride its first-mover advantages to a nearly $3.2 trillion increase in market cap since the start of 2023. To date, its AI-graphics processing units (GPUs) hold a veritable market share monopoly in high-compute data centers. Despite this competitive edge, more than a half-dozen billionaires were decisive sellers of Nvidia stock during the June-ended quarter, including (total shares sold in parenthesis): Taking into account Nvidia's historic climb of well over 800% in roughly 22 months, profit-taking likely accounts for some of this selling activity. But there may be more to this selling than meets the eye. For example, U.S. regulators have been limiting Nvidia's sales and profit potential over the last two years. Regulators have restricted exports of the company's high-powered AI chips to China, which is one of Nvidia's top-dollar markets. Insider activity has been another sore spot for Nvidia. While there are plenty of reasons for high-ranking executives and board members to sell, some of which are benign, there's only reason for insiders to purchase stock -- they expect the share price to head higher. December will mark four years since the last open-market purchase from an Nvidia insider. Meanwhile, there have been 83 insider sales over the trailing-12-month period. Nvidia can also expect competition to slowly chip away at its leading data-center market share. New entrants into the AI-GPU arena, coupled with Nvidia's largest customers all internally developing AI chips of their own, would be expected to adversely impact Nvidia's, thus far, otherworldly pricing power and margins. Lastly, no market leader of a next-big-thing innovation has avoided a bubble-bursting event over the last 30 years. Investors have a terrible habit of overestimating the adoption of new technologies, and nothing suggests AI is going to be the exception. Rather than hold shares of Nvidia, billionaire money managers have consistently chosen to buy the following two artificial intelligence stocks instead. The first AI stock that billionaires clearly preferred over Nvidia in the second quarter is customizable rack server and storage solutions specialist Super Micro Computer (SMCI 1.92%). Based on the latest 13F filings, a half-dozen billionaire asset managers were buyers of Super Micro, including (total shares purchased in parenthesis and adjusted for the company's 10-for-1 stock split at the end of September): The logical reason for investors to buy into the Super Micro growth story is that businesses wanting first-mover advantages in the AI arena will need to rapidly expand their data-center infrastructure. Super Micro is the logical choice to make that happen, as evidenced by the 110% net sales growth the company delivered in fiscal 2024 (ended June 30), and the 87% sales growth, based on the midpoint of its guidance, expected for the current fiscal year. What makes this somewhat of an odd selection for billionaires is that Super Micro Computer's rack servers incorporate Nvidia's H100 GPUs. On one hand, this acts as a dangling carrot that keeps its infrastructure in high demand. Conversely, it puts Super Micro at the mercy of its suppliers, including Nvidia, which is dealing with backlogged orders for its GPUs. I'd be remiss if I didn't also mention that noted short-seller Hindenburg Research released a report in late August alleging "accounting manipulation" at Super Micro. Despite the company denying these allegations, reports have surfaced that the U.S. Justice Department is conducting an early stage probe. To boot, Super Micro delayed filing its annual report, which is raising eyebrows on Wall Street -- and not in a good way. There's no question that Super Micro Computer's stock is historically cheap, based on forward-year earnings per share (EPS) estimates; but there are also some very big questions that need answers before this stock gets a clean bill of health. A second artificial intelligence stock billionaires are consistently choosing over Nvidia is one of only three $3 trillion businesses, Microsoft (MSFT 0.03%). During the June-ended quarter, eight prominent billionaire money managers purchased shares of Microsoft, including (total shares purchased in parenthesis): Whereas Nvidia and Super Micro Computer represent the backbone of the AI revolution, Microsoft is viewed as a beneficiary based on the utility of the AI solutions it's incorporating into its services. For example, Microsoft incorporated AI into its search engine (Bing) and web browser (Edge) with the assistance of OpenAI, the company behind the ultra-popular chatbot, ChatGPT. Microsoft happens to be a notable investor in OpenAI. Additionally, Microsoft plans to lean on AI solutions within its rapidly growing cloud infrastructure service platform, Azure. Giving its enterprise clients the ability to build and train large language models, as well as run generative Ai solutions, should help Azure sustain double-digit sales growth and, at worst, maintain its position as the global No. 2 cloud infrastructure service platform. Beyond AI, billionaire asset managers are likely impressed with Microsoft's cash flow machine. Although legacy segments like Office and Windows aren't the growth stories they once were, their impressive market share and juicy margins continue to deliver. The exorbitant amount of cash generated from Microsoft's operations affords the company the ability to take risks. Microsoft is no stranger to making big acquisitions, and ended fiscal 2024 (June 30) with more than $75 billion in cash, cash equivalents, and short-term investments. If the AI bubble were to burst, Microsoft would have the sales channels and cash in place to weather the storm much better than Nvidia.

3 Artificial Intelligence (AI) Stocks to Buy With $500 and Hold for Decades | The Motley Fool

Artificial intelligence (AI) is new and full of exciting potential. But just like the internet, AI will evolve, so it's hard to say what the future will look like. So, how does someone invest in AI for the long term? Not for next year, but for decades out? If it were me, I would look beyond specific AI applications and instead focus on what will drive AI's evolution. At its core, AI needs three things: chips, cloud, and data. These are what power, train, and distribute AI technology to the world. So, you want to invest in AI? Look for the companies leading in these three areas. In that lens, three AI stocks instantly jumped out: Arm Holdings (ARM 0.15%), Amazon (AMZN 0.33%), and Alphabet (GOOG 0.61%) (GOOGL 0.65%). Buy them all for roughly $500 today and hold them for decades to profit from AI, a story still in its early chapters. Here is the pitch for each stock: Nvidia has received considerable attention since its GPU chips are used to train AI models, but I think Arm Holdings might have better long-term positioning. Most of the AI innovation you see today is contained within data centers, where powerful AI models like ChatGPT are trained. But over time, AI technology could spread across everyday life. Vehicles may drive themselves, and your glasses might have as many capabilities as your smartphone -- who knows what else will be possible. Anything AI touches must have a computer, which is where Arm comes in. Arm designs architecture for central processing units (CPUs), chips that effectively act as a computer's brain. The company earns royalties and fees for every chip built using its proprietary designs. That's a big deal because Arm is dominant. Virtually every smartphone on Earth uses Arm-based chips, and the company is picking up market share across almost every notable technology end market. According to Statista, Arm's market share increased from 42% to 49% from 2020 to 2022. This strong momentum seemingly bodes well for the company's future as the broader need for chips grows over the coming decades. It's hard not to like Arm if you're an AI investor thinking years ahead. The cloud isn't in the sky; it's in data centers. Companies like Amazon build massive centralized computing systems and then rent out capacity. It's cheaper for companies to purchase cloud computing power than to build and maintain their own systems. Amazon started as an e-commerce company, but it has built Amazon Web Services (AWS) into the world's leading cloud platform with an estimated 31% share of the world's cloud market. The broad migration of computing to the cloud has made it a natural tie-in with AI since companies using AI will almost assuredly power it through the cloud like they would their other technology. Most of the world's cloud market belongs to a big-tech trio of Amazon, Microsoft, and Alphabet. Amazon's proven ability to create and grow new businesses makes it my pick here. Amazon is an e-commerce and cloud juggernaut and is building a massive advertising business that could become a bigger deal down the road. Buy Amazon for its AI upside via AWS, but its collective business and growth-focused culture (despite its massive size) have made the stock one of the best long-term investments ever. I expect Amazon to continue creating wealth for investors for the foreseeable future. Data is the last ingredient of AI, as it needs data to train and learn. Alphabet controls 90% of the world's internet searches via Google, which has dominated for more than two decades to the extent that it was formally declared a monopoly earlier this year in court after the U.S. Justice Department sued Alphabet for anticompetitive practices. Alphabet has data on nearly everything anyone has ever searched for online, an unimaginably powerful trove of first-party data that can't be replicated anywhere else. It goes beyond Google. Alphabet owns YouTube, the world's largest video platform, and Android, the mobile operating system used by 70% of the world's smartphones. An estimated 3 billion people use Google software applications like Gmail to organize their lives. You might say that Alphabet knows you better than you know yourself since it has access to virtually every interaction you've had with a computer or smartphone. It remains to be seen what will happen to Alphabet due to its antitrust suit. Still, Alphabet represents an all-in-one AI package with a data advantage over arguably any other AI company and the vast financial resources to build on that advantage. Like Amazon, the company's AI opportunities will likely create immense value for shareholders over the coming decades.

