Sure, Nvidia is on fire. Its stock is up an eye-popping 1,980% over the last 5 years -- meaning a $10,000 investment in 2019 would be worth a staggering $208,000 today.
But as the saying goes, past performance is no guarantee of future results. So let's consider some alternatives to the king of AI stocks. Here are three names that I think AI-focused investors would be wise to consider.
Image source: Getty Images.
Advanced Micro Devices
First up is Advanced Micro Devices (AMD 2.37%). Granted, AMD may not have captured the same level of AI buzz as its competitor Nvidia, but the company is similarly benefiting from the AI revolution. Indeed, shares of AMD have soared 179% since January 2023.
Like Nvidia, AMD designs advanced semiconductors that can be used to train large language models. Its latest AI-focused offering is the MI300X chip, unveiled in December 2023. So far, Microsoft, OpenAI, and Meta Platforms have all expressed interest in using the chip, which offers an alternative to the current AI workhouse, Nvidia's H100 chip.
The MI300X could help AMD secure a key foothold in the AI accelerator market, particularly considering its cost. It sells for around $10,000 to $15,000, well below the H100's price of $40,000.
With the first deliveries of the MI300X happening right now, it will take some time to see what the demand for the chip looks like. However, AMD Chief Executive Officer (CEO) Lisa Su has expressed optimism, both for the MI300X and the overall AI market. Back in December she predicted that the market for AI chips would hit $400 billion by 2027, up from around $40 billion in 2023. If her prediction is anywhere near accurate, AMD investors will have lots to smile about in the coming years.
Oracle
Next up is Oracle (ORCL 2.02%), an under-the-radar AI stock if ever there was one.
The company is probably best known for being one of the classic "tech bubble" stocks of the early 2000s. The database software giant's stock skyrocketed during the first wave of internet adoption in the late 1990s before crashing 84% in the bear market of 2001-2003.
Nevertheless, Oracle is now back and riding high thanks to its data center business. In its most recent earnings report (for the three months ending on Feb. 29, 2024), Oracle beat expectations, highlighted by:
- $13.3 billion in total revenue, up 7% year-over-year
- $5.1 billion in cloud revenue, up 25% from a year ago
- $2.4 billion in net income, an increase of 27% from a year earlier.
Moreover, the company raised forward guidance. Indeed, Chief Financial Officer (CFO) Safra Catz sounded a very optimistic note, saying that the company is likely to surpass its goal of $65 billion in annual revenue by 2026. Moreover, Chairman Larry Ellison highlighted that soaring spending from hyperscalers like Microsoft is moving Oracle's needle.
In short, the AI wave is helping Oracle find its mojo once again -- and investors should take note.
Palantir Technologies
Last is Palantir Technologies (PLTR 3.73%), the company at the forefront of AI-driven big data analysis.
Some investors might find Palantir's business model difficult to understand. In a nutshell, Palantir helps organizations run their operations more efficiently. The company does this through multiple AI-powered software platforms that analyze enormous data sets, recognize patterns, and offer solutions.
Financially, it's clear Palantir is racking up wins. Its customer count, revenue, net income, and free cash flow are all growing. Moreover, the company is starting to execute a pivot toward the private sector after getting much of its early-stage revenue from government contracts.
Even now, Palantir generates more revenue from governmental entities ($1.2 billion in 2023) than from commercial customers ($1.0 billion in 2023).
However, that's likely to change. Palantir's commercial revenue is growing at around 20% year over year, while government revenue is growing at 14%. If that trend holds, Palantir's commercial revenue will surpass its government revenue by 2027.
At any rate, investors shouldn't sleep on Palantir. The company's rapid growth means that it could become the next big name in the AI investing space.
