Artificial intelligence (AI) made a huge splash in 2023 and is likely to continue making waves in 2024. After all, industry forecasts estimate the global AI market will grow from roughly $208 billion in 2023 to nearly $300 billion in 2024 and will continue expanding to reach $1.8 trillion by 2030.
When it comes to investing in AI, you want companies where the technology is essential to their businesses. This positions them to prosper from the AI industry's growth over the long haul. This trio of stocks falls into that bucket. Each of these companies represents different aspects involved in the creation of an AI solution.
It starts with Nvidia (NVDA 6.18%), which provides the graphics processing units (GPUs) needed to handle the computing demands of an AI system. Next is Amazon (AMZN 3.43%), as its Amazon Web Services (AWS) division delivers the data centers and other IT infrastructure needed to house and run AI programs. Finally, there's UiPath (PATH 0.26%), which illustrates the kinds of potent AI apps being produced today.
1. AI processing power: Nvidia
Nvidia had a banner 2023, thanks to the popularity of its GPUs used in AI and cloud computing technologies. The company is positioned to repeat its success in 2024.
AI systems require potent processing power, given the complex calculations they must perform. Nvidia's GPUs fit the bill, leading to sales of $18.1 billion in the company's fiscal third quarter, ended Oct. 29. That's a jaw-dropping 206% jump from the prior year's $3.8 billion.
The company expects its fiscal Q4 to deliver $20 billion in sales, a huge leap from 2022's $6.05 billion and making for an impressive start to 2024.
Nvidia's chips are used not only in AI, but also in other hot industries, such as electric vehicles and robotic systems. Moreover, the company formed a partnership with Foxconn to construct data centers specifically tailored to the demands of AI using Nvidia's technology.
In describing these new data centers, Nvidia CEO Jensen Huang said, "A new type of manufacturing has emerged -- the production of intelligence." As its 2023 results show, Nvidia possesses the technology and partnerships to succeed over the long term in this new AI manufacturing era.
2. AI infrastructure: Amazon
Nvidia built the chips that enable AI. Amazon's AWS delivers the computing infrastructure needed to run AI programs.
AWS provides the servers where AI apps, and the mountains of data they require to make decisions, can be housed. Businesses can use AWS tools to implement AI systems, and corporations such as United Airlines are doing just that.
AWS is already the largest cloud computing provider in the world, and it is strengthening its leadership position going into 2024. AWS and Nvidia are partnering to boost AWS data centers with Nvidia's latest AI tech, making Amazon an attractive vendor for businesses interested in implementing AI apps.
And AWS isn't the only area where AI plays a role in Amazon's success. The company has infused AI across a number of its businesses.
For example, Amazon now provides third-party sellers on its site with AI capabilities to help them create product listings. These sellers generated $34.3 billion of Amazon's $143.1 billion in Q3 sales, accounting for more revenue than the $23.1 billion delivered by AWS.
Amazon's Q3 revenue was a 13% increase over the prior year, and the company expects at least 7% year-over-year growth in Q4. As Amazon continues to add AI capabilities, these improvements should help the company continue to grow revenue in 2024.
3. AI applications: UiPath
Now, let's look at UiPath, a company that uses Amazon's AWS. UiPath helps businesses increase automation in their operations by using AI to analyze current workflows, then automating many of those steps.
For instance, UiPath's AI can automatically fill out online forms, streamlining data entry. Several U.S. government agencies, including the Internal Revenue Service, are using UiPath's AI to automate tasks.
As a result, the company's revenue in its fiscal third quarter, ended Oct. 31, grew 24% year over year to $326 million. UiPath's revenue growth has also helped its free cash flow (FCF).
The company's Q3 adjusted FCF reached $43.7 million, a dramatic improvement over the prior year's FCF of negative $24.1 million. And its balance sheet is strong. UiPath had total assets of $2.8 billion, with over $1 billion in cash and equivalents exiting Q3. Total liabilities were $825.8 million.
With strong financials, UiPath has the resources to expand its business, and its revenue growth illustrates the success of its AI offerings.
Nvidia, Amazon, and UiPath are all going into 2024 with excellent financial results. With the growing AI market serving as a tailwind, these companies are poised to continue generating success in 2024.
