Top 2 Artificial Intelligence Stocks for Long-Term Investing

Synthetic intelligence (AI) is currently one of the most popular technology trends, and investors are broadly seeking to invest in companies that could greatly benefit from this technology. That’s expected since AI has the capacity to revolutionize multiple industries and make a significant contribution to the global economy over the next decade and beyond.

According to a projection from Bloomberg Intelligence, the generative AI market could potentially generate a massive $1.3 trillion in revenue in 2032, making up 12% of all technology spending in that year. This would be a considerable increase from this year’s estimate of $137 billion in generative AI spending. Considering this forecast, now is a good time for investors to acquire and retain shares of strong companies positioned to take advantage of the approaching growth in this profitable market.

Nvidia (NASDAQ: NVDA) and Palantir Technologies (NYSE: PLTR) are already capitalizing on this immense opportunity. While Nvidia’s graphics processing units (GPUs) are crucial hardware for training and powering large language models (LLMs), Palantir is helping customers incorporate AI into their operations and utilize it to enhance productivity with its software platform.

Here’s why investors should ponder acquiring these two AI stocks and holding them for the next decade.

1. Nvidia

The demand for chips capable of powering AI applications is set to surge significantly in the next decade. According to Allied Market Research, the AI chip market could bring in annual revenue of around $384 billion in 2032 compared to just $15 billion in 2022. Nvidia currently holds about a 90% share of the AI chip market, positioning it well to take full advantage of this opportunity.

The good news is that Nvidia is already observing astounding growth. The company will be reporting its fiscal 2024 results next week, and analysts anticipate that it will announce a 119% increase in revenue to $59 billion. Additionally, Nvidia’s earnings are expected to rise from $3.34 per share in fiscal 2023 to $12.33 in fiscal 2024, thanks to the significant pricing power it wields in AI chips.

More significantly, Nvidia’s business is projected to expand at a healthy rate. This is evidenced in the chart below, which also shows that analysts have been increasing their growth expectations.

NVDA Revenue Estimates for Current Fiscal Year ChartNVDA Revenue Estimates for Current Fiscal Year Chart

NVDA Revenue Estimates for Current Fiscal Year Chart

Once again, Nvidia’s earnings are forecasted to increase at an astonishing compound annual growth rate of 102% over the next five years. All this explains why Nvidia is one of the leading AI stocks you could acquire right now, particularly considering the company’s prompt actions to ensure that it remains the leading player in this market.

For example, Nvidia revised its product roadmap last year to stay ahead of its competitors. It will be rolling out updated AI chips every year instead of following a two-year cycle. This schedule could help Nvidia maintain its impressive share of the AI chip market. Additionally, reports indicate that Nvidia is contemplating undertaking custom AI chips as well.

Reuters reports that Nvidia is establishing a new business unit to produce tailor-made AI chips for cloud infrastructure service providers and others. While the demand for Nvidia’s GPUs has been exceptionally high, with potential customers possibly needing to wait a year to obtain them, some companies have been internally developing custom chips to manage certain AI-related workloads. Entering this market will present another lucrative revenue opportunity for Nvidia; the custom chip market was valued at around $30 billion last year.

All in all, it can be concluded that Nvidia could continue as the premier AI semiconductor selection over the next decade, considering the potential growth available and the company’s current market share. Additionally, Nvidia trades at 35 times forward earnings, which represents a discount to its five-year average forward earnings multiple of 42. As a result, investors would do well to acquire it right now — its promising AI prospects could result in substantial gains over the next decade.

2. Palantir Technologies

While Nvidia is among the best ways to harness the AI hardware market, Palantir Technologies offers investors an opportunity to benefit from the software aspect of AI. Research provider Precedence Research predicts that the AI software market could generate an impressive $1 trillion in revenue by 2032. Achieving this would entail clocking a compound annual growth rate of nearly 23% over the next decade.

Market research firm IDC ranked Palantir as the number one player in the global AI software platform market in 2021 in terms of both market share and revenue. The company’s latest results indicate that the AI software opportunity will soon start driving significant growth.

While Palantir’s revenue in Q4 2023 increased by 20% year over year to $608 million, its commercial business grew by 32% to $284 million. The faster growth of the commercial business was due to the increasing adoption of Palantir’s Artificial Intelligence Platform (AIP) by customers.

Palantir observed a 44% year-over-year surge in the number of commercial customers last quarter. Furthermore, the adoption of AIP helped Palantir close 103 deals worth over $1 million last quarter — twice as many as in the prior-year period. “The demand is off the charts for AIP, with bootcamps as the delivery mechanism for AIP, and we’re seeing AIP drive the expanding addressable market, that we’re seeing,” said Chief Revenue Officer and Chief Legal Officer Ryan Taylor on the latest earnings conference call.

Therefore, Palantir could be at the onset of a significant growth trend. Some analysts argue that the company could potentially have a revenue opportunity of $1 trillion in the AI software space. The consensus forecast from analysts is that Palantir’s earnings will increase at a compound annual rate of 85% for the next five years.

Considering the massive end-market opportunity the company is facing, it could sustain impressive levels of growth for a prolonged period and deliver substantial gains over the next decade, which is why investors should consider acquiring this tech stock before it goes even higher following its remarkable gains over the past year.

Should you invest $1,000 in Nvidia right now?

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

2 Synthetic Intelligence Stocks You Can Purchase and Retain for the Next Decade was originally published by The Motley Fool

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