Over the past year or so, the growth story of artificial intelligence (AI) has begun. Generative AI's ability to generate original content and streamline time-consuming processes is a potential game-changer in the way business is done. In order to have the opportunity to benefit from the productivity gains made possible by these next-generation algorithms, many companies are looking to determine how best to integrate these algorithms into their day-to-day operations. I'm running around.
Despite producing market-beating performance in 2023, some market watchers believe there is more to come from AI stocks. In fact, two Wall Street analysts suggest the stock still has upside potential of 63% and 70% next year, according to two analysts.
Artificial Intelligence #1 Buy: Nvidia — 63% Up Expected
If there's one stock that embodies the potential represented by recent advances in AI, it's this one: Nvidia (NASDAQ:NVDA) It's definitely running. Its graphics processing unit (GPU) uses parallel processing. This is the ability to process large amounts of mathematical calculations simultaneously by dividing the data into smaller chunks to make it easier to manage. This not only revolutionized gaming, but also enabled advances in AI.
For the company's fiscal year 2024 (ending January 28), NVIDIA's revenue increased 126% year-over-year to approximately $61 billion, and diluted earnings per share (EPS) increased 586% to $11.93. . Nvidia is projecting record revenue of $24 billion for the first quarter of fiscal 2025 (ending April 30), up 234% year over year. Management left no doubt that accelerating demand for generative AI is behind this surge.
Even though the stock is up 488% since the beginning of 2023 (as of this writing), Rosenblatt analyst Hans Mosesmann, who calls himself “the most bullish analyst on NVIDIA,” is calling it a buy. The company has a high rating and a high price target of $1,400. stock. This represents a potential upside of 63% compared to Monday's closing price. “The transition from general computing to accelerated computing has reached a tipping point, where disruptive new apps, generative AI, are creating entirely new industries,” said Mosesman.
Analysts are not alone in their bullish views. Of the 56 analysts who issued their opinions in March, 52 rated the company's stock as a “buy” or “strong buy.” Not 1 Recommended sales. This is surprising considering Wall Street doesn't agree on anything.
Nvidia stock is currently selling for 34 times forward earnings. This is a premium for multiples of 27; S&P500the company's triple-digit growth and strong tailwinds suggest it deserves a premium.
No. 2 artificial intelligence buy: Super microcomputers — 70% upside expected
Nvidia provides the GPUs needed to train and run AI systems; super microcomputer (NASDAQ:SMCI)Also known as Supermicro, these cutting-edge chips and others are built into high-end servers specifically designed to withstand the rigors of AI processing.
The company's focus on energy efficiency is well documented, as is its building block architecture. Supermicro offers a variety of technologies, including free air cooling, liquid cooling, and traditional air cooling, providing AI-centric server solutions to suit every budget and technology level.
In the company's second quarter of 2024, Supermicro's revenue increased 103% year-over-year to approximately $3.7 billion, and adjusted EPS increased 71% to $5.59. And management believes the company's growth spurt will continue to accelerate. Supermicro projects third-quarter revenue of $3.9 billion and EPS of $5.22 at the midpoint of its guidance. This corresponds to year-over-year growth of 205% and 220%, respectively.
The stock is up an incredible 975% since the start of 2023, but some think there's still a lot of upside left. Loop Capital analyst Ananda Barua rates the stock a “buy” and has a high price target of $1,500. This represents a potential upside of 70% compared to Tuesday's closing price.
Baruah is increasingly confident in Supermicro's position in the generative AI server space and its leadership in addressing the increasing complexity and scale of the server industry. Additionally, he believes the company can achieve a revenue run rate of $40 billion by the end of fiscal 2026. For context, this revolves around the $7.1 billion it generated in fiscal year 2023 (ending June 30).
Analysts are not alone in their bullish views. Of the 15 analysts who covered the stock in March, 11 rated it a “buy” or “strong buy.” none Recommended sales. Supermicro stock is also attractively priced, currently selling at 3x forward sales.
Should you invest $1,000 in Nvidia right now?
Before buying Nvidia stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors can buy right now…and Nvidia wasn't among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of April 15, 2024
Danny Vena has held positions at Nvidia and Super Micro Computer. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
The post 2 Best Artificial Intelligence (AI) Growth Stocks to Buy Before Soaring 63% and 70%, According to Some Wall Street Analysts was originally published by The Motley Fool.