2 Artificial Intelligence (AI) Stocks That Could Go Parabolic
Demand for artificial intelligence (AI) services has skyrocketed over the last year, prompting countless tech companies to pivot their businesses toward the budding sector. The launch of OpenAI's ChatGPT reignited interest in AI and highlighted just how far the technology had come.
According to Grand View Research, the AI market is projected to grow at a compound annual rate of 37% until at least 2030, which would see it hit a value close to $2 trillion. AI will likely boost countless industries as the technology is applied to sectors like consumer tech, cloud computing, autonomous vehicles, machine learning, and more.
As a result, there are dozens of ways to invest in AI and profit from the market's long-term expansion. Here are two artificial intelligence stocks that could go parabolic.
1. Intel
It hasn't been easy to be an Intel (NASDAQ: INTC) investor in recent years, with the company hitting a few roadblocks.
Intel was responsible for over 80% of the central processing unit (CPU) market for at least a decade and was the primary chip supplier for Apple's MacBook lineup for years. But the tech giant's dominance made it complacent, leaving it vulnerable to more innovative competitors.
Chip rival Advanced Micro Devices started gradually eating away at Intel's CPU market share in 2017, and that share is now down to 63%. Then in 2020 Apple cut ties with Intel in favor of more powerful in-house hardware designs. As a result, Intel's stock is down about 35% over the past three years.
However, the fall from grace seemed to light a fire under Intel again, and it has been making moves to come back strong in the coming years. Last June, Intel announced a "fundamental shift" to its business, adopting an internal foundry model that it believes will help it save $10 billion by 2025.
Moreover, Intel is investing heavily in AI. In December 2023, the company debuted a range of AI chips, including Gaudi3, a graphics processing unit (GPU) designed to challenge similar offerings from market leader Nvidia. Intel also showed off new Core Ultra processors and Xeon server chips, which include neural processing units for running AI programs more efficiently.
Intel has a mountain to climb to catch its rivals in AI. However, it is on a promising path that could pay off in a major way over the long term, and earnings per share (EPS) estimates support its significant potential.
This chart indicates Intel's earnings could hit nearly $3 per share over the next two fiscal years. When multiplying that figure by the company's forward price-to-earnings (P/E) ratio of 31, you get a stock price of $91. Looking at its current position, these projections could see Intel's stock soar 112% by fiscal 2026. With its expanding position in AI, Intel is a screaming buy right now.
2. Advanced Micro Devices
If you're looking to invest in AI, you can't have too many chip stocks in your portfolio. These companies are developing the hardware necessary to train and run AI models. AMD is an attractive investment option -- it currently has the second-largest market share in GPUs, and is gradually expanding in AI.
Last December, AMD unveiled its new MI300X AI GPU. The chip was designed to compete directly with Nvidia's offerings and has already caught the attention of some of tech's most prominent players, signing on Microsoft and Meta Platforms as clients.
AMD's earnings have yet to reflect its investment in AI. However, its recent quarterly earnings suggest it's moving in the right direction. In its fourth quarter of 2023, AMD's revenue rose 10% year over year to $6 billion, beating analysts' expectations by about $60 million. The company's AI-focused data center segment posted 38% revenue growth.
In addition to AI chips, AMD is diversifying its position in the market by expanding into AI-powered PCs. According to research firm IDC, PC shipments are projected to see a major boost this year, with AI integration serving as a key catalyst. And a Canalys report predicts that 60% of all PCs shipped in 2027 will be AI-enabled.
AMD's earnings are projected to reach $7 per share over the next two fiscal years. In a similar calculation to Intel, multiplying this figure by AMD's forward P/E of 49 yields a stock price of $345. From its current position, AMD's stock would soar 92% by fiscal 2026. Like Intel, AMD's stock could go parabolic if all goes well.
Should you invest $1,000 in Intel right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks That Could Go Parabolic was originally published by The Motley Fool
