When it comes to investing in growth stocks, sometimes it’s best to let your winners run. That seems to be the case with two red-hot growth companies whose stocks have performed strongly over the past year.
1. AppLovin
It is not a well-known company, but AppLovin (NASDAQ: APP) The stock is certainly gaining some attention and is up nearly 375% over the past year. The company has been a big beneficiary of artificial intelligence (AI), which has helped reinvigorate its growth.
AppLovin is an adtech company whose solutions are used by mobile app developers to improve the marketing and monetization of their apps. The company also owns a portfolio of apps.
The company started gaining momentum after the launch of its AXON 2 AI-based advertising technology in the second quarter of 2023. The new AI engine is more predictive and enhances the use of automation, which allows AppLovin to work together. Broad reach of advertisers in various verticals beyond its core gaming customer base.
The results so far have been outstanding. For the third quarter, the first full quarter AXON 2 was available, its software platform revenue increased 65% year-over-year to $504 million, while interest, taxes, depreciation, and amortization for the segment Adjusted earnings before amortization (EBITDA) increased by 92%. $364 million
The momentum continued into the fourth quarter, with software platform revenue up 88 percent year-over-year to $576.5 million, while segment adjusted EBITDA rose 126 percent to $420 million. Gross revenue rose 36% in Q4 year-on-year.
The company will also consider using its AXON 2 engine in other products, including one for its connected TVs as well as its end-to-end app management suite for Array.
AppLovin has also started taking advantage of real-time bidding changes in mobile auctions. This helps the company in two ways.
First, its optimized solution, used to generate in-app revenue, only charges for real-time bidding. Second, real-time bidding clears auctions more quickly, allowing publishers to show more ads to their customers. This makes users use AppLovin’s platform more frequently.
Given its strong growth and momentum, AppLovin looks attractively valued despite the stock’s rise over the past year. The stock trades at a forward P/E of just under 17x.
2. Nvidia
Another company that has benefited greatly from AI. Nvidia (NASDAQ: NVDA )Its stock is up nearly 225 percent over the past year.
The company’s graphics processing units (GPUs) are being used to power generative AI applications in data centers. While Nvidia isn’t the only company developing GPUs, its CUDA software platform has been a differentiator by allowing its GPUs to be programmed directly. This has made Nvidia’s GPUs the industry standard.
With the advent of AI, Nvidia’s growth has been spectacular. Last quarter, the company saw its revenue grow 265% to $22.1 billion. Data center revenue rose 409 percent to $18.4 billion. Data center revenue was about 40 percent of its revenue in fiscal 2021, rising to 78 percent of its revenue in fiscal 2024, which ended in January.
In addition to its success with GPUs, Nvidia’s networking business, much of which comes from its 2019 acquisition of Mellanox, is also showing phenomenal growth. The business saw its revenue grow by 217% in Q4. The segment ended the year with an annual revenue run rate of more than $13 billion. The company’s Quantum InfiniBand product grew more than 5x year-over-year in Q4, and it is now poised to enter the Ethernet networking market with a new end-to-end solution to support AI-enhanced networking in the data center. Is.
Given that AI is still in its early stages of adoption, Nvidia should have strong growth ahead of both its GPU and networking businesses. And while the stock has more than tripled over the past year, at about 35x forward P/E, Nvidia stock is cheap given its growth rate.
More upside ahead
Despite their big stock returns over the past year, both AppLovin and Nvidia stocks trade at attractive valuations, given their current growth patterns as both companies benefit greatly from artificial intelligence, and it’s AI-driven. The momentum should continue to help drive their results. As such, both of these stocks look like red-hot buys.
Should you invest $1,000 in Nvidia right now?
Before buying stock in Nvidia, consider this:
gave Motley Fool Stock Advisor The analysis team only indicated what they believed. 10 Best Stocks For investors to buy now… and Nvidia wasn’t one of them. 10 stocks that made the cut could generate monster returns in the coming years.
Stock Advisor Provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular updates from analysts, and two new stock picks each month. gave Stock Advisor The service has more than tripled the return of the S&P 500 since 2002*.
See 10 stocks
*Stock Advisor returns on April 8, 2024
Jeffrey Seiler has no positions in any of the stocks mentioned. The Motley Fool has positions and recommends Nvidia. The Motley Fool has a Disclosure Policy.
2 Red Hot AI Growth Stocks to Buy in 2024 and Beyond was originally published by The Motley Fool.