The heightened interest in generative artificial intelligence (AI) has sparked an impressive rally in many tech stocks. Advances in generative AI are expected to boost productivity and innovation in a variety of fields, including tech, healthcare, and vehicle automation. Given the strong growth opportunities, we have acquired Amazon (NASDAQ:AMZNNvidia (NASDAQ:NVDA), and Palantir (NYSE:PLTR) to find Wall Street’s top AI picks.
Amazon (NASDAQ: AMZN )
E-commerce and cloud computing giant Amazon has impressed investors with its performance in recent quarters. The company’s strong performance has helped drive solid growth despite macro headwinds. Cost-cutting and streamlining initiatives have improved profitability.
Analysts are optimistic that AI-driven productivity demand will benefit the company’s cloud computing unit, Amazon Web Services (AWS). He is also upbeat about the potential of the company’s fast-growing advertising business.
Amazon is scheduled to announce its first quarter results on April 30. Analysts expect the company’s revenue to grow 12% year over year to $142.68 billion. They estimate the company’s earnings per share (EPS) growth from $0.31 to $0.85 in the prior year quarter.
What is the stock price forecast for Amazon?
On Tuesday, BMO Capital analyst Brian J. Pitz raised his price target for Amazon stock to $215 from $205 and maintained a buy rating. The analyst raised AWS’s revenue growth estimate for 2024 to 15% from 14%. He expects further growth from the migration of creative AI workloads and IT spending.
Pitz believes the integration of AI-powered shopping assistant Rufus into Amazon’s retail business is undervalued. The analyst believes the benefits of Rufus, combined with next-generation AI capabilities, could help Amazon’s retail business achieve double-digit growth in gross merchandise value (GMV) and unlock meaningful free cash flow. .
Overall, Amazon has earned a Strong Buy consensus rating based on 42 consensus buys. At $212.41, the average AMZN stock price target indicates about 18.3% upside potential. AMZN stock is up nearly 68% in the past year.
Nvidia (NASDAQ:NVDA)
Shares of Nvidia are up more than 64% year-to-date and up nearly 204% in the past year. The semiconductor giant has benefited greatly from the creative AI wave, which has created massive demand for the company’s advanced graphics processing units (GPUs).
In the fourth quarter of fiscal 2024, Nvidia’s revenue grew 265% to $22.1 billion, while adjusted EPS rose 486% to $5.16. Allaying concerns about sustaining high growth rates, Nvidia CEO Jensen Huang said during the Q4 FY24 earnings call that the backdrop is favorable for continued growth.
The CEO expects demand for the company’s GPUs to remain high due to AI-led tailwinds and an industry-wide shift away from main processors to accelerators sold by the company.
Is Nvidia a Buy, Sell, or Hold?
Recently, Evercore analyst Mark Lapassis initiated coverage of Nvidia stock with a buy rating and a price target of $1,160. The analyst claims that investors are underestimating the importance of the chip, hardware, and software ecosystem that Nvidia has built. He highlighted the upside that NVDA could offer by pointing to the era of computing in the last 15-20 years and “generally dominated by a vertically integrated ecosystem company, whose profits are 100 is measured in the 1000 bager range.”
With 39 Buys and two Holds, NVDA earned a Strong Buy consensus rating. NVDA stock’s average $1,004.92 price target indicates an upside potential of about 22%.
Palantir (NYSE:PLTR)
Shares of Palantir have surged a staggering 164.5% in the past year, fueled by optimism surrounding AI. Upbeat quarterly results from the data analytics firm also helped lift the stock. In the fourth quarter of 2023, the company’s revenue grew 20% to $608 million. Additionally, Q4 2023 marked the fifth consecutive quarter of GAAP profitability for the company.
It’s worth noting that Palantir’s commercial revenue is growing faster than its official business. For the full year 2023, the company’s government revenue grew 14% to $1.2 billion while commercial revenue rose 20% to $1 billion. In particular, the company attributed the strength in its US commercial business to its Artificial Intelligence Platform (AIP) offering.
Earlier this month, investors took stock of tech giant Oracle (NYSE:ORCL). The partnership will combine Oracle’s cloud and AI offerings with Palantir’s AI and data analytics platforms.
PLTR is scheduled to declare its Q124 results on May 6. Analysts expect the company’s EPS to come in at $0.08, up from $0.05 in the prior year quarter. The Street expects revenue to rise 17.2% to $615.30 million.
What is the target price for Palantir?
Last month, Monness analyst Brian White downgraded Palantir Technologies stock to Sell from Hold with a $20 price target. The analyst noted that PLTR stock continues to rise after the 2023 hike, resulting in “a very rich valuation.”
The analyst acknowledged that PLTR is well-positioned to capitalize on the long-term AI boom and volatile geopolitics. That said, he is concerned about uneven revenue from government contracts, unstable implementation, and high prices.
Wall Street has a consensus rating of moderate sell on Palantir stock, based on two buys, five holds, and six sells. The average PLTR stock price target of $19.67 indicates a potential downside of 9.1% from current levels.
Result
While Wall Street has been bearish on Palantir because of its lofty valuation, Amazon and Nvidia have gained bullish reviews. Analysts currently see a slightly higher upside to Nvidia stock than Amazon shares. Both of these companies have the financial strength and capabilities to capitalize on the creative AI wave.
Disclosure