These companies are on a growth trajectory that could deliver big benefits over the next few years.
If you follow technology or stock market news at all, you may be tired of reading about artificial intelligence (AI). Since the launch of OpenAI's ChatGPT in early 2023, the technology has been featured in countless headlines. This advanced chatbot has reignited interest in AI, highlighting its potential to improve many industries and motivating companies across the technology industry to pivot their operations to emerging markets.
But whether you're suffering from AI fatigue or not, it's still hard to deny the potentially lucrative opportunities that investing in AI brings. Despite massive investments over the past year, the market is still in its infancy. Generative technologies are being applied to many industries, including healthcare, education, consumer technology, cloud computing, and productivity software. Perhaps the best uses for AI have yet to be thought of.
As a result, AI may still have a lot to offer businesses and new investors, so here are two artificial intelligence stocks that could make you rich.
1. Advanced Micro Devices
Despite years of success in the chip market, the AI boom appears to have caught Advanced Micro Devices (AMD, 0.90%) off guard. Last year, a surge in demand for AI models led to a similar increase in demand for graphics processing units (GPUs), the high-performance chips that enable AI.
AMD is no stranger to the GPU industry, having held the second largest market share (behind Nvidia) in desktop GPUs for many years, but Nvidia was able to get ahead by quickly supplying GPUs to AI developers in 2023, while AMD was slow to catch up.
AMD has long focused on central processing units (CPUs) and has had record-breaking results in that area. AMD has steadily taken CPU market share from Intel since 2017, growing from 20% to 34%.
Meanwhile, AMD's business has proven to be much more efficient than Intel's: Intel boasts a 76% market share in datacenter CPUs and is on track to generate $3 billion in revenue in the second quarter of 2024, while AMD's server CPU business generated $2.8 billion in revenue over the same period, but only a 24% market share.
And now AMD is making promising progress with AI GPUs: The company released new GPUs in 2024 to better compete with Nvidia and welcomed Microsoft's Azure, Meta Platforms, and Oracle as customers. The expansion of AI is already paying off, with AMD's datacenter division seeing revenue grow 115% in the second quarter of 2024, a record for the chipmaker.
AMD's stock price has risen over 376% over the past five years, and AI could help it rise even more over the next five. The company has a high forward price-to-earnings (P/E) ratio of 44, but that number is below the metric's trailing 12-month average. Given the huge potential in AI, AMD is worth considering now.
2. Apple
Apple (AAPL -0.05% ) has taken a more subdued approach to AI than many other companies, as it finally prepares to launch its most significant AI product to date while companies like Microsoft and Alphabet enter the space full force in 2023. But its strong brand and vast cash reserves could soon enable the company to assume a powerful role in the industry.
This fall, the tech giant will unveil Apple Intelligence, the name for a series of AI updates to its product lineup. The software overhaul will add language, imaging and speech generation capabilities to iPhones, Macs and iPads. Apple Intelligence follows the September launch of the iPhone 16, the company's first AI-enabled smartphone.
Apple has made Apple Intelligence available only on its newer, more powerful devices, so iPhone users will need an iPhone 15 Pro or later to access the new AI features, while Macs and iPads will need the M1 to M4 chips.
Apple has seen repeated declines in product segments over the past year amid generally weak consumer purchasing power and declining market share in key markets like China, but its fiscal 2024 third-quarter earnings results, which ended June 29, suggested that new AI-focused product releases could boost sales.
Revenue for the quarter increased 5% year over year, boosted by a 24% increase in iPad sales due to the launch of new iPad Air and Pro models in May, the first new iPad launches since 2022. As a result, other product refreshes will likely drive further sales growth in the coming months, especially driven by AI.
Rivals like Microsoft, Amazon, and Alphabet have primarily focused on the business side of AI, but Apple's priority of putting AI in the hands of consumers could go a long way in securing a strong position in the industry.
Apple's forward P/E is high at 34. But with $104 billion in free cash flow and a strong brand, Apple stock remains an attractive AI investment that could generate huge wealth.
Randi Zuckerberg, former director of market development and public relations at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Oracle. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
