Two Current AI-Focused Stocks Worth Investing In Immediately
AI, a technology with the potential to exponentially boost productivity and grow the global economy, is currently in its infancy. This presents an exceptional investment opportunity, particularly for companies that can successfully capitalize on its advancements. Here are two such companies with impressive growth prospects and returns:
1. Advanced Micro Devices (AMD)
AMD's semiconductor division is harnessing the power of AI in high-performance computing markets, such as data centers. Recently, the stock has seen a dip, making it an attractive option for investors.
AMD's Q3 2024 revenue from its data center business skyrocketed by 122% year over year. The segment's robust demand is also reflected in the client segment, which saw a 29% increase in revenue last quarter. Notably, AMD now generates more data center revenue than Intel, marking a significant shift in the semiconductor industry.
The market size for data center GPUs is projected to reach $500 billion in the next three years. AMD launched its data center GPUs a year ago, with estimates of generating $5 billion in revenue from this segment alone. Additionally, the company has recently launched its fifth-generation Turin EPYC CPUs designed for AI and cloud computing, promising better performance and lower cost of ownership over previous generations.
Analysts predict a 25% increase in earnings for 2024 and another 54% in 2025. Given these projections, the current share price of $130 for AMD stock offers investors a reasonable 25 times 2025 estimates.
2. Amazon
Amazon's Amazon Web Services (AWS) is the leading cloud service provider, benefiting from growing demand for AI services. With AWS generating most of the company's operating profit, the stock could provide substantial long-term gains.
Demand for AI services in the cloud is growing rapidly, and the shift is accelerating. AWS revenue increased by 19% year over year in Q3 2024 on a currency-neutral basis, and its trailing-12-month revenue reached $103 billion. With a near-third market share, AWS is well-positioned to capture the $300 billion cloud market.
Recent developments, such as AI chip leader Nvidia choosing AWS for its AI supercomputer, highlight AWS' outstanding capabilities in performance and security. Amazon's investments in AI capabilities within AWS could benefit various parts of its business, such as AI shopping assistants for Amazon.com, boosting sales in its retail unit.
Amazon's stock is a solid growth option, with analysts projecting annualized earnings growth of 22% over the next five years. This growth rate, coupled with the company's focus on lowering retail costs, could propel Amazon investors towards potentially doubling their returns.
- Investors looking to capitalize on AI's potential in finance should consider AMD's robust data center business, which saw a 122% revenue growth in Q3 2024 and is projected to reach a market size of $500 billion by 2025.
- The dip in AMD's stock price presents an attractive investing opportunity, with analysts predicting a 25% increase in earnings for 2024 and another 54% in 2025, offering a reasonable 25 times 2025 estimates.
- In the AI-driven cloud services sector, Amazon's AWS is the leading provider, benefiting from growing demand for AI services and projecting annualized earnings growth of 22% over the next five years, potentially doubling investor returns.
- Analysts suggest that intelligently investing in AI-driven companies could yield significant returns, as intelligent valuation and timing, such as AMD's dip and Amazon's growth projections, can lead to lucrative long-term gains.
