It's hard to watch the value of your investments falter in a short period, but everyone is in the same boat. The good news is that market declines are historically excellent buying opportunities. Markets