Artificial intelligence (AI) has emerged as the buzzword of 2024, permeating various industries and captivating the attention of companies and investors alike. Those who have yet to embrace the AI revolution may be missing out on significant opportunities. While certain celebrated stocks like Nvidia (NASDAQ:NVDA) may appear prohibitively expensive, there are other AI-focused companies poised for substantial growth in the near future. A recent Bloomberg study forecasts that the Generative AI market could reach a staggering $1.3 trillion by 2032, underscoring the immense potential of AI technologies.
Amidst this backdrop, here are three overlooked AI stocks that have been quietly soaring in the shadows, presenting compelling investment opportunities.
Advanced Micro Devices (AMD)
Nvidia’s primary competitor, Advanced Micro Devices (NASDAQ:AMD), has been experiencing a strong performance in 2024. With a remarkable 147% increase in the past year and a 46% rise in the current year, AMD stock is gaining significant traction. The surge in demand for its chips, coupled with the interest from major tech giants, positions AMD as one of the premier AI stocks to invest in. Currently trading at $202, the stock is approaching its 52-week high of $227, suggesting further potential upside.
One catalyst for AMD’s growth is the recent launch of its MI300 graphics processing units, designed to handle higher AI workloads. The success of these GPUs could drive even better performance in the years ahead. Management forecasts revenue of $3.5 billion from its chips this year, indicating a robust outlook for the company.
From a fundamental standpoint, AMD is demonstrating resilience, evidenced by a 6% year-over-year revenue increase in the fourth quarter, along with an EPS of $0.41 and revenue of $6.2 billion. With a mature market presence and ample potential, particularly in the expansive global data center market, AMD is well-positioned to thrive amidst competition.
Moreover, the growing demand for chips presents a significant growth opportunity for AMD, especially as Nvidia alone cannot satisfy the supply requirements. As customers seek alternative options, AMD stands to benefit and could reach new highs in the coming months.
Analysts at Mizuho Securities have assigned a buy rating for AMD, with a price target of $235, underscoring the favorable outlook for the stock. For investors who perceive Nvidia as too pricey, AMD represents a compelling alternative worth considering before it becomes too lucrative to ignore.
Palantir Technologies (PLTR)
Palantir (NYSE:PLTR) has undergone a remarkable transformation over the past decade, evolving from a highly secretive government-focused business to a thriving entity achieving profitability. In its most recent fourth-quarter report, Palantir achieved a significant milestone by reporting its first-ever quarter of positive net income, signaling a notable improvement in its financial performance.
A key driver of Palantir’s growth is its Artificial Intelligence Platform (AIP), which plays a pivotal role in data analysis and providing actionable insights to businesses. The company’s boot camps for clients have been instrumental in converting leads into successful deals. Palantir secured 103 deals in the quarter, driven by an increase in commercial clients, showcasing the effectiveness of its business strategies.
Notably, Palantir witnessed a 32% year-over-year rise in its commercial business and an 11% increase in government revenue, accompanied by a 35% year-over-year growth in customer count. The company reported total revenue of $608 million for the quarter and expects revenue in the range of $612 to $616 billion for the current quarter.
The success of AIP with clients in the fourth quarter underscores its potential to generate significant revenue in the years ahead, while also indicating strong profitability prospects in subsequent quarters. Despite trading at $24 today, Palantir’s stock appears undervalued and presents a compelling opportunity for investors, potentially doubling their investment.
Following the AIPCon event, Wedbush analysts raised Palantir’s price target from $30 to $35, reaffirming an Outperform rating. This positive sentiment from analysts, coupled with Palantir’s steady growth trajectory and expanding presence in both government and commercial sectors, reinforces its position as a strong buy in the market. With a year-to-date increase of 48%, Palantir has demonstrated its resilience and potential for further growth, making it a safe and promising investment option for investors.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is widely recognized as one of the premier e-commerce companies globally, but its AI capabilities often go overlooked by investors. However, Amazon’s robust presence across various industries, coupled with its strong performance in the cloud computing segment through Amazon Web Services (AWS), positions it as a significant player in the AI space.
AWS continues to be a reliable revenue generator for Amazon, with a notable 13% year-over-year increase in revenue reported in the fourth quarter. With a substantial market share, AWS contributed $24.2 billion in revenue for the quarter and $91 billion for the year, underscoring its strength and reliability as a business segment.
Amazon’s utilization of AI technology across its platforms, including AWS, has played a crucial role in enhancing its cloud infrastructure and services. Despite trading at $175 today, Amazon’s stock appears undervalued and offers considerable growth potential. With year-to-date gains of 16% and a remarkable 89% increase over the past year, Amazon’s stock still trades below that of other high-performing companies like AMD.
With its attractive valuation and status as a Wall Street favorite, Amazon presents an enticing long-term investment opportunity. Whether viewed as an e-commerce or an AI stock, Amazon’s diverse business model and continued innovation make it a compelling addition to any investment portfolio. Analysts overwhelmingly favor Amazon, with the majority of ratings being Buy, indicating strong confidence in its future performance.
In summary, Amazon’s multifaceted business operations, coupled with its significant presence in the AI sector through AWS, position it for continued growth and success in the coming months and beyond.