Artificial intelligence (AI) is changing the world. It goes far beyond OpenAI's ChatGPT and other chatbots. AI will personalize products and ads to customers. It will enable humans to work smarter and faster and may even perform certain tasks so people don't have to.
According to a PricewaterhouseCoopers study, AI could contribute almost $16 trillion to the global economy by 2030. That means the investment opportunity extends beyond Nvidia (NVDA +4.26%) and other big technology companies.
Three Motley Fool contributors have identified Snowflake (SNOW 4.55%), Palantir Technologies (PLTR +0.96%), and Advanced Micro Devices (AMD +13.32%) as winners with the potential to grow to become trillion-dollar stocks someday. Here's what you need to know about these three AI stocks with trillion-dollar potential.
Snowflake has partnered with Nvidia on generative AI
Justin Pope (Snowflake): Nvidia has become the household name in artificial intelligence (AI), but don't overlook Snowflake. The data cloud company partnered with Nvidia last summer on generative AI. Snowflake is a cloud-based data platform on which customers can store, organize, share, and query their data. Snowflake's tie-up with Nvidia is a big deal because the latter is the industry AI chip leader, which should funnel business to Snowflake as corporations integrate AI into their business.
Today, Snowflake has a $75 billion market cap. The business is doing $2.7 billion in annual revenue. Snowflake is scooping up business from top corporations, including 691 of the Forbes Global 2,000. Thanks to a usage-based billing model, its 131% net revenue retention signals that customers spend more on the platform over time.
NYSE: SNOW
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The long-term growth opportunity is tremendous. The world is increasingly digital and creating more and more data over time. That feeds into Snowflake's growth and doesn't figure to change. AI models in the future will probably train on more data as AI gets more intelligent and more capable.
Snowflake's CEO recently retired, but the former CEO wasn't a founder. Investors should monitor the new CEO's performance but not let this recent development scare them away from the stock. The company is established and spreading its roots deep into the corporate sector. Data could become one of the great investing trends of the future, so Snowflake is as good a bet as any to become one of the next great megacap tech companies.
Palantir's market cap could eventually crack the $1 trillion mark
Jake Lerch (Palantir Technologies): With a current market cap of around $54 billion, Palantir has a long way to go before cracking the $1 trillion mark. I wouldn't expect it to do so in the next decade. However, that doesn't mean Palantir won't eventually scale the $1 trillion mountain -- or that it's a bad stock to own.
NASDAQ: PLTR
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Palantir is a software company specializing in AI-powered big data analytics. Although the company first found a market for its services with government intelligence agencies and the defense industry -- partnerships it still maintains today -- Palantir's future depends on its ability to win over commercial clients.
And the company appears to be making significant headway on that front. In its latest quarter (the three months ended on Dec. 31, 2023), Palantir's commercial customer count grew to 497. Moreover, revenue derived from U.S. commercial clients grew 70% from a year earlier to $131 million. Nevertheless, government revenue still outpaces commercial revenue:
| Segment | Fiscal Year 2023 | Growth Rate (YOY) |
|---|---|---|
| Government revenue | $1.2 billion | 14% |
| Commercial revenue | $1.0 billion | 20% |
Data source: Palantir Technologies. YOY = Year over year.
However, as more and more businesses sign up with Palantir, that's likely to change. As Palantir CEO Alex Karp has put it, "Obviously, our performance in U.S. commercial is extraordinary, some would say bombastic."
In any event, the AI revolution shows no signs of slowing down, let alone stopping. And as more organizations look to AI for analysis and cost savings, Palantir stands ready to sign them up as new customers. As that happens, expect Palantir's market cap to climb. Perhaps -- eventually -- all the way to $1 trillion.
When it comes to AI chips, Nvidia is not the only game in town
Will Healy (Advanced Micro Devices): When it comes to the AI chip market, Nvidia is dominant, claiming at least 80% of the market, according to analyst estimates. The insatiable demand for this type of semiconductor has taken Nvidia to an approximately $2 trillion market cap. It has also led customers to look elsewhere for such chips, and the company best positioned for second place is likely to be Advanced Micro Devices.
As a leader in CPUs, GPUs, and data centers, the company is well suited for this role, and it recently leveraged this expertise by releasing its AMD Instinct MI300 Series Accelerators to meet this demand. The MI300A combines the CPU and GPU in one unit, while its MI300X chip is the most advanced generative AI accelerator, according to the company.
Moreover, Allied Market Research forecasts the AI chip market will reach $384 billion by 2032, a compound annual growth rate of 38%! Thus, AI chipmakers should benefit across the board.
NASDAQ: AMD
Key Data Points
Currently, the data center and AI segment makes up around $6.5 billion of AMD's revenue, about 29%. Additionally, AMD is prominent in the client, gaming, and embedded segments, and combined, they made up over $16 billion of AMD's nearly $23 billion in revenue in 2023. Hence, these segments will contribute to the company's growth, though probably at a slower pace than AI.
As conditions stand now, it has reached a market cap of around $300 billion, meaning the stock has to rise by about 3.3 times to reach a $1 trillion market cap. This looks like an attainable goal. Analysts project 36% higher profits in 2024, with an additional 51% increase next year. Also, its forward P/E ratio is about 48.
Such a valuation is high, but it's far from bubble levels, indicating AMD could achieve a $1 trillion market cap organically. If AMD can meet part of this massive demand for AI chips, the semiconductor stock's market cap could reach the $1 trillion level sooner rather than later.
