2 AI Stocks With Over 29% Upside Potential, According to Wall Street Analysts

Interest in artificial intelligence (AI) is growing explosively, and according to Statista, the global AI market size is $208 billion and is expected to exceed $1.8 trillion by 2030. That’s where a lot of wealth creation comes down the pike. Investors looking for wealth-building stocks would be wise to check out the leaders of this new opportunity.

advanced micro devices (AMD 9.06%) and alphabet (google 1.52%) (GOOG 1.71%) These are two major technology stocks that Wall Street is increasingly seeing bullish on. Shares of AMD and Alphabet have risen 126% and 57%, respectively, over the past year, outperforming AMD’s 40% return. Nasdaq Composite. Stocks that perform better through a market correction like 2022 can be a leading indicator of which companies are likely to perform better in a new bull market.

Here’s why these two stocks are poised for market-beating gains from these highs.

1. Advanced micro devices

Analysts at KeyBanc Capital Markets recently raised their price target on Advanced Micro Devices stock to $270. This represents a 52% upside from the current share price of $178. AMD is well-positioned to enter the data center AI GPU market this year with its new MI300x chips.

AMD is gaining strong momentum in its data center business as it launches new products. In the fourth quarter, sales were up 38% year-over-year, and the company said this was just the beginning. AMD expects this hardware market to grow to approximately $400 billion by 2027.

“We have built exceptional customer traction based on our strong multi-year AI hardware and software roadmap, and see clear opportunities to drive the next generation of growth while delivering leadership AI solutions across our portfolio,” said CEO Lisa Su. The company’s fourth quarter results were announced at the end of January.

Meanwhile, AMD continues to deepen its relationship with AMD. microsoft Developing the next generation of AI-powered PCs in the consumer space. AMD says Ryzen CPUs power more than 90% of AI PCs on the market.

Momentum in data center GPUs and AI PCs shows AMD is well positioned to deliver returns to shareholders over the next decade. The stock is highly valued, with a forward price-to-earnings (P/E) ratio of 50, which reflects Wall Street’s expectations that earnings will double to $7.17 over the next three years.

The company will need to report impressive growth this year to meet analysts’ targets, but regardless of its short-term performance, we believe AMD is a great stock to own for the long term.

2. Alphabet

Analysts at Wolfe Research recently increased their price target for Alphabet to $180, which suggests a 29% upside potential from the current stock price. Google’s parent company is seeing early signs of positive returns from its AI tools, which could lead to significant growth in advertising revenue.

Advertising is a cyclical business that can move in tandem with the health of the broader economy. The company’s advertising revenue declined sharply in 2022 due to macroeconomic headwinds, but advertising revenue is solidifying as the economy warms again. Google’s advertising revenue grew 11% year-over-year in the fourth quarter, and AI already looks like a catalyst for further growth.

The company recently released version 1.5 of its Gemini AI model. Google is using Gemini to help advertisers accelerate ad campaign creation in search. It also serves as the brains behind Bard, a search tool powered by generative AI.

Alphabet is also seeing significant growth in its Google One subscription service, which provides cloud storage and access to other Google products. We want to provide our users with more AI features that will help us expand our already sizable subscriber base of over 100 million people.

Of course, AI plays an important role in Google Cloud’s enterprise business, which is just starting to generate consistent revenue after years of losses. As you can see, AI is the foundation of the entire business, so it’s right that Wolfe Research is bullish on the stock’s prospects.

Alphabet is expected to reach $8.85 in revenue by 2026, according to consensus analyst estimates. The stock is trading at a reasonable forward P/E of 21, which could justify the stock hitting analysts’ price targets this year, with more gains to come.