2 artificial intelligence (AI) stocks that could go parabolic

The artificial intelligence (AI) industry has exploded in the past year, and the hype around this technology doesn’t seem to be going away anytime soon.

According to Grand View Research, the AI ​​market will reach $197 billion in 2023 and is expected to expand at a compound annual growth rate (CAGR) of 37% through 2030. According to forecasts, this sector is expected to surpass $1 trillion before the end of 2020. There has never been a better time to invest in AI.

Across technology, companies have reorganized their business structures to prioritize the advancement of the AI ​​market and have put in place numerous ways to support high-growth sectors.

Here are two AI stocks that could go parabolic.

1. Microsoft

microsoft (MSFT 0.46%) Over the past few years, it has emerged as one of the biggest players in the AI ​​space. The company was an early investor in the industry, investing $1 billion in ChatGPT developer OpenAI in 2019. Microsoft has since increased this investment, taking a 49% stake in the startup, giving Microsoft exclusive access to some of its most advanced AI models. At the supermarket.

Microsoft has upgraded its entire product lineup using OpenAI’s technology starting in early 2023. Elements of ChatGPT have been integrated into the tech giant’s search engine Bing, a host of new AI tools have been added to the cloud platform Azure, and various Office services now offer improved productivity with the help of AI.

Microsoft’s journey into AI is still early days, but the company’s quarterly earnings suggest its investments are paying off. In the first quarter of 2024 (ending September 2023), Microsoft reported 13% year-over-year revenue growth, beating Wall Street estimates by nearly $2 billion.

There were significant gains in the company’s cloud and productivity divisions (both focused on AI development), with revenue rising 19% and 13%, respectively.

Data from YCharts

This chart shows that Microsoft’s earnings could reach $15 per share over the next two years. Multiply this figure by the forward price-to-earnings ratio (P/E) of 35, and you get a stock price of $525. It is expected to grow by 35% over the next two years.

The potential of a company means that its stock is worth investing in. However, it’s also worth noting that Microsoft’s stock price has risen at a CAGR of approximately 56% since 2019, indicating that this may be a conservative estimate. With a strong presence in the AI ​​space, this company is a no-brainer at the moment.

2. Intel

Because graphics processing units (GPUs) are critical to training and running AI models, chip stocks have soared along with AI growth over the past year. while nvidia Because they’ve garnered so much attention, chipmakers just starting out in AI may be better investments with more room to operate. intel (INTC -0.13%) It’s a compelling option.

Intel has had a rough few years. After dominating the chip market for so long, the company appeared complacent and became vulnerable to competition. Intel’s central processing unit (CPU) market share plummeted from 82% in 2017 to 61% in 2023. advanced micro devices occupied a significant share.

Then, in 2020, Intel lost one of its biggest customers. apologize It ended partnerships between technology companies in favor of homegrown chips.

As a result, Intel’s stock price has fallen 3% over the past five years. But the recent headwinds are exactly why Intel’s stock could soar. As competition intensifies, Intel appears to be highly motivated to regain what it has lost.

The company entered the desktop GPU market for the first time last year, diversifying its business by taking on a larger role in PC gaming. Meanwhile, the company is preparing to launch a range of new AI chips that could threaten Nvidia’s dominance in the long term.

With the AI ​​market expected to see a CAGR of 37%, Intel doesn’t need to catch up with Nvidia to make big profits from its AI products. The company could see significant growth in its profits over the next decade.

Data from YCharts

Moreover, this chart shows that Intel’s earnings could reach nearly $3 per share by fiscal 2025. Using a similar calculation to Microsoft’s, multiplying this figure by a future P/E of 25 would mean a potential stock price of $67. If the predictions are accurate, the company’s shares could increase by 43% over the next two years.

Intel’s projected growth rate is much higher than Intel’s. S&P 500The CAGR of is approximately 17% since 2019. As a result, this stock is a great buy for anyone looking to invest in AI.