Artificial intelligence (AI) has proven to be an incredible enabler for many businesses over the past year, and many names capitalizing on the growing adoption of this technology have seen a rapid rise in their stock prices. actions.
For example, an investment of $10,000 in Nvidia in early 2023 is now worth almost $58,000. This is not surprising since this company has been a pioneer in the field of AI thanks to its graphics cards, which allow users to train major language models (LLM) and deploy AI applications. A similar investment in Super microcomputer stock early last year is now worth $110,000 as the company’s AI servers were in high demand.
The good news is that AI adoption is still in its early stages. Buying strong AI stocks as part of a diversified portfolio could allow investors to take advantage of this secular growth trend.
Palantir Technologies (NYSE:PLTR) And ASML Holding (NASDAQ: ASML) are two such stocks that investors can consider buying now to make the most of the proliferation of AI.
1. Palantir Technologies
Palantir Technologies is proving to be a strong player amid the growing demand for AI software. The company’s artificial intelligence platform (AIP) is seeing robust adoption, and management said it helps the company “significantly compress sales cycles and accelerate the rate of new customer acquisition.” . This is not surprising since AIP gives organizations the ability to integrate large language models into their operations through bootcamps, which Palantir hosts to help customers understand AI use cases and how this technology can be used to improve their business.
The AIP led to a sharp increase in the number of commercial agreements signed by the company. Management highlighted during the February earnings conference call: “Demand for AIP is off the charts, with boot camps as a delivery mechanism for AIP, and we see AIP driving expanding addressable market.”
Palantir’s strength in the AI ​​software market is a key reason why analysts expect the company’s revenue to grow 22% in 2024 to $2.71 billion, an improvement from the 17% growth recorded in 2023. More importantly, Palantir’s AI business is in the early stages of growth, as the AI ​​software platform market is expected to see annual growth. by 31% through 2030, generating revenue of $279 billion by the end of this decade.
Palantir’s growth rate is expected to accelerate if it can maintain its impressive deal momentum. For example, the number of $1 million-plus deals closed in Q4 2023 nearly doubled year-over-year to 103.
The company’s remaining performance obligations (RPOs), the value of future contracts that Palantir expects to fulfill in the future, also jumped 28% year over year to $1.24 billion. of dollars. With RPO growth outpacing revenue, 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 attract more customers. These promising developments explain why analysts are forecasting the company’s annual earnings growth of 85% over the next five years.
This improvement in earnings power is likely to generate even more gains for Palantir shareholders, making it a top choice for investors looking to add an AI growth stock to their portfolio.
2. ASML management
Semiconductors play a vital role in the AI ​​revolution, as evidenced by the enormous demand for Nvidia chips. However, the manufacturing of these chips would not have been possible without ASML Holding’s machines.
For example, Nvidia’s flagship H100 processor, which is selling like hot cakes, is manufactured using a custom 5 nanometer (nm) node from Semiconductor manufacturing in Taiwan, popularly known as TSMC. To manufacture chips based on this process 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 rapidly increasing production of its AI chips to meet customer demand. To achieve this, foundries such as TSMC would increase their capital investments. During its previous earnings conference call, TSMC management highlighted that “between 70% and 80% of the capital budget will be allocated to advanced process technologies” out of its total capital expenditure budget of 28 to 80%. 32 billion dollars for 2024.
Additionally, with companies like Nvidia and Apple With it poised to move to more advanced chips made using 3nm and 2nm process nodes, capital expenditures for 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 climb to €9.2 billion in the fourth quarter of 2023, compared to €2.6 billion in the previous quarter. Its order book amounts to 39 billion euros. ASML’s order book is likely to expand as the AI ​​chip market is expected to grow at an annual rate of 38% through 2032, which will further drive demand for advanced chip manufacturing equipment.
TSMC, for example, is set to build a third factory in the United States to make 2nm chips, which also means it will place orders for EUV lithography equipment from ASML, the latter occupying a monopoly position in this market. Overall, the secular growth of the AI ​​chip market and ASML’s hold on EUV lithography are the reasons why this company looks poised for robust growth in the future.
It’s worth noting that the company’s shares have risen almost tenfold over the past decade, and the lucrative opportunity looming in semiconductors indicates that ASML stock could prove to be a major winner in the long run. term.
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Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends ASML, Apple, Nvidia, Oracle, Palantir Technologies and Taiwan Semiconductor Manufacturing. The Mad Motley has a disclosure policy.
2 Millionaire Artificial Intelligence (AI) Stocks was originally published by The Motley Fool
