Finding stocks that can set you up for life is easier than you think. Regardless of how expensive a stock might look, if the underlying business is experiencing robust demand for its products and still has a huge opportunity in front of it, it's a good bet the stock is going to deliver outstanding returns.
With that in mind, let's look at two magnificent growth stocks that could make you a fortune over the long term that you can then pass down to the next generation.
1. Nvidia
Shares of Nvidia (NVDA +1.95%) have rocketed higher over the last year on the back of strong growth in its data center business. The company is a key supplier of chips used by cloud service providers and researchers to develop artificial intelligence (AI). The company's continued innovation in the AI chip market should continue to make Nvidia a solid long-term investment.
NASDAQ: NVDA
Key Data Points
Chip demand can be cyclical, and this has hurt Nvidia a few times in the last decade -- most recently in 2022 when its share price was cut in half. But through the ups and downs, Nvidia continues to experience growing demand for its technology. Co-founder and CEO Jensen Huang understands the industry inside and out and has steered the company to adapt its GPU technology -- originally developed for video games -- for profitable new markets, creating tremendous wealth for shareholders.
The market for AI chips is so robust now that Nvidia's own customers -- the big three cloud companies Amazon Web Services, Microsoft, and Alphabet's Google -- are investing in their own AI chips. However, these chips are no match for the general-purpose processing power that Nvidia's advanced GPUs are designed to handle. This is why nearly half of Nvidia's data center revenue was from the leading cloud companies last quarter.
Nvidia is well aware that its lucrative position as the dominant AI chip supplier will attract competition. To counter, it is speeding up the frequency with which it releases new chips. For example, customers are currently transitioning from Nvidia's H100 GPU to the new H200, and there's already another major product launch coming later this year. Management said on last quarter's earnings call that demand for its upcoming Blackwell GPU platform is already pacing ahead of supply.
Some Wall Street analysts are anticipating demand for Blackwell to drive revenue results ahead of the consensus estimates in the near term, and that's on top of already high growth expectations. The consensus estimate calls for Nvidia's earnings to increase at an annualized rate of 33% over the next several years. That is less than the triple-digit earnings growth it has been reporting over the past year, but it should be more than enough for Nvidia stock to deliver wealth-building returns in the years to come.
2. Palantir Technologies
Shares of Palantir Technologies (PLTR +0.10%) are up 63% over the last year due to growing demand for its enterprise AI software platform. A growing number of U.S. companies are turning to Palantir to use AI models with their data, which could be the start of a long stretch of high growth.
NASDAQ: PLTR
Key Data Points
Palantir is used for a variety of use cases, including military operations, supply chain analysis, and investigating financial crimes. The U.S. government made up over half the company's revenue last quarter, which validates the capabilities of Palantir's technology, but government spending can also be a two-edged sword considering the potential for budget caps.
However, Palantir is starting to see momentum in diversifying away from the government. U.S. commercial revenue grew 40% year over year last quarter to $150 million and accounted for nearly a quarter of Palantir's business. Management expects U.S. commercial revenue to be up 45% in 2024 over 2023 and expects this segment to remain a significant growth driver over the long term.
Another positive indicator is that management is seeing a significant shortening in deal cycles. Some customers are signing deals just days after trying the product. To capitalize on the growing demand, management wants to broaden the market for its offering outside the U.S., in addition to state and local governments, researchers, and academic institutions.
It's clear Palantir has only just begun to tap its potential. The company reported a record net profit of $106 million in Q1 on $634 million of revenue, and Wall Street analysts currently expect the company to grow earnings at an annualized rate of 22% over the next several years.
As demand for AI software takes off over the next decade, Palantir shares should be a very rewarding holding for patient investors.
