When OpenAI's ChatGPT-3 was released to the public in late 2022, it started a firestorm of interest in all things artificial intelligence (AI). Although companies had been developing the technology for years -- Alphabet acquired the pioneering AI start-up DeepMind in 2014 -- ChatGPT and modern generative AI felt like a quantum leap forward.
Since that time, markets have exploded, rewarding companies that bring the technology to market or that supply those who do with critical hardware. While there is plenty of hype, it's more than possible that the technology lives up to it. This could be truly revolutionary stuff, and it's not just the companies who sell AI products that are saying so. PwC -- one of the "big four" accountants -- estimates the technology could add $15.7 trillion to the global economy by 2030.
With all that's happened since late 2022, here are two AI stocks that can deliver.
1. Meta Platforms is still relatively cheap
Of all the major players in big tech, Meta Platforms (META +1.81%), despite a 66% gain this year, is still one of the cheapest stocks (by tech's standards). The only company trading at a lower forward price-to-earnings ratio (P/E) is Alphabet, likely from some combination of antitrust actions and the threat AI competitors pose to its search business, the lifeblood of the company.
While Meta has its own antitrust concerns -- no one in big tech seems safe at the moment -- its stock is still surprisingly cheap given the state of the business. A relatively low valuation is hardly a reason in and of itself to invest in a business, but it doesn't hurt, and Meta is delivering the goods where it counts.
NASDAQ: META
Key Data Points
Maybe Facebook has lost some of its shine, but you'd be surprised at how popular it continues to be. It is by far the most popular social media platform today with a very active user base and it is only one of the company's many platforms. In fact, Meta owns the first, third, fourth, and seventh most popular social media platforms in the world.
According to the company, 3.3 billion people use one or more of its platforms daily and that user base is growing, up 7% last quarter year over year. That kind of audience means Meta's ad business is very profitable; the company netted nearly $20 billion last quarter from ads, up a whopping 47% year over year.
With the release of Meta AI and the company's heavy investment in the space -- it's on track to spend $40 billion in capital expenditures (capex) this year, a significant portion of which is going toward supporting its "ambitious AI research and product development efforts" -- it is in a prime position to continue to grow its user base along with ad revenue.
2. Nvidia is still the king
I'm sure this one didn't surprise you. Nvidia (NVDA +1.67%) is undoubtedly a paragon of the AI boom, seeing its stock rise more than 1,000% from late 2022. Here's the crazy thing: Its P/E is still roughly the same as it was then, meaning its earnings growth has kept pace.
Can the ride continue? It sure seems that way. Just like Meta, the rest of Silicon Valley is also investing heavily in AI -- and a huge portion is directed toward Nvidia. Take Alphabet. The company expects to spend roughly $50 billion this year in capex, up from $31 billion the year before. And judging from what they said on the last round of earnings calls, these big tech behemoths intend to keep the money flowing. AI is their No. 1 priority and Nvidia is the No. 1 supplier of AI hardware.
NASDAQ: NVDA
Key Data Points
While the company's current iteration of its flagship AI chip, Hopper, is still selling like crazy -- Elon Musk just bought 100,000 for his company xAI -- Nvidia is about to begin shipping the new Blackwell iteration. It's already sold out for at least a year.
All this is great news for Nvidia investors. While unforeseen developments can always happen and believing anything is a "sure thing" in the market is a recipe for disaster, all indications are that Nvidia should continue to see solid growth for some time. It is trading at a premium that is high even for tech stocks, but the market has consistently shown it is willing to pay that or more for Nvidia, even before the AI boom took off.