The Investment Opportunity of a Lifetime: 2 AI Stocks Up 160% and 305% in 5 Years to Buy Now | The Motley Fool

Artificial intelligence could be one of the most transformative technologies in history. Analysts at the Switzerland-based investment bank UBS believe artificial intelligence (AI) will be "the most profound innovation and one of the largest investment opportunities in human history." But that grandiose phrasing fails to capture how transformative the technology could be. Demis Hassabis, CEO of DeepMind, estimates humankind could achieve artificial general intelligence (AGI) by 2030, meaning a level of superintelligence that would help scientists "cure most diseases within the next decade or two." Hassabis also believes AGI could solve problems related to energy production and climate change. And he is not alone in making bold predictions. Dario Amodei, CEO of AI start-up Anthropic, says the emergence superintelligence could lead to the eradication of most infectious diseases, the elimination of most cancers, and the mitigation of climate change. Amodei also thinks AGI will support a doubling in the human lifespan, and he believes those changes could happen within a decade. Even if those timelines are overly optimistic, companies that provide AI infrastructure and software services could create substantial wealth for investors in the coming years. Alphabet (GOOGL 0.30%) (GOOG 0.33%) and Datadog (DDOG 1.50%) fit that profile. The stocks over the last five years returned 160% and 305%, respectively, and the AI boom could lead to an even stronger performance over the next five years. Here's what investors should know. Alphabet subsidiary Google was recently recognized by Forrester Research as a leader in artificial intelligence (AI) infrastructure solutions and foundational large language models. The company is using its AI expertise to reinforce its leadership in digital advertising, and strengthen its position in cloud infrastructure and platform services (CIPS). For instance, generative AI overviews are increasing usage and improving satisfaction with Google Search, especially among young adults aged 18 to 24, according to CEO Sundar Pichai. Similarly, the company has debuted AI-driven profit optimization tools for advertisers, as well as generative AI tools that automate media content creation and advertising campaign construction. Additionally, Google Cloud Platform added over 500 updates last year for its machine learning platform Vertex AI, according to consultancy Gartner. Vertex lets users customize pretrained models like Gemini and build AI applications. Google still trails Amazon and Microsoft by a wide margin in CIPS, but its market share increased by a percentage point over the past year, according to Synergy Research. Alphabet reported strong financial results in the second quarter. Revenue increased 14% to $84.7 billion due to momentum in the cloud computing segement, and modest growth in the advertising segement. Meanwhile, GAAP net income jumped 31% to $1.89 per diluted share as the company continued to prioritize disciplined cost control. Looking ahead, Wall Street expects Alphabet's earnings to increase at 17% annually over the next three years. That consensus estimate makes the current valuation of 23 times earnings look quite reasonable. Patient investors should feel confident buying a small position in this AI stock today. Datadog provides observability software that helps businesses monitor, analyze, and fix performance issues across their IT infrastructure and applications. Its portfolio features artificial intelligence features that identify anomalies, surface insights, and automate root cause analysis. Consultancy Gartner has recognized Datadog as a leader in observability software for four consecutive years, and Forrester Research has recognized its leadership in AI for IT operations. Observability software becomes more important as computing environments grow more complex. So, the proliferation of AI systems should be a major tailwind for Datadog, and it's leaning into that opportunity with LLM Observability, a performance monitoring product for large language models (LLMs). The company also introduced a natural language interface called Bits AI that leans on generative AI to accelerate incident investigation and response. Datadog reported strong financial results in the second quarter. Revenue increased 27% to $645 million as its customer base expanded and existing customers spent more money. Meanwhile, non-GAAP net income increased 48% to $0.43 per diluted share. Management also raised its full-year guidance, such that sales are projected to increase 23% in 2024. Looking ahead, Wall Street expects Datadog's revenue to increase at 23% annually through 2026. That makes the current valuation of 20 times sales look tolerable, and it represents a discount to the three-year average of 23.7 times sales. To be clear, the stock is not cheap at its current price, but patient investors should still consider buying a few shares. Datadog has a strong position in a software market that will become more critical as AI deployments increase. Importantly, there is a reasonably good chance the stock will pull back at some point in the future, maybe by more than 20%. Investors should be comfortable with that possibility before purchasing shares today, and they should be willing to buy the dip if such a pullback occurs.

Billionaires Are Buying These 3 Top Artificial Intelligence (AI) Stocks Hand Over Fist | The Motley Fool

Artificial intelligence (AI) is one of the hottest investing themes on the planet right now, thanks to this technology's potential to revolutionize how business is done -- and your daily life. Investors big and small have been buying AI stocks like hotcakes over the past year, and top AI tech players have helped the S&P 500 soar to records over and over ever since. If you haven't yet gotten in on AI stocks or are looking to add to your current AI positions, you may be wondering which companies to choose at this point. It's often a good idea to look to billionaire investors for some inspiration, as they have a solid track record of success when it comes to choosing quality long-term investments. This doesn't mean you should follow their every move -- your comfort with risk or your investing horizon may differ from theirs, for example. And billionaire investors don't agree with each other on every buy and sell. But in recent times, certain billionaires have seen eye-to-eye on three top AI players and loaded up on them in the second quarter. Bridgewater Associates' Ray Dalio, Citadel's Ken Griffin, and Tudor Investment's Paul Tudor Jones all bought these three stocks hand over first. Are they good buys for you? Let's find out. Nvidia (NVDA 4.14%) has become almost synonymous with AI in recent times. The company is the world's No. 1 AI chipmaker, and this dominance and its broad offerings of AI products and services has grown earnings in the triple digits quarter after quarter. And this has helped the stock price to climb more than 200% over the past year. Billionaires clearly believe Nvidia's gains are far from over. Bridgewater's Dalio increased his position by 831% to 6,556,193 shares in the second quarter; Citadel's Griffin lifted his position by 107% to 2,421,072 shares; and Tudor Investment's Tudor Jones increased his holdings by 853% to 273,294 shares. Considering Nvidia's current market position, as well as the company's focus on innovation -- it's pledged to update its chips annually -- and the general forecast for an AI market of $1 trillion by 2030, the company could have plenty of new waves of growth ahead. And more growth could be just around the corner, as Nvidia is about to launch its new Blackwell architecture by the end of the year. All of this makes this top AI company a great buy for these billionaires -- and it could make a solid long-term addition to your portfolio, too. You may think of e-commerce first when you think of Amazon (AMZN 0.04%), but the company actually is a leader in the AI market, too. Amazon uses AI to help gain in efficiency across its e-commerce business, and it also is a seller of AI through its Amazon Web Services (AWS) unit. AWS has gone all-in on AI, offering its customers products and services to suit every AI need, which has helped AWS reach an annualized revenue run rate of more than $105 billion. The cloud computing business is Amazon's profit driver, so this performance is excellent news for the company. Certain billionaires are optimistic about Amazon's future, as we can see from their second-quarter investments. Dalio lifted his Amazon holdings by 153% to 2,645,567 shares; Griffin raised his Amazon stake by 17% to 7,692,857 shares; and Tudor Jones boosted his holdings by 28% to 336,407 shares. Amazon is the ideal investment for investors who want to get in on the AI theme, but want to minimize their risk. This is because Amazon doesn't rely on AI for growth -- the company's e-commerce and cloud computing businesses generated billion-dollar sales prior to the AI boom, establishing a solid track record of strength. And the company's focus on AI these days offers an additional opportunity for growth. Super Micro Computer (SMCI 1.14%) is a behind-the-scenes winner in the AI world. The company makes servers, workstations, and other products that power AI data centers. Supermicro works closely with top chip designers like Nvidia so it can immediately integrate their innovations in its equipment -- and this speed to market appeals to AI customers. The company has generated triple-digit revenue growth in recent quarters, and moving forward, it could see a new wave of growth thanks to its specialization in direct liquid-cooling technology -- something that should solve the big problem of heat buildup in AI data centers. Dalio opened a new position in Supermicro, buying 15,777 shares in the second quarter; Tudor Jones did the same, buying 26,165 shares; and Griffin lifted his holdings by 96% to 201,733 shares. Is Supermicro right for you too? This depends on your comfort with risk. Supermicro encountered headwinds recently: A short report back in August alleged troubles at the company, and a few weeks later, The Wall Street Journal reported a possible Justice Department probe into Supermicro. Investors may be seeking further clarification, and this could weigh on the stock in the near term -- so you should only consider this AI stock today if you're an aggressive investor.

