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• NVIDIA stock with massive price jump in 2023 due to AI hype • Microsoft, AMD and Palantir recommended as AI beneficiaries • Long-term upward potential also given The year 2023 was dominated by the trend topic of artificial intelligence (AI). The reason for the rapid rise in the AI hype was in particular the widespread use of the text robot ChatGPT from the Microsoft subsidiary OpenAI, which made the topic much more tangible for a broad mass of people. Against this background, numerous companies jumped on the AI bandwagon and reported on the (planned) use of the innovative technology in their own services or products.
The US chip designer NVIDIA emerged as the biggest beneficiary of the AI boom in 2023. As artificial intelligence becomes more widespread in various products, the demands on the underlying technical elements also increase. NVIDIA offers such powerful components and, with its great expertise, has become the market leader in the AI chip segment.
This can also be seen in NVIDIA’s stock performance. The share increased its value on the NASDAQ tech stock exchange by a whopping 238.87 percent in 2023 and ended last year at a price of just under $500. Even though 92.45 percent of the 53 analysts surveyed by FactSet recommend NVIDIA shares as a buy and the average price target of $674.54 is well above the share’s last closing price, many investors are still wondering whether It is still worth investing in NVIDIA shares at this point and whether the big price jump has not been missed.
But in addition to NVIDIA, there are of course many other titles that can benefit from the current hype surrounding artificial intelligence. Especially if you have a longer-term investment horizon. Ultimately, it will probably take a while before AI technology is fully integrated into everyday life, although there is of course still the question of to what extent this is even desirable in the future and where regulation will set limits.
So if you want to invest in the AI boom but don’t have that much money left over for NVIDIA shares, the three Motley Fool authors Jake Lerch, Will Healy and Justin Pope have identified three other promising companies in the segment which are likely to be worth investing in in the long term.
Microsoft shares driven by OpenAI stake
The first rather obvious and also rather higher priced title is the tech giant Microsoft. The group secured a stake in the AI expert OpenAI in 2019, which was expanded in 2021 and 2023. The AI wave also gave Microsoft a strong boost last year and the momentum has not waned this year either. On January 11, 2024, Microsoft even managed, at least temporarily, to replace Apple as the most valuable company in the world (according to market capitalization). The last time founder Bill Gates’ company was worth more than Apple was in November 2021.
But how exactly does the hardware and software manufacturer monetize the AI trend? In 2023, the company launched Microsoft Copilot, an AI assistant that is used in Microsoft 365 applications, Windows 11 and the Bing search engine. A “Pro” version of the assistant was recently announced, the use of which will cost 22 euros per user per month as a subscription. The accompanying website specifically states: “You get priority access to GPT-4 and GPT-4 Turbo during peak load times and benefit from accelerated performance to create solutions, content and AI images even faster.”
Microsoft has wasted no time and has now integrated the well-known GPT software into its own product range. The Motley Fool writer Lerch concludes: “This is another example of how the company is at the forefront of the AI revolution and why Microsoft is an AI stock to hold forever.”
AMD shares are not beaten when it comes to AI chips
Although NVIDIA is considered the market leader in the market for graphics processors, the demand for which is skyrocketing due to the growing demand for AI applications, the US chip manufacturer Advanced Micro Devices, AMD for short, is also already working on competing products. AMD comes with a significantly more favorable valuation and is recommended to buy by 72 percent of the 46 analysts surveyed on FactSet.
AMD is likely to benefit from increasing demand for AI chips, as experts like the consulting firm Gartner are convinced that the semiconductor industry is expected to recover in 2024 due to the AI boom. Global chip sales are expected to increase by 17 percent to $624 billion in 2024, analyst Alan Priestley told Reuters.
AMD’s positive outlook is also thanks to CEO Lisa Su, who became CEO in 2013 and is increasing the company’s focus on CPUs and GPUs – both technologies needed in the application of artificial intelligence, argues The Motley Fool. Author Will Healy. According to Healy, AMD will have managed to overtake its long-standing rival Intel in terms of CPU market share as early as 2023. But even when it comes to AI chips, the tech company is not prepared to let top dog NVIDIA take the lead without a fight. Instead, AMD has created a competing product with the AMD Instinct MI300 Series Accelerators that combines CPU and GPU in one device.
AMD can also look back on an attractive growth story. As Lerch writes in another article, the company generated sales of $22.1 billion in the last twelve months. Just three years earlier, sales were only $11.4 billion.
Palantir stock is making itself indispensable to customers
Another AI profiteer that will increasingly come into the public eye in 2023 is the software company Palantir. Last but not least, the US company impressed with its quarterly presentation for the third quarter of 2023, which recorded a huge jump in profits that also exceeded preliminary estimates. Investors reacted euphorically and ultimately sent Palantir shares up 20.5 percent in response to the numbers.
According to its own information, Palantir offers data management and analysis software to customers in the private and public sectors. The company also uses artificial intelligence and machine learning to process and organize the huge amounts of data, which often come from many different sources. The use cases for Palantir software are diverse, from monitoring to optimizing supply chains, as The Motley Fool’s Justin Pope summarizes. The company has now also launched its own AI platform, which is intended to help customers integrate the technology into their organizations.
A sticking point in Palantir’s business is that the company’s software analyzes the needs of customers and is then tailored to them. It is then integrated into the user’s processes in order to organize the data streams and ultimately make work processes more efficient and well-rounded. In this way, the Palantir software becomes indispensable for the user, especially over a longer period of time, which provides Palantir with recurring income. Numerous such impact studies from well-known customers can be viewed on the Palantir website. These include, for example, the British health system NHS, which Palantir helped with the COVID-19 vaccination program during the corona pandemic, and the United Nations World Food Program.
According to Pope, what also speaks in favor of investing in Palantir in the long term is the fact that the US government is one of the software company’s customers and therefore represents a reliable source of recurring income. The US government is now responsible for more than half of Palantir’s revenue, although spending has increased over the years. In addition, it seems likely that it will continue to be of great importance for companies to be able to extract the greatest possible amount of information from their data.
Now it only remains to be seen whether these three AI stocks can live up to the high expectations.
Editorial team finanzen.ch