Artificial intelligence (AI) has turned out to be an incredible catalyst for quite a lot of corporations over the past yr or so, and many names that are capitalizing on the growing adoption of this technology have witnessed a rapid rise of their share prices.
As an illustration, an investment of $10,000 in Nvidia at first of 2023 is now value almost $58,000. That just isn’t surprising as this company has been a pioneer within the sector of AI due to its graphics cards, which enable users to educate large language models (LLMs) and deploy AI applications. The identical investment in Super Micro Computer stock at first of last yr is now value $110,000 as the company’s AI servers have been in hot demand.
The nice part is that AI adoption stays to be in its early phases. Buying solid AI stocks as a component of a diversified portfolio could allow investors to benefit from this secular growth trend.
Palantir Technologies (NYSE: PLTR) and ASML Holding (NASDAQ: ASML) are two such stocks that investors can consider buying immediately to profit from the proliferation of AI.
1. Palantir Technologies
Palantir Technologies is coming out to be a solid play on the booming demand for AI software. The company’s Artificial Intelligence Platform (AIP) is witnessing robust adoption, and management said it’s helping the company “significantly compress sales cycles and speed up the speed of recent customer acquisition.” That just isn’t surprising as AIP gives organizations the ability to integrate large language models into their operations through bootcamps, which Palantir hosts to help clients understand the use cases of AI and the way in which this technology is likely to be used to make their businesses higher.
AIP has led to a sharp jump throughout the variety of business deals the company has been signing. Management identified on the February earnings call, “The demand is off the charts for AIP, with boot camps since the delivery mechanism for AIP, and we’re seeing AIP drive the expanding addressable market.”
The strength of Palantir throughout the AI software market is a key reason why analysts expect the company’s revenue to increase 22% in 2024 to $2.71 billion — an improvement from the 17% growth reported for 2023. More importantly, Palantir’s AI business is throughout the early phases of growth because the marketplace for AI software platforms is predicted to clock annual growth of 31% through 2030, generating revenue of $279 billion by the tip of this decade.
Palantir’s growth rate is more prone to speed up if it manages to maintain up its impressive deal momentum. As an illustration, the range of $1 million-plus deals it struck throughout the fourth quarter of 2023 nearly doubled on a year-over-year basis to 103.
The company’s remaining performance obligations (RPO), the value of future contracts Palantir expects to satisfy in the long term, also jumped 28% yr over yr to $1.24 billion. With RPO growth outpacing the best line, the company is well-positioned with a healthy revenue pipeline.
And now, the company has partnered with Oracle to distribute its AI software platform across a wider network, which should help it land more customers. These promising developments explain why analysts are forecasting 85% annual earnings growth for the company over the following five years.
This improved earnings power is more prone to fuel way more gains for Palantir shareholders, making it a top alternative for investors searching for so as to add an AI growth stock to their portfolio.
2. ASML Holding
Semiconductors are playing a critical role in driving the AI revolution, which is clear from the big demand for Nvidia’s chips. Nonetheless, manufacturing those chips wouldn’t have been possible without machines from ASML Holding.
As an illustration, Nvidia’s flagship H100 processor, which sells like hotcakes, is manufactured using a custom 5-nanometer (nm) node from Taiwan Semiconductor Manufacturing, popularly known as TSMC. For manufacturing chips based on this process node, TSMC utilizes ASML’s extreme ultraviolet (EUV) lithography systems.
The good news for ASML is the demand for advanced process nodes is increasing due to AI. Nvidia, for instance, is rapidly increasing the output of its AI chips to satisfy customer demand. To make that occur, foundries paying homage to TSMC are reportedly boosting their capital investments. On its previous earnings call, TSMC management identified that “between 70% and 80% of the capital budget will likely be allocated for the advanced process technologies” out of its total capital expenditure budget of $28 billion to $32 billion for 2024.
Moreover, with the likes of Nvidia and Apple set to maneuver to more advanced chips manufactured using 3nm and 2nm process nodes, the capital expenditure on procuring EUV machines should ideally increase. That’s the reason why the orders for ASML’s machines shot up significantly throughout the fourth quarter of 2023.
The Dutch company saw its net bookings spike to 9.2 billion euros in Q4 2023 from 2.6 billion euros throughout the preceding quarter. Its order backlog stood at a solid 39 billion euros. ASML’s order book is more prone to grow to be larger because the marketplace for AI chips is predicted to grow at an annual rate of 38% through 2032, further driving the demand for advanced chipmaking equipment.
TSMC, for instance, is about to construct a third plant throughout the U.S. to fabricate 2nm chips, which also means it will be placing orders for ASML’s EUV lithography equipment since the latter holds a monopoly-like position on this market. In all, the secular growth of the AI chip market and ASML’s hold over EUV lithography are the the rationale why this company seems set for robust growth going forward.
It’s value noting shares of the company have jumped nearly tenfold thus far decade, and the lucrative semiconductor opportunity that lies ahead signals that ASML stock could grow to be a serious winner in the long run.
Do you might have to speculate $1,000 in Palantir Technologies immediately?
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends ASML, Apple, Nvidia, Oracle, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Idiot has a disclosure policy.
2 Millionaire-Maker Artificial Intelligence (AI) Stocks was originally published by The Motley Idiot