Artificial intelligence (AI) has been an incredible catalyst for many companies over the past year, and many names that are taking advantage of the technology’s growing adoption have seen their share prices rise sharply. has come.
For example, an investment of $10,000 in Nvidia At the beginning of 2023 it is now worth about $58,000. This is not surprising since the company is leading the field of AI thanks to its graphics cards, which allow users to train large language models (LLMs) and deploy AI applications. Similar investments in Super Microcomputer The stock is now valued at $110,000 early last year as the company’s AI servers are in high demand.
The good thing is that the adoption of AI is still in its early stages. Buying solid AI stocks as part of a diversified portfolio can allow investors to take advantage of this secular growth trend.
Palantir Technologies (NYSE: PLTR ) And ASML Holding (NASDAQ: ASML) There are two stocks that investors can consider buying now to make the most of the AI boom.
1. Palantir Technologies
Palantir Technologies is proving to be a solid play on the growing demand for AI software. The company’s artificial intelligence platform (AIP) is witnessing strong adoption, and management said it is helping the company “significantly compress sales cycles and accelerate new customer acquisition rates.” ” This is not surprising since AIP gives organizations the ability to integrate big language models into their operations through bootcamps, hosted to help clients understand AI use cases and How this technology can be used to improve their business.
AIP has rapidly increased the number of commercial deals the company is signing. “Demand for AIP is off the charts, Bootcamp as a delivery method for AIP, and we see AIP driving an expanding addressable market,” management pointed out on the February earnings call.
Palantir’s strength in the AI software market is a key reason why analysts expect the company’s revenue to grow 22% to $2.71 billion in 2024 — an improvement from the 17% growth reported for 2023. Is. The early-stage market for AI software platforms is expected to grow by 31 percent annually through 2030, generating $279 billion in revenue by the end of the decade.
Palantir’s growth rate is likely to accelerate if it manages to maintain its impressive deal pace. For example, the number of deals over $1 million in the fourth quarter of 2023 nearly doubled to 103 on a year-over-year basis.
The company’s remaining performance obligations (RPO), the value of future contracts that Palantir expects to fulfill in the future, also rose 28% year over year to $1.24 billion. With RPO growth outpacing the top line, the company is well positioned with a healthy revenue pipeline.
And now, has partnered with the company Oracle To distribute its AI software platform over a wider network, which will help it gain more customers. This promising development explains why analysts are predicting an 85% increase in the company’s annual revenue over the next five years.
This improved earnings power is likely to lead to even greater gains for Palantir shareholders, making it a prime choice for investors looking to add AI growth stocks to their portfolios.
2. ASML Holding
Semiconductors are playing an important role in driving the AI revolution, as evidenced by the huge demand for Nvidia’s chips. However, manufacturing these chips would not have been possible without ASML Holding’s machines.
For example, Nvidia’s flagship H100 processor, which sells like hotcakes, is manufactured using a custom 5 nanometer (nm) node. Taiwan Semiconductor ManufacturingKnown as TSMC. To create chips based on this processing node, TSMC uses ASML’s extreme ultraviolet (EUV) lithography systems.
The good news for ASML is that the demand for advanced process nodes is increasing thanks to AI. Nvidia, for example, is ramping up production of its AI chips to meet consumer demand. To do this, foundries like TSMC are reportedly ramping up their investment. On its previous earnings call, TSMC management pointed out that “between 70% and 80% of the capital budget is allocated to advanced process technologies” of its $28 billion to $32 billion total capital expenditure budget for 2024. will go”.
Moreover, with the likes of Nvidia and apple With the move to more advanced chips manufactured using 3nm and 2nm process nodes, investment costs on purchasing EUV machines should ideally increase. This is the reason why orders for ASML machines increased significantly in the fourth quarter of 2023.
The Dutch company saw its net bookings rise to 9.2 billion euros in Q4 2023 from 2.6 billion euros in the previous quarter. Its order backlog stood at 39 billion euros. ASML’s order book is likely to grow further as the market for AI chips is expected to grow at an annual rate of 38% through 2032, further fueling demand for advanced chipmaking equipment.
TSMC, for example, is set to build a third plant in the US to produce 2nm chips, which also means it will place orders for ASML’s EUV lithography equipment as the latter monopolizes the market. Holds a position like Dari. Overall, the secular growth of the AI chip market and ASML’s grip on EUV lithography are reasons why the company seems poised for strong growth.
It’s worth noting that the company’s shares have risen nearly tenfold over the past decade, and the semiconductor’s lucrative opportunity is an indication that ASML stock could be a big winner in the long run.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Apple, Nvidia, Oracle, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool has a Disclosure Policy.
2 Millionaire Maker Artificial Intelligence (AI) Stocks was originally published by The Motley Fool.