Data from Grand View Research shows global cryptocurrency revenue hit $5 billion last year and is projected to expand at a compound annual growth rate (CAGR) of 12% through 2030. While that growth is not insignificant, it pales in comparison to the artificial intelligence (AI) market's CAGR of 37% for the rest of the decade and value of $137 billion.
Data by YCharts.
Excitement over cryptocurrency faltered in recent years as volatility caused pullback from investors. The chart above compares the two-year growth between the two most prominent cryptocurrencies and three companies active in AI. While not all of the tech giants have delivered growth, they have performed significantly better than Bitcoin and Ethereum.
Cryptocurrencies have developed a reputation for inconsistency. However, it's just the opposite with tech stocks. The tech market has a reputation for rewarding innovative companies with consistent gains over the long term, with that unlikely to change alongside a recent boom in AI.
So, here are three AI stocks with more potential than any cryptocurrency.
1. Alphabet
Shares in Alphabet (GOOG +0.20%) (GOOGL +0.20%) have soared 50% year to date, rallying investors with promising growth in its digital advertising business and increasing potential in AI.
The company faced challenges last year as macroeconomic headwinds curbed ad spending. However, cost-cutting measures have paid off and illustrated Alphabet's massive growth potential over the long term.
In the third quarter of 2023, the company posted revenue growth of 11% year over year, beating analysts' expectations by $980 million. Meanwhile, Google Search and YouTube ad revenue jumped 11% and 12%, respectively.
NASDAQ: GOOGL
Key Data Points
Potent brands such as Google, Android, and YouTube have made Alphabet an advertising powerhouse, attracting billions of users daily. However, these platforms also strengthen the company's AI prospects. Alphabet will launch its highly anticipated large language model Gemini next year, which is expected to be competitive with OpenAI's GPT-4.
Gemini and Alphabet's extensive user base across its different platforms could prove a lucrative combination, presenting countless opportunities to monetize its AI offerings.
Data by YCharts.
In addition to a solid outlook in AI, Alphabet's stock could be the biggest bargain in the industry. The table above shows Alphabet's price-to-earnings ratio (P/E) and price-to-free cash flow are the lowest among some of the biggest names in AI, suggesting shares in the Google company offer the most value.
Alphabet's low stock price makes it far more reliable than any cryptocurrency, with its prospects in AI potentially offering investors more growth over the long term.
2. Nvidia
All eyes have been on Nvidia (NVDA 0.48%) this year as its chips have become the go-to for developers across the AI market. The company's dominance in graphics processing units (GPUs) gave it a leg up on its competitors, allowing it to secure an estimated 80% to 95% market share in AI chips.
Soaring demand for AI GPUs has seen Nvidia's revenue skyrocket. In Q3 2024 (ended October 2023), the company reported revenue growth of 206% year over year, with operating income up more than 1,600%. The meteoric growth was primarily thanks to a 279% rise in data center revenue, which benefited from increased chip sales.
Data by YCharts.
Nvidia might not have a P/E or price-to-free cash flow that screams "bargain," but both metrics are at one of their lowest points in the last six months. The chart above illustrates how these metrics have significantly declined for Nvidia, representing a massive increase in value for its stock and making it the cheapest it has been in months.
As a leading chipmaker in AI, Nvidia has much to gain from the sector's CAGR of 37%. Its chips are crucial to the development of the industry, with its stock a better bet than any cryptocurrency.
3. Apple
Apple (AAPL +3.26%) has had a particularly challenging year as spikes in inflation caused consumers to pull back. The company posted a revenue dip of 3% year over year in its fiscal 2023 after sales declined across its four product segments.
However, Apple remains the biggest name in consumer tech, with leading market shares in smartphones, tablets, headphones, and smartwatches. The company might not be as far in its AI journey as companies like Nvidia and Microsoft, but the popularity of its devices and services could make it a sleeping giant in the sector.
NASDAQ: AAPL
Key Data Points
In 2023, Apple's research and development spending increased by nearly $4 billion, with much of that going to generative AI development. The tech giant has reportedly built its own large language model and a chatbot, which developers call Apple GPT. Apple has used its research to introduce several AI features across its product lineup this year but could easily monetize its offerings down the line.
With $99 billion in free cash flow and $30 billion in cash and equivalents, the company has the funds to overcome market challenges and keep investing in its business.
Apple's P/E of 31 and price-to-free cash flow of 30 make its stock more expensive than Alphabet's but still cheaper than many other AI companies. Meanwhile, its shares have outperformed Bitcoin and Ethereum over the last two years. And with that, I would bet on Apple any day before I'd bet on a cryptocurrency.