These 2 Artificial Intelligence (AI) Giants Are Trading at Record Highs. Wall Street Says Only 1 Is a Buy. | The Motley Fool

One of these players may decline in months to come if Wall Street estimates are right. This year has been a big one for artificial intelligence (AI) stocks, with these players leading gains in the S&P 500. Investors have piled into the stocks to get in early on a big market opportunity -- analysts forecast today's $200 billion AI market will reach beyond $1 trillion later this decade. That could equal significant revenue for companies using AI as well as those that develop AI products and services. And today, some of these AI players already are scoring big wins in terms of earnings and stock performance. In fact, two top AI companies are trading at record highs right now after climbing in the triple digits since the start of the year. These players both have reported fantastic earnings and offer solid long-term outlooks -- but Wall Street says only one of them is a buy today. Let's zoom in on each of these AI leaders. Nvidia (NVDA -0.08%) has become an AI empire over the past few years, selling not only its top graphics processing units (GPUs) but also a full range of products and services to support any AI project. This has resulted in triple-digit earnings growth quarter after quarter, and growth may be far from over. For three reasons. First, as mentioned, the AI market is soaring and should continue to grow throughout the decade, offering ongoing revenue growth opportunities to companies in the space. Second, Nvidia already is a leader with the best-performing GPUs around, and that's led to demand for its products outpacing supply. Finally, Nvidia has pledged to update these GPUs annually, a key move that should keep it in the lead. Nvidia shares may not be dirt cheap at 50 times forward earnings estimates, but considering the company's growth, gross margin of more than 70%, and long-term prospects, valuation looks reasonable. Though Wall Street's average price forecast calls for less than a 4% gain over the coming 12 months, analysts' average recommendation is a "buy." So, the general feeling is Nvidia is a stock to pick up today -- though it may not soar tremendously in the year to come, the stock still has what it takes to roar higher over the long term. Palantir Technologies (PLTR 0.56%) has been around for about 20 years and through most of its history, it's been associated with government contracts. But thanks to its leap into AI, Palantir's overall growth as well as its commercial business have taken off. For example, in the most recent quarter, Palantir reported its highest level of quarterly profit ever. So, why are companies and governments flocking to this software company? Palantir, using AI, helps customers aggregate their data and make the best possible use of it. And this often produces game-changing results -- from increased efficiency to entirely new ways of getting business or projects done. And Palantir has developed a genius way of introducing its Artificial Intelligence Platform (AIP) -- launched last year -- to potential customers. Palantir holds bootcamps to help businesses go from zero to a solid use case by the end of the camp. This has helped the company generate double-digit revenue growth in recent quarters and up its game in the commercial space -- commercial revenue growth now is surpassing the still strong growth in the government business. In the recent quarter, U.S. commercial revenue rose 55%, while government revenue increased 23%. In spite of this strength, the average Wall Street recommendation is a "hold" and 12-month price forecasts call for a 32% drop in the stock. That's as the shares trade for 120 times forward earnings estimates. Though the long-term picture still looks bright, the idea is this hot stock has gotten pricey and may cool down in the months to come.

2 Artificial Intelligence (AI) Stocks That Are No-Brainer Buys | The Motley Fool

AI stocks are taking off. These two companies are your best bets. If you want to create huge upside potential for your portfolio, get familiar with the AI industry. According to data compiled by Statista, the AI market is already worth $184 billion. But by the end of the decade, its value will increase to an astounding $827 billion -- an average annual growth rate of nearly 30%! There's an old saying: During a gold rush, sell shovels. The idea is that whether or not the gold rush amounts to anything concrete in terms of actual gold production, those who sell the shovels still profit. The same can be said today about Nvidia today when it comes to AI. Training and running AI models takes a huge amount of computing power. These complex, data-heavy tasks often require specialized chips based on high-end graphics processing units (GPUs). Nvidia's AI accelerator GPUs are the best on the market right now. This reality is borne out in its market share numbers, with most estimates giving the company a 70% to 95% share of the AI chip market. Nvidia's dominance is also demonstrated by its pricing power. Gross margins for the company are around 76% -- a solid lead versus the competition, which is currently generating 40% to 50% gross margins. The AI spending craze fueling Nvidia's rise likely isn't a short-term phenomenon. Industry spending on AI infrastructure is expected to quadruple by the end of the decade, growing at a compound annual growth rate (CAGR) of nearly 30%. And to be sure, competition will grow fiercely in the years to come. But Nvidia has a strong lead, with the financial and reputational might to invest heavily in new products. Intel and Advanced Micro Devices are contrarian AI hardware picks if you think Nvidia's market lead might dissipate over time. For now, however, Nvidia remains the undisputed leader for investors looking to bet directly on the rise of AI. I love Nvidia stock. But with the company now valued at $3.3 trillion, it's unclear whether it can repeat its past success -- at least when it comes to stock price performance. I fully expect Nvidia's sales base to take off over the next decade. But the market has caught on to this growth potential, pricing the company at an astounding 35 times sales. If you want to make the most money possible with AI stocks, you'll need to look at something smaller. SoundHound AI (SOUN -5.45%), for instance, is valued at just $1.9 billion, even though it's directly exposed to many of AI's biggest growth drivers. There's potentially more risk with this company than with Nvidia, but there's also the opportunity for significantly greater profit. As its name suggests, SoundHound is involved in the voice and sound categories of AI. Anytime you interact with your devices with your voice -- say, asking your phone what song is currently playing, talking with your car about maintenance issues, ordering from a drive-thru window, or talking to a customer service representative on the phone -- SoundHound wants to be involved. Its AI technology can augment your experience in these situations while driving efficiencies for businesses regarding labor costs. SoundHound's technology isn't new. The company has been around for decades, with a growing customer list that includes major automakers, global restaurant brands, and even a suite of technology companies. But the voice AI category will have stiff competition from Big Tech companies, nearly all of which are developing their own platforms. Whether or not SoundHound will become a long-term winner is unclear. The company is still losing money, while its research and development budget -- which currently stands at just $56 million per year -- pales in comparison to what Big Tech is spending. But in return you get a stock directly exposed to AI tailwinds -- with proven technology -- at under a $2 billion market cap. There's plenty of risk to this story, but it's easy to imagine the company growing significantly in size should its technology and sales growth maintain its current trajectory.

