Nvidia (NVDA +4.39%) has wowed investors over the past few years with its triple-digit earnings growth and explosive share-price performance. And that's helped the company reach $2.26 trillion in market value. The reason behind all of the excitement? Nvidia's graphics processing units (GPUs) have proven their ability to power the most crucial of artificial intelligence (AI) tasks -- such as the training of large language models (LLMs) -- and the company now holds about 80% of the AI chip market.
This chip giant still has plenty of great days ahead, but two other AI stocks could join it in the $2 trillion club and even go on to surpass Nvidia's market value. These players have solid moats protecting their main businesses and have delivered strong earnings over time. Now their focus on AI could launch a whole new era of growth.
While AI offers these players a boost in the coming years, increasing competition in the AI chip market may make it more difficult for Nvidia to grow as quickly as in recent times. Analysts expect annual growth of about 35% from Nvidia over the coming five years -- down from annual growth of more than 50% over the past five years.
My prediction is the following two AI growth stocks may be worth more than the chip giant in five years...
Image source: Getty Images.
1. Amazon
Amazon (AMZN 1.15%) is a leader in the two high-growth businesses of e-commerce and cloud computing, with a solid moat thanks to its brand strength. And these businesses have helped the company generate billions of dollars in earnings annually.
Though Amazon reported an annual loss in 2022 -- the first in nearly a decade as it struggled with rising inflation -- it quickly revamped its cost structure and delivered earnings growth a year later. Its efforts made Amazon more efficient and set the company on the right track for more growth down the road too.
Amazon also should benefit from its investments in AI, particularly through its Amazon Web Services (AWS) business. AWS is the world's leading cloud-computing provider, putting it in the position to win as more and more companies launch AI projects. Everyone's talking about AI these days, but it's important to remember we're at the beginning of this story, so much of the growth is yet to come.
NASDAQ: AMZN
Key Data Points
AWS has prepared by offering customers all of the tools they need for their projects, from a wide range of chips for every budget to a fully managed service offering access to top LLMs.
"We're optimistic that much of this world-changing AI will be built on top of AWS," CEO Andy Jassy wrote in his recent letter to shareholders. AWS, historically Amazon's biggest profit driver, recently reached a $100 billion annual revenue-run rate and reported double-digit growth in sales and operating income in the recent quarter.
Today, Amazon's market value totals $1.94 trillion, but it could easily increase 16% to reach Nvidia's market capitalization -- and even surpass it -- as demand for AI projects gain momentum.
2. Meta Platforms
You may use Meta Platforms (META +0.30%) every day without even thinking about it. Meta is the owner of Facebook, Messenger, Instagram, and WhatsApp. More than 3.2 billion people use at least one of these apps daily. One reason Meta's moat is so strong is users know that if they leave Meta's social media for a rival platform, their contacts may not follow.
Advertisers understand this, so they flock to Meta with their marketing dollars, and this has resulted in billions of dollars in revenue annually for the technology company.
In recent times, Meta has put the focus on AI and has even said that its biggest investment area this year is in this high-growth technology. The company aims to launch AI across its apps, for example, by making an AI assistant available for every sort of use, from leisure to professional. Meta recently got the ball rolling by launching Meta AI, a conversational assistant in several English-speaking markets.
This should translate into revenue growth as users spend more time on Meta's apps, prompting advertisers to keep coming back and even increase their spending.
NASDAQ: META
Key Data Points
Meta hasn't yet monetized its investment in AI, but the positive point here, as I mentioned above regarding Amazon, is that AI growth truly is in the early stages. That means AI could offer Meta a significant growth driver down the road.
Meta today is worth $1.18 trillion, so it would have to gain about 90% to reach Nvidia's market value. That might seem like a lot, but Meta may have what it takes to make the leap. After all, over the past five years, the company's revenue and market value climbed 90% and 100%, respectively. So as the AI investment starts to bear fruit and boost earnings, Meta could replicate that performance -- and surpass Nvidia in the years to come.
