Artificial intelligence (AI) is revolutionizing multiple industries and has the potential to significantly contribute to the global economy in the coming years. As the AI market continues to expand, investors are looking for opportunities to invest in companies that are poised to capitalize on this growing trend.
According to a forecast from Bloomberg Intelligence, the generative AI market is projected to generate a staggering $1.3 trillion in revenue by 2032, accounting for 12% of all tech spending in that year. This represents a massive jump from the current estimate of $137 billion in generative AI spending. With such promising growth prospects, now is an opportune time for investors to consider buying and holding shares of companies that are well-positioned in the AI market.
Two companies that are already taking advantage of the AI opportunity are Nvidia (NASDAQ: NVDA) and Palantir Technologies (NYSE: PLTR). Nvidia, known for its graphics processing units (GPUs), plays a critical role in training and powering large language models (LLMs). Palantir, on the other hand, helps customers integrate AI into their operations and improve productivity with its software platform.
Why should investors consider these two AI stocks for long-term investment?
1. Nvidia: The demand for AI chips is expected to skyrocket in the next decade. Allied Market Research forecasts that the AI chip market could generate annual revenue of $384 billion by 2032, compared to just $15 billion in 2022. Nvidia currently holds about a 90% market share in AI chips, positioning the company to capitalize on this growing demand. The company has already demonstrated impressive growth, and analysts expect its revenue to increase 119% to $59 billion in fiscal 2024. With a forward earnings multiple of 35, Nvidia trades at a discount to its five-year average, making it an attractive investment option. Additionally, Nvidia is actively updating its product roadmap and exploring the custom AI chip market, which could further expand its revenue opportunities.
2. Palantir Technologies: While Nvidia focuses on the hardware side of AI, Palantir offers investors exposure to the software aspect. Market research provider Precedence Research projects that the AI software market could generate $1 trillion in revenue by 2032, necessitating a compound annual growth rate of nearly 23% over the next decade. Palantir, ranked as the top AI software platform company by IDC in 2021, is well-positioned to benefit from this growth. The company’s latest financial results indicate that its AI software platform is gaining traction, with its commercial business growing by 32% in Q4 2023. Palantir has also seen a significant increase in the adoption of its Artificial Intelligence Platform (AIP), resulting in a growing number of commercial customers and multi-million dollar deals. Analysts forecast an 85% compound annual growth rate for Palantir’s earnings over the next five years, highlighting its potential for sustained impressive growth.
Investing in Nvidia and Palantir Technologies offers exposure to two different aspects of the AI market. Nvidia’s dominance in the AI chip market and its aggressive product roadmap make it an attractive investment. Palantir’s strong foothold in the AI software platform market and its potential for substantial revenue growth position it as another compelling investment opportunity.
It is important for investors to conduct thorough research and consider their own investment goals and risk tolerance before making any investment decisions. However, given the bright prospects of the AI market, both Nvidia and Palantir could be solid long-term investments with the potential for healthy gains over the next decade.