2 Stock-Split Artificial Intelligence (AI) Stocks Up 650% and 1,030% in 2 Years to Buy Now, According to Wall Street | The Motley Fool

Specifically, Supermicro and Nvidia saw their shares surge 650% and 1,030%, respectively, over the last two years as unprecedented demand for AI infrastructure led to phenomenal financial results. Consequently, both companies reset their soaring share prices earlier this year by completing 10-for-1 stock splits. However, businesses are still in the early stages of building out their AI infrastructure, and Wall Street believes continued investments in supercomputing chips and servers will drive shares of Supermicro and Nvidia higher over the next 12 months. Here are price targets provided by The Wall Street Journal: Here's what investors should know about Supermicro and Nvidia. Super Micro Computer manufacturers high-performance computing platforms, including servers and full server racks, optimized for AI. The company handles most product development and assembly internally at facilities in Silicon Valley, and it uses electronic building blocks to rapidly build a broad range of servers featuring the latest chips. That often allows Supermicro to bring new products to market two to six months before its competitors. In March, Rosenblatt analyst Hans Mosesmann wrote, "Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out." That time-to-market advantage, coupled with broad product selection, has carried Supermicro to the forefront of the AI server industry, which is forecast to grow at 30% annually through 2033. Supermicro reported mixed results in the fourth quarter of fiscal 2024 (ended June 30). Revenue increased 143% to $5.3 billion, but gross margin contracted almost 6 percentage points to 11.2%, and non-GAAP (generally accepted accounting principles) net income increased only 78%. Margin contraction may be a symptom of diminished pricing power amid increased competition, but management expects gross margin to normalize between 14% and 17% as liquid-cooled servers ship in higher volume toward the end of fiscal 2025. Importantly, short-seller Hindenburg Research accused Supermicro of accounting manipulation in August, and The Wall Street Journal said the company was being investigated by the Justice Department in September. Supermicro was fined in 2020 for accounting manipulation, prior to which the stock was temporarily delisted from the Nasdaq Exchange because the company filed its Form 10-K for fiscal 2017 nearly two years late. A similar sequence of events is playing out this time around. Supermicro has yet to file its Form 10-K for fiscal 2024, despite it being due on Aug. 29, and the company has received a letter of noncompliance from the Nasdaq Exchange. While delisting is not imminent and the situation may be resolved without issue, investors should know Supermicro is a risky stock due to the regulatory issues hanging over the company. Having said that, Wall Street still expects the company's earnings to increase 54% over the next 12 months, which makes its current valuation of 21.7 times adjusted earnings look quite cheap. At that price, risk-tolerant investors can buy a small position in Supermicro stock, provided they know regulatory issues could make shares volatile in the coming months. Dan Ives at Wedbush Securities has called Nvidia the "foundation of the AI revolution." Its graphics processing units (GPUs) power the most advanced artificial intelligence systems, such that the semiconductor company has more than 80% market share in AI accelerators. That leadership is reinforced by CUDA, a robust ecosystem of software tools that lets developers write GPU-accelerated applications across numerous domains, from computational chemistry to machine learning. Beyond that, Nvidia has a key advantage in its full-stack computing platform that spans hardware, software, and services. Since acquiring networking specialist Mellanox in 2019, Nvidia has secured a leadership position in generative AI networking equipment, according to Morningstar. Nvidia has also introduced its first server central processing unit (CPU), and its software and services business is expected to reach a $2 billion revenue run rate this year. Grand View Research estimates AI accelerator sales will increase at 29% annually through 2030, while spending across AI hardware, software, and services compounds at 36% annually. Nvidia is one of the companies best positioned to benefit, given that it participates in so many parts of the AI economy, and dominates the AI accelerator market. "Competing with Nvidia, a company that spends over $10 billion per year in R&D, is a difficult feat," according to analysts at Morgan Stanley. Wall Street expects Nvidia's adjusted earnings to increase 54% over the next year. That estimate makes the current valuation of 63.3 times adjusted earnings look fair. To be clear, the stock is not cheap, nor is it outrageously expensive. Patient investors should feel good about buying a small position in Nvidia today.

2 Game-Changing Artificial Intelligence (AI) Stocks to Buy Right Now (Hint: Not Nvidia) | The Motley Fool

What's driving the next wave of AI innovation? Check out two underrated stocks poised to reshape the AI landscape. Artificial intelligence (AI) has been around for decades. From industrial automation and unbeatable chess engines to self-driving cars and automatic vacuum cleaners, AI-assisted technologies are becoming a normal part of our everyday lives. But the adoption and general awareness of AI accelerated dramatically in November 2022, when OpenAI released the ChatGPT AI platform. This ultramodern large language model (LLM) could do things previously seen as uniquely human. ChatGPT and its rivals can write halfway decent text, generate nearly photorealistic images and videos, and even create new music from a primordial soup of earlier examples. Large sets of human creations have become fodder for computer-powered, semi-creative productions. A handful of companies are driving this generative AI boom, led by AI accelerator designer Nvidia (NVDA 0.78%). That stock has soared more than 1,000% higher in two years, powered by a 237% uptick in revenues and a ninefold boost to Nvidia's free cash flows. The LLMs you see today wouldn't be possible without Nvidia's high-performance AI accelerator chips, and the company is often seen as the best AI stock on the market today. But even stellar business performers can become overvalued. Nvidia's stock trades at extremely lofty valuation ratios nowadays, and many die-hard bulls are ignoring the rise of alternative AI hardware solutions. So I have a few Nvidia shares in my portfolio, but am not eager to buy more today. There are safer AI investments out there, and I'm here to show you a couple of great AI stocks not named Nvidia. Big Blue has been an AI innovator since the 1970s, introducing game-changing technologies such as the first speech recognition system and the first programming language for self-learning manufacturing robots. And IBM's AI interest never faded. The company remains a leading AI researcher today, even though you don't often see its name in generative AI headlines. You see, IBM lets other companies mess around with consumer-friendly chatbots and image generation systems. Meanwhile, the company focuses its AI products on deep-pocketed enterprise clients. The IBM Watsonx generative AI platform delivers business-oriented features such as deep integration with other business-grade information systems, audit-ready paths from input data to generated content, and robust digital security. So IBM took some extra time to prepare these AI tools for release, insisting on quality results instead of rushing a half-baked solution to the market. Now it's time to reap the rewards of that strategic delay. Watsonx has been around for a year and a half now, and has already generated more than $2 billion of generative AI orders. Next week's third-quarter report will show how quickly corporate clients are embracing IBM's AI solutions in a healthier economy. And as seen in the table, the stock looks downright cheap next to Nvidia's high-flying shares. Process automation expert UiPath (PATH 2.27%) is another low-priced bet on a solid AI business. The company's robotic process automation (RPA) may sound like an industrial hardware controller, but is actually software that helps businesses automate repetitive tasks. Automated software has many benefits over their human counterparts in this area. Computers don't get bored or tired. Their actions can't result in "human error," and UiPath's sophisticated software robots don't suffer from machine learning equivalents such as sloppy programming. With the recent addition of LLM functions, UiPath's robots can even manage advanced but repetitive tasks like filling out forms and interpreting the meaning of text entered by end users. "RPA is not AI; AI is not RPA," according to UiPath. But the combination of robust RPA systems and powerful AI backends bring out the best of both worlds in a single job-automation process. UiPath's tools are already game changers for clients with lots of rote information management activities. They will only grow more powerful over time. UiPath's shares have barely moved in two years, falling far behind other AI specialists and the S&P 500 (SNPINDEX: ^GSPC) market index. At the same time, trailing sales rose by 32% over the last two years, while free cash flows swung from a $134 million loss to $327 million of cash profits. The stock is swooning while financial results are soaring, and UiPath's AI-plus-RPA solutions are only getting more powerful. That's why this game changer looks like a no-brainer buy today.

Billionaires Have Been Buying These 3 Top Artificial Intelligence (AI) Stocks. Should You Follow Suit? | The Motley Fool

Keep in mind that you likely don't have the same goals as a billionaire. Investors looking for investment ideas often turn to billionaires' investment ideas. This can make sense, as one often gets to billionaire status by making wise investing decisions. One problem with this approach is that a billionaire may have different investing goals than an average investor looking to accumulate wealth over their lifetime. Instead of seeking long-term gains, a billionaire may buy a stock as a short-term trade. We don't know what billionaires are going to do ahead of time, and we likely won't know why they make the investing decisions they do. So while it makes sense to see which stocks the super-wealthy like, average investors have to go the extra step and confirm that a stock suits their investment needs. Let's dig in on three stocks that billionaires have bought shares of recently. Admittedly, Amazon (AMZN 0.78%) is more of a known quantity to investors of all wealth levels. Its online retail and cloud computing leadership has made it a favorite among consumers and investors alike. Although its online sales business has not been a growth center, it has benefited from subscription sales, third-party seller services, and advertising. Additionally, amid strong growth in cloud computing and AI, its AWS arm continues to drive most of Amazon's operating income. Although net sales rose by only 11% yearly in the first half of 2024, a continued recovery from 2022 weakness took profits higher by 141% over the same period. Moreover, while its 45 P/E ratio may not sound cheap, it is far below the stock's average 87 earnings multiple over the last five years. That may have helped draw several billionaire investors into the stock in the second quarter of 2024. Ken Griffin, Ray Dalio, and Paul Tudor Jones are just some of the billionaires who added positions during that quarter. With numerous business lines and $89 billion in liquidity, Amazon is among the safest individual stocks to own, likely making it an excellent choice for average investors. Another noteworthy "stock" choice of billionaires is an exchange-traded fund (ETF) that owns the 100 nonfinancial stocks on the Nasdaq-100 index. The Invesco QQQ Trust (QQQ 0.61%) tends to attract investors at all interest levels since individual components tend to have little influence. Although it contains 100 stocks, its weighting tends to vary. Its top holding, Apple, constitutes just under 9% of the fund as of this writing. Also, the top 10 stocks, all but one of which is a tech stock, make up just over 50% of its assets. The Invesco QQQ Trust has performed well for investors. While its 37% return over the last year closely approximates the S&P 500's performance, its 436% return over 10 years nearly doubled that index. Thus, it is little wonder that investors such as billionaires Cliff Asness and Steven Cohen added shares in Q2. For them, this was likely a way to balance safety and considerable growth. Given the safety of the fund owning multiple stocks and its returns, the ETF is a wise option for most investors. Super Micro Computer (SMCI 2.25%) shot out of obscurity in recent years as a partnership with Nvidia led to a massive increase in demand for its servers. The volatility has been particularly pronounced over the last year as the stock surged past the split-adjusted level of $120 per share in March. However, investors began to sell, and sentiment worsened after a short-seller report from Hindenburg Research in late August and the announcement that it would delay filing its latest 10-K report to the SEC. (Remember, short-sellers make money when the stock they are short on falls, so they have a reason to spread pessimism.) Millennium Management -- led by billionaire Israel Englander -- purchased shares of Supermicro in the second quarter, before the short's report, and I think, considering that its P/E ratio is 24 and analysts forecast 51% profit growth in fiscal 2025, some risk-tolerant investors may feel justified in buying shares now despite possible accounting issues that may come to light if the short-seller is correct. However, it's impossible to know how things will shake out, so I think Supermicro is a stock for speculative money, and one that risk-averse investors should probably avoid. Billionaires can make excellent stock picks. Indeed, billionaires do not obtain that status by making lousy stock picks. Though no one's right 100% of the time, and average investors need to perform their own due diligence to figure out if any particular stock is right for their portfolio.

2 Game-Changing Artificial Intelligence (AI) Stocks to Buy Right Now | The Motley Fool

Looking to ride the AI wave? Consider SoundHound AI and Nvidia. Artificial intelligence (AI) stocks are surging in value again this year. Many of them are giants of the tech world, led by none other than Nvidia (NVDA -0.08%). The chipmaker has seen its stock price soar by 186% since the year began. But there are smaller potential opportunities in this niche to consider, too. Among them is voice recognition specialist SoundHound AI (SOUN -2.23%), which focuses on an area that should see substantial growth -- and so it's not too late for investors. In fact, these growth stories are likely just getting started. Anyone investing in the AI space right now has to begin with Nvidia. Its market capitalization is up 186% this year, with about 40 percentage points of the gain occurring after its 10-for-1 stock split on June 7. There's a reason why everyone is talking about Nvidia as the best-performing AI stock even though it doesn't necessarily peddle AI software itself. The company is a key supplier to the AI industry. But it's not just selling basic parts and services. Without Nvidia, the AI industry as a whole couldn't exist in the way it does today. That's because the company's graphics processing units (GPUs) -- specialized chips that are critical to simultaneously processing the large amounts of data necessary in training and running complex AI models -- are superior to what the competition offers. If you need proof of Nvidia's superior technology, just know that various estimates peg Nvidia with a 70% to 95% market share for AI chips. Plus, its gross margins of 75% suggest clear pricing power versus competitors like Advanced Micro Devices and Intel, which boast gross margins of around 40% to 50%. AI spending growth has just begun. Data compiled by Statista suggests that industrywide spending should increase by an average of 30% per year for perhaps the next decade. Competition in the AI chip space will emerge, and it's unlikely that Nvidia will retain its dominant market share in perpetuity. But if you want to bet on AI, there are few better ways to do so than with Nvidia stock. Just know that you'll pay a premium for the privilege, with the stock trading at an astounding 35 times sales. If you want to bet on an AI stock before it explodes in value, the next company on this list may be a better fit. If you're looking to add the most growth potential to your portfolio possible by buying high-upside AI stocks, look no further than SoundHound AI. There are some clear risks to this investment, but if the company reaches its potential, the upside should be significant. Like Nvidia, SoundHound already trades at a premium valuation -- roughly 25 times sales. The big difference is in their market caps -- $1.9 billion for SoundHound versus $3.3 trillion for Nvidia. Given its far smaller current size, it's easy to see that SoundHound has greater potential to quadruple in value from here than Nvidia. That's especially true when you consider SoundHound's niche: voice AI. This year, the global speech and voice recognition market is estimated to be worth around $15 billion. But between now and 2032, its value is expected to grow by more than 20% per year to $85 billion. SoundHound has an impressive start, with a suite of global brands signed up as customers, and a revenue base that has grown by more than 150% over the past 12 months. Yet, the company's total revenue is still below $60 million per year. Compare that to an addressable market that could be worth $85 billion by 2032 and it's not hard to see how the company's sales and valuation could soar over the long term. While SoundHound is a great pick for AI investors looking for stocks with maximum growth potential, there are some risks to be aware of, too. The company is still losing money and sports a research and development budget of only around $56 million annually. The big tech giants, meanwhile -- many of which are developing their own voice AI platforms -- are investing billions into boosting their AI chops. It's possible that SoundHound will struggle to compete with these giants as industry spending on its niche begins to take off. These risks are partially why SoundHound has been assigned a market value of just $1.9 billion despite its position in one of the hottest industries this century. But if you're willing to take on some extra risk for extra reward, few AI stocks offer you so much growth potential.

