Artificial intelligence (AI) is a transformative technology that could reshape the way companies do business. According to some estimates, the AI industry could be worth $1.8 trillion annually by 2030, but that doesn't count the enormous value organizations will unlock by using it -- that number is almost impossible to quantify.
AI is already being applied across a multitude of industries including financial services, insurance, energy, and in the tech sector. AI capabilities will only grow more advanced over time, and some stocks could experience soaring growth because of it. Wall Street is betting these two AI stocks could deliver returns of between 101% and 339%, potentially supercharging your portfolio.
1. Nvidia: Implied upside of 101%
Nvidia (NVDA 0.35%) is best known as a producer of advanced computer chips used in applications like gaming, data centers, and graphics rendering for industrial purposes. But the company is often referred to as a pioneer of artificial intelligence technology, building a portfolio of the world's first AI supercomputers.
Data centers contain mountains of information collected from end-users in different industries. Nvidia is turning them into a hive of AI learning for its customers, gaining valuable insights from what can be a chaotic mess of data uninterpretable by regular humans without weeks, months, or even years of manual analysis.
One of the company's main goals is to accelerate the advancement of AI with its graphics chips, and its V100 data center graphics processing unit (GPU) is proving as powerful as 100 central processing units (CPUs). It translates to the ability to train AI up to 32 times faster, whether companies are developing self-driving vehicle technology or attempting to cure diseases.
Nvidia wants to shed its reputation as a hardware company and instead be known as a platform computing company. Its two smallest segments -- professional visualization and automotive and robotics -- are proof of a bright future in software technology, addressing opportunities that could be worth trillions of dollars in the decade to come.
Amid the broader tech sector sell-off, Nvidia stock has declined by 42%. Wall Street investment firm Needham thinks it could more than double from here to $400 per share in the next 12 to 18 months. Since Nvidia generated $26.9 billion in revenue during 2021 and was highly profitable with $4.44 in earnings per share, it's a lower-risk bet than some of its peers in the technology industry, especially considering analysts expect growth to continue in 2022 (and beyond).
2. Lemonade: Implied upside of 339%
Dealing with the insurance industry is notoriously painful for consumers, particularly when it comes to making claims. It often involves multiple phone calls with the insurer, and weeks or months of waiting before funds are finally paid. Lemonade (LMND 1.19%) is using artificial intelligence to overhaul the customer experience, and its use of data could result in a more profitable company compared to the rest of the industry in the long run.
Lemonade's AI-powered online bot, Maya, interacts with customers, eliminating the need for human input the majority of the time. It can write a quote in 90 seconds, and automatically assess and pay claims in under three minutes. The results speak for themselves: Over 1.4 million people have joined Lemonade, and most of them have left much larger insurers to do so.
The company operates in five insurance categories: renters, homeowners, pet, life, and auto, which is the most recent addition. The U.S. auto insurance market could be worth $316 billion in 2022, from a pool of over 198 million policyholders. That's a rich hunting ground for Lemonade, and its acquisition of AI-powered insurance broker Metromile adds a decade's worth of driver data to Lemonade's arsenal to accelerate its market penetration.
Lemonade has suffered with net losses as it attempts to crack new insurance segments and scale its business. In 2021, the company was in the red to the tune of $246 million on just $128 million of revenue, and it's part of the reason Lemonade stock is down 86% from its all-time high. But 2022 should bring an improvement with revenue expected to top $216 million for the year, although losses will likely persist.
Wall Street investment firm JMP Securities thinks Lemonade will come out the other side with a much stronger business. It's betting Lemonade stock could soar to $95 in the next 12 to 18 months, a whopping 339% higher than where it trades today.