Without a doubt, many artificial intelligence (AI) investors are kicking themselves for missing out on Nvidia's big gains. With the stock up 280% in the last year and over 1,800% in five years, it is one of the major beneficiaries in the AI space.
Nonetheless, Nvidia is not the only AI stock in the chip industry, and AI is so much more than semiconductors. With the breadth of AI investing options, the industry should continue to bring opportunity. Three Fool.com contributors have ideas on where AI investors can look next: Amazon (AMZN +3.97%), The Trade Desk (TTD +1.12%), and Tesla (TSLA -1.71%).
Amazon has many ways to win when it comes to AI
Jake Lerch (Amazon): There are hotter AI stocks out there, but Amazon remains one worth watching, and buying. Here's why:
NASDAQ: AMZN
Key Data Points
First, the company is the largest cloud services provider. Amazon Web Services (AWS) is estimated to have about 31% of the worldwide cloud services market. That's important because new generative AI tools and applications often utilize cloud services like AWS. As the AI revolution rolls on, Amazon is poised to profit thanks to its lead in the cloud infrastructure market.
Second, Amazon's massive e-commerce business dovetails nicely with many different AI applications. For example, the company has already introduced Rufus, a new AI-powered shopping assistant designed to help people by answering questions, making pricing comparisons, and generating product recommendations.
In addition, Amazon is using AI in many other areas of its operations, such as:
- Streamlining prescription drug delivery time and cost through Amazon Pharmacy.
- Lowering the company's environmental impact through AI-generated recommendations to reduce packaging use.
- Improving shopping recommendations via Amazon Fashion.
- Updating Alexa-enabled devices to enhance conversation and dialogue between users and Alexa.
On top of all of that, Amazon remains one of the world's best-run companies. Shares are up 73% over the last 12 months, while revenue growth has bounced back to a solid 13%.
In short, Amazon remains a smart choice for AI-focused investors.
The Trade Desk benefits from AI and digital advertising tailwinds
Justin Pope (The Trade Desk): Artificial intelligence is a hot topic today, but it began disrupting the advertising business several years back when The Trade Desk was in its infancy. Brands and other companies can buy advertising on The Trade Desk's platform, which uses AI and user data to match ads to potential customers. This is far more effective than traditional advertising, which would broadcast to broad audiences on television, radio, or in print.
NASDAQ: TTD
Key Data Points
The Trade Desk has thrived, growing profitably since its 2016 initial public offering. The reason? The Trade Desk sits in an ideal spot in the industry. Advertising dollars are shifting to digital mediums and while competitors like Meta Platforms and Alphabet operate with limited transparency, The Trade Desk offers more information to its clients, and that is winning over customers.
TTD Revenue (TTM) data by YCharts
Total worldwide ad spending in 2023 was an estimated $830 billion, which means that The Trade Desk's $9.6 billion in gross ad spending translates to just over 1% of market share. That leaves a tremendous growth runway for this company operating outside the closed ecosystems of big technology companies.
The Trade Desk's long-term growth opportunities and profitable business model make the stock a no-brainer AI investment you can hold for the long term.
Tesla likely has some AI-driven surprises under the hood
Will Healy (Tesla): Investors may tend to look at Tesla as an automaker, but it's actually a diverse business also developing battery technology, solar energy solutions, and AI breakthroughs.
Instead of relying on chip companies like Nvidia for its technology, Tesla has developed its own semiconductor and robotics solutions. Among these are the Dojo chip, designed to power neural networks, and the FSD (full self-driving) chip, which would power fully autonomous vehicles.
CEO Elon Musk wants to launch a robotaxi business based on Tesla technology. With robotaxis, analysts at Cathie Wood's Ark Invest believe Tesla's revenue could reach a minimum of $600 billion by 2027, over seven times the 2023 level of $82 billion.
Wood believes that growth would take Tesla's stock price to $2,000 per share, a more than tenfold gain from today's levels.
While that may seem outrageous, and Musk has a track record of being overly ambitious in his promises, Wood predicted a split-adjusted price target of $267 per Tesla share in 2018. Within less than three years, Wood's prediction came to pass, so she could be right again.
NASDAQ: TSLA
Key Data Points
Tesla's stock price has pulled back as Tesla has cut prices on electric vehicles (EVs) to boost sales and stay competitive with emerging rivals. That pessimism has taken its P/E ratio down to 45, a low valuation rarely seen in the stock's history.
Although profits are expected to fall 1% this year, analysts predict a 36% increase in 2025. These earnings forecasts give some validation to Wood's thesis. Some of that optimism may be related to the release of the lower-cost, compact Model 2 EV expected for 2025, and investors are also likely to jump in as the company improves its AI and self-driving capabilities.