This Has Been the Best Performing Artificial Intelligence (AI) Company After Splitting Its Stock This Year | The Motley Fool

Artificial intelligence (AI) markets have gone gangbusters. But there's one AI stock in particular that's leading the market higher this year. It's not necessarily a pure-play AI stock in terms of the products it makes, but rather this company has positioned itself as a key supplier to the AI industry. Without this company, it's possible the market wouldn't see the massive innovation that is occurring worldwide right now when it comes to AI. This May, the stock price of this AI component supplier grew so much that management instituted a 10-for-1 stock split. Yet the surge continued, with shares rising another 60% since the split -- resulting in a 186% increase in valuation since the year began. Is there still time for you to get into this massive growth opportunity? The answer might surprise you. Of course, the AI superstar is none other than Nvidia (NVDA -0.08%). The company has an enviable position in the AI supply chain, and it's not hard to see why shares have skyrocketed this year. Nvidia isn't so much of an AI company as it is a supplier of AI components. Most AI models, especially those related to generative applications, require huge datasets and a large amount of training in order to grow in strength and capability. All of this training and computation requires specialized high-powered chips. Nvidia's top-of-the-line graphics processing units (GPUs) like its H100 and A100 models are considered some of the best in the industry for those types of computational workloads. Most estimates peg the company as having a 70% to 95% share of the AI chip market. So as AI infrastructure spending explodes, Nvidia becomes a prime beneficiary. There's little doubt that Nvidia's revenue base will continue to increase over the coming years. AI infrastructure overall is expected to grow at an annualized rate of nearly 30%, and Nvidia's sales in particular are expected to grow by 126% in its current fiscal year. The problem for the stock isn't sales growth, it's expectations. Nvidia stock recently traded at 35 times sales -- an incredibly high premium. And its valuation premium hasn't dipped even as revenue growth rates have reverted toward the industry's overall growth rate. A few quarters ago, Nvidia's sales growth was above 200% year over year, and its price-to-sales ratio was hovering between 24 and 42. This fiscal year, sales growth is expected to slow to 125%, and estimates for the following year project that it will slow even further to just 42%. Yet the valuation remains toward the higher end of its recent range. At these levels, most of the easy money has already been made with Nvidia stock. That's true given company's sales growth will likely trend closer and closer to industrywide spending growth rates of around 30%. It's also true because competition will likely heat up considerably in the coming years -- as has happened in every previous chip war. There's always an initial winner, but massive investments by competitors in R&D and production capacity generally cause such gaps to narrow, sometimes enough to change which company is the market leader several times. At a minimum, expect there to be pressure on Nvidia's gross margins, which recently stood at around 75%. Intel and AMD, for comparison, have gross margins of between 40% and 50%. Nvidia's competitive position won't erode overnight. But it's a reasonable expectation given how much money is at stake in the AI infrastructure sweepstakes. "Nobody can deny that today Nvidia is the hardware you want to train and run AI models," said 3Fourteen Research Chief Data Scientist Fernando Vidal during an interview by CNBC back in June. "But there's been incremental progress in leveling the playing field, from hyperscalers working on their own chips, to even little start-ups, designing their own silicon." Is Nvidia still a great bet for those looking to make a long-term bet on the rise of AI? Absolutely. Even if its competitive position erodes over time, investors can expect Nvidia's sales base to grow significantly over the next decade. But in order to see Nvidia's business grow to a level that justifies its extremely high valuation, investors will need to remain very patient. Don't jump in today expecting the rapid returns of the past.

2 Popular Artificial Intelligence (AI) Stocks to Sell Before They Plunge 20% and 79%, According to Certain Wall Street Analysts | The Motley Fool

In August, Aaron Rakers at Wells Fargo lowered his price target on Super Micro Computer to $37.50 per share. That forecast implies 20% downside from the current share price of $47. Investors should never take forecasts at face value. Here are the details required to make an informed decision about these two companies. Palantir helps businesses manage and make sense of complex data. Its primary platforms, Gotham and Foundry, integrate information and artificial intelligence models into an ontology, a digital representation of the relationships between real-world objects. Users can interact with the ontology through analytical applications that surface insights to improve decision-making. Palantir says its ontology-based software is an important differentiator. Last year, Palantir debuted AIP (Artificial Intelligence Platform), which enhances Foundry and Gotham with support for large language models, allowing businesses to integrate generative AI into analytical applications. Some analysts are impressed by the product. For instance, Forrester Research has recognized Palantir as a leader in artificial intelligence and machine learning platforms. Other analysts are less impressed. Consultancy Gartner didn't even mention Palantir in its latest report on data science and machine learning platforms, and scored the company below a dozen other vendors for its data integration tools. Additionally, RBC Capital analyst Rishi Jaluria told CNBC that Palantir "does not appear to be anything truly differentiated when it comes to generative AI." Palantir reported solid financial results in the second quarter. Revenue increased 27% to $678 million, the fourth consecutive sequential acceleration, and non-GAAP net income jumped 80% to $0.09 per diluted share. CEO Alex Karp attributed the strong quarter to an "unrelenting wave of demand from customers for artificial intelligence systems that go beyond merely performative and academic." In the third quarter, Palantir announced a $100 million contract with the U.S. government that will bring access to its AI targeting tools to more military personnel. The company also said that gas and oil giant BP will adopt AIP to "improve and accelerate human decision-making with suggested courses of action based on automated analysis of the underlying data." The problem with Palantir is its sky-high valuation. Wall Street expects its adjusted earnings to grow 22% over the next year. That makes the current valuation of 134 times adjusted earnings look outrageous. Wall Street's median price target for Palantir is $28 per share, which implies a 35% downside from its current share price of $43. By that measure, Palantir is the most overvalued stock in the S&P 500. I doubt Jaluria is correct about Palantir declining 79%, but I do believe the stock is headed for a serious correction at some point. Prospective investors should avoid Palantir until the share price looks more reasonable, and current shareholders should consider trimming their positions. Super Micro Computer builds servers, including full server racks outfitted with storage and networking, to provide a turnkey data center infrastructure solution. Internal manufacturing capabilities and modular design allow the company to bring new products to market more quickly than its competitors. That time-to-market advantage has helped Super Micro win a leadership position in artificial intelligence servers. Super Micro reported mixed results for the fourth quarter of fiscal 2024 (ended June 30). Revenue increased 143% to $5.3 billion on strong demand for AI computing infrastructure. But gross margin declined about 6 percentage points to 11.2%, and non-GAAP net income increased only 78%. Comparatively, the bottom line grew more slowly than the top line, which may signal a loss in pricing power amid increased competition. However, management said margin contraction was due to costs associated with direct liquid cooling (DLC) components. Liquid cooling is more efficient than air cooling, so Super Micro has invested heavily to position itself as a leader as the technology takes root. That may enhance its standing in the AI server market. Either way, management expects gross margin to return to normal (14% to 17%) by the end of fiscal 2025 as DLC components ship in higher volume. The problem with Super Micro is regulatory uncertainty. In August, short-seller Hindenburg Research accused Super Micro of accounting manipulation, and The Wall Street Journal subsequently said the company was being investigated by the Justice Department. Neither situation has been resolved, and the stock could fall further than the 20% forecast by Wells Fargo analyst Aaron Rakers, depending on the outcomes. However, Wall Street still expects the company's earnings to increase 51% over the next year. That makes its current valuation of 20.8 times earnings look cheap. Patient investors comfortable with the risks should consider buying a position, but I would keep it quite small until the regulatory uncertainty dissipates. Alternatively, shareholders nervous about Hindenburg's allegations or the Justice Department's investigation should consider selling their positions.

Meet the Little-Known Artificial Intelligence (AI) Stock Leading the S&P 500 in 2024 (Hint: Not Nvidia) | The Motley Fool

Nvidia is the second best-performing stock in the S&P 500 year to date behind Vistra. Artificial intelligence (AI) could be one of the largest investment opportunities in history. Consequently, many investors have become familiar with Nvidia (NVDA -2.81%), the semiconductor company whose chips power the most advanced AI systems. Nvidia is the second best-performing member of the S&P 500 (^GSPC -0.92%) year to date, with its share price increasing 200% amid unprecedented demand for its hardware. But AI stocks come in all shapes and sizes. For instance, utilities company Vistra (VST 0.86%) has led the S&P 500 higher this year, with its share price increasing 228%. While not a traditional AI stock, investors think Vistra could be a major winner as the AI boom increases data center energy requirements. Here are the important details. Investors may worry they missed a golden opportunity to buy Nvidia stock earlier this year, before it tripled in value. However, while I doubt shares will perform as well over the next year, the stock is still a worthwhile investment. Grand View Research estimates spending on artificial intelligence (AI) accelerators will compound at 29% annually through 2030, and Nvidia is ideally positioned to benefit. Of course, many chipmakers hope to cash in on the AI boom, and hyperscale cloud companies like Alphabet and Meta Platforms have started designing custom AI silicon. But competing with Nvidia is incredibly difficult. Its graphics processing units (GPUs) are the gold standard in accelerating AI workloads not only because they are faster than rival chips, but also because they are backed by a more extensive ecosystem of software development tools. Nvidia has been building that ecosystem, called CUDA, for the better part of two decades. Consequently, the Nvidia brand is synonymous with AI accelerators. The company accounted for 98% of data center GPU shipments over the last two years, and it currently accounts for about 80% of AI chip sales. Nvidia has reinforced its leadership by adding server central processing units and networking gear to its portfolio. That strategy lets the company design data center systems with the lowest total cost of ownership, according to CEO Jensen Huang. In summary, Nvidia is well positioned to protect its leadership position in the AI accelerator market because it pairs superior chips with robust software development tools, and its systems theoretically offer industry-leading return on investment. In turn, Wall Street expects the company's earnings to increase at 38% annually over the next three years. That makes the present valuation of 67 times earnings look tolerable. In fact, those figures give a PEG ratio of 1.7, which is well below the three-year average of 3.1. That does not mean Nvidia stock is cheap today, but it does mean long-term investors should feel comfortable buying a small position at the current price. Vistra is a utilities company that integrates (1) power generation across gas, coal, nuclear, and renewable energy facilities with (2) retail electricity sales to residential, commercial, and industrial customers. With an installed capacity of 41 Gigawatts (GW), it is the largest power generator in the United States. It is also the largest residential retail electricity provider in the country. Vistra has several important catalysts on the horizon. First, electrification of the Permian Basin driven by population growth in West Texas is expected to add 20 GW of demand by 2030. Second, the artificial intelligence infrastructure buildout in data centers is expected to add 35 GW of demand during the same period. Third, management expects additional demand arising from the reshoring of industrial activity. Vistra reported second-quarter results that missed estimates on the top and bottom lines. Revenue increased 21% to $3.8 billion, but Wall Street expected $4 billion. Likewise, GAAP earnings declined 23% to $0.90 per diluted share, but analysts expected $1.38 per diluted share. On the bright side, management reiterated adjusted EBITDA guidance for 2024 and raised its full-year outlook for 2025. Vistra also announced power purchase agreements with Amazon and Microsoft. Investors are hoping nuclear deals follow, like the recent agreement between Microsoft and Constellation Energy. Many experts see nuclear energy as a good way to address growing demand from data centers because it is virtually carbon-free and more reliable than solar and wind energy. Importantly, Vistra has the second-largest nuclear power fleet in the U.S., which could position the company as a long-term winner as the AI boom unfolds. Wall Street expects Vistra's earnings to increase at 78% annually through 2027, reflecting in part the company's plan to repurchase more than $3 billion in stock through 2026. Overall, that estimate makes the current valuation of 96 times earnings look reasonable. Indeed, among the 15 analysts that follow Vistra, 93% rate the stock a buy and the median price target of $137.50 per share implies 10% upside from its current share price of $125. Having said that, Wall Street has been relatively inconsistent where Vistra is concerned. In fact, analysts have overestimated earnings for four consecutive quarters, and the average estimate was 400% too high. So, investors should view future projections skeptically, and it may be prudent to wait for more proof that Vistra will be a major winner from the AI boom.

Three AI Stocks That Could Beat Nvidia After Today

Nvidia has returned 700% during the Age of AI, but smaller companies, like these 3, may have more room to run. The semiconductor giant Nvidia (NVDA) has returned over 700% during this "Age of AI," soaring enough to turn every $1,000 invested into $80,000 and change. But these gains are in the past... and with Nvidia now valued as high as $3 trillion, investors interested in cashing out on the $15.7 trillion AI Revolution might be better served by buying smaller companies with much more room to run. Here are 3 other stocks that could potentially soar as the AI Revolution unfolds. AI Stock No. 1: Pfizer (PFE) Artificial intelligence holds huge implications for pharmaceutical companies, which spend billions or even tens of billions of dollars each year on research and development for their drug-making pipelines. Artificial intelligence can make this process much cheaper and faster, by running thousands of simulations on various chemical and biological reactions in the time it would take a team of human doctors to carry out just one. That's a major reason that Pfizer Inc. (PFE) has been making big investments in the AI sector since 2014 -- almost a full decade before ChatGPT became a household name. In 2022, for instance, it invested $20 million in CytoReason, a firm using AI to build new disease models, and may ramp up its investments to $100 million a year through 2027. Pfizer's CEO, Mikael Dolsten, is well-aware of the potential that the AI Revolution holds for Pfizer. "The rapid expansion of new technologies, like artificial intelligence, holds tremendous potential to help transform what is possible in human health," he said in 2022. Pfizer trades at around $29 today. Unlike most Big Tech firms and other AI plays, the stock pays a hefty dividend of 5.75%, compared to 1.29% for the average S&P 500 company. AI Stock No. 2: Tesla Motors Inc. (TSLA) Tesla shares have fallen out of favor with investors lately after Elon Musk's presentation on robotaxis failed to impress Wall Street. But its recently unveiled Optimus robots -- humanoid robots that could soon be capable of doing household chores and working in assembly lines like fast-food restaurants -- could be yet another game changer for the stock. Elon Musk estimates that Optimus alone could lift Tesla's valuation to $30 trillion, which would represent a 50x gain for the stock. Such a scenario would take years to play out, as Optimus robots won't be ready to retail in 2024 or likely even 2025. But betting against Elon Musk hasn't been a winning move since Tesla went public in August 2010. And this famous Big Tech stock could still multiply investors' money in the years ahead. AI Stock No. 3: The Kroger Co (KR) Most people wouldn't consider this 135-year old grocery store chain as being an innovator -- but in 1972, Kroger was the first grocery retailer in America to test the electronic scanner. Today it's making big moves in the AI sector, harnessing the technology to improve efficiency. It's now using cutting-edge data science to scour data on 62 million households to offer coupons, streamline operations, and tailor shipping schedules to cut back on waste and inefficiency and deliver an experience that's crafted to make grocery shopping more convenient, enjoyable, and rewarding for tens of millions of repeat customers. Kroger currently serves 23 million digitally engaged households each year, and issues 500 billion "Start My Cart" recommendations each year. As its data operations grow more powerful and sophisticated, there are signs it's already paying off. Kroger shares are up 27% year-to-date. The company recently hiked its dividend, and now pays 2.1%, compared to the 1.29% average of the S&P 500 companies. Perhaps most importantly, Kroger shares are still cheap relative to their fundamentals. The stock has a price-to-earnings (PE) ratio of just 14, making it a more tempting "Buy" for value investors than high-flying tech stocks that have already soared hundreds of percent in recent years. Most traders struggle to consistently profit because they're relying on guesswork, chasing rumors, or simply are confused. But you can finally skip all these frustrations and get proven trade ideas with an 83% win rate... Click here now for more details Image via Shutterstock Market News and Data brought to you by Benzinga APIs

1 No-Brainer Artificial Intelligence (AI) Stock to Buy Hand Over Fist After TSMC's Terrific Quarter | The Motley Fool

TSMC's solid results bode well for one of its largest customers, which currently dominates the market for AI chips. Taiwan Semiconductor Manufacturing (TSM 1.20%), popularly known as TSMC, delivered outstanding results for the third quarter on Oct. 17, handily beating Wall Street's expectations and sending its shares soaring. Even better, the foundry giant raised its full-year forecast and believes that it is set for healthy growth over the next five years as well. One of the reasons TSMC management is bullish is because of the booming demand for artificial intelligence (AI) processors such as graphics processing units (GPUs), central processing units (CPUs), and other kinds of accelerators. That bodes well for one of TSMC's largest customers: Nvidia (NVDA -2.81%). Let's take a look at the reasons TSMC's solid results indicate that Nvidia's red-hot rally is here to stay. TSMC management said on its latest earnings conference call that it is witnessing "extremely robust AI-related demand from our customers throughout the second half of 2024, leading to an increasing overall capacity utilization rate for our leading 3-nanometer and 5-nanometer process technologies." More specifically, the company's revenue from sales of AI processors is on track to triple this year, accounting for a mid-teens percentage of its overall top line. As a result, it raised its full-year revenue growth forecast to 30%, which is an improvement over its prior expectation of mid-20% growth. So TSMC is on track to finish 2024 with $90 billion in revenue as compared to the $69.3 billion top line it reported last year. TSMC says that next year will be a healthy growth year as well. Given that it manufactures chips that are designed by Nvidia, a company that controls more than 85% of the AI chip market, the former's sunny forecast suggests that the demand for AI chips continues to remain solid. As TSMC management said, the demand for its 3nm and 5nm process nodes is high. Nvidia's current generation Hopper AI processors are based on TSMC's 5nm node. Nvidia management said on its August earnings conference call that its Hopper chips remain in demand even though the next-generation Blackwell processors are on the way. According to Nvidia, shipments of its Hopper processors are set to increase in the second half of the ongoing fiscal year, and TSMC's results indicate the same. Moreover, Nvidia's upcoming Blackwell processors are going to be manufactured on a more refined and advanced version of the same process that Hopper chips were made. The TSMC 4NP node is being used for Nvidia's Blackwell B200 chips, which explains why TSMC is forecasting continued strength in demand for its 5nm chips. Nvidia said it expects to sell "several billion dollars" worth of Blackwell chips in the next quarter when the production ramp-up of these processors begins. But more importantly, 2025 could be another blockbuster year for Nvidia thanks to the Blackwell architecture. Analysts at Morgan Stanley said that Nvidia's Blackwell AI chips are sold out for the next 12 months. The investment bank believes that the company could continue to gain even more share in the AI chip market despite being the dominant player in this space already. TSMC is going to play a key role in helping Nvidia achieve further market share gains in AI chips. That's because Nvidia relies on TSMC's advanced chip packaging technology, formally known as CoWoS (Chip on Wafer on Substrate), to manufacture its AI processors. TSMC is going to significantly increase its advanced chip packaging capacity next year. According to C.C. Wei, the company's CEO: In fact, we are putting a lot of effort to increase the capacity of the CoWoS. Roughly, let me share with you, today's situation is our customers demand far exceeds our ability to supply. So, even we work very hard and increase the capacity by about more than twice, more than two times as of this year compared with last year and probably double again, but still not enough. If TSMC manages to keep increasing its CoWoS capacity at a nice clip in 2025 as well, Nvidia should ideally be able to ship more Blackwell processors to customers and bring down the long waiting period. More importantly, Morgan Stanley says that the price of the Blackwell B200 is around 60% to 70% higher than the Hopper H200 chip. So, Nvidia seems on track to deliver another year of stunning growth in its data center business thanks to higher shipments and improved pricing. Supply chain checks by Morgan Stanley suggest that Nvidia could manufacture between 250,000 to 300,000 Blackwell chips in the fourth quarter of 2024, generating between $5 billion and $10 billion in revenue. That number is expected to triple in the first quarter of 2025, with Nvidia expected to produce between 750,000 to 800,000 Blackwell processors in a single quarter thanks to TSMC's help. If that's indeed the case, Nvidia could sell $15 billion to $30 billion worth of Blackwell processors in the first quarter of calendar year 2025. At the same time, the company is expected to sell 1 million units of its Hopper chips as well in the first quarter of next year. All this indicates that Nvidia's data center business could get off to a blockbuster start next year. The revenue run rate of Nvidia's data center business this year suggests that the chipmaker could generate $98 billion in revenue from this segment. Morgan Stanley's estimates suggest that Nvidia could sell $210 billion worth of Blackwell chips in 2026, which is much higher than the $179 billion revenue that consensus estimates are projecting for the next fiscal year. So, investors looking to buy an AI stock right now can still consider Nvidia despite the 190% surge in its stock price this year, as TSMC's sales and capacity expansion plans tell us that the AI chip leader still has room for more upside. Moreover, Nvidia is currently trading at 35 times forward earnings, which isn't all that expensive when compared to the Nasdaq-100 index's forward earnings multiple of 30. Considering the growth that Nvidia has been clocking and the lucrative AI opportunity it is sitting on, buying it at this valuation looks like a no-brainer right now.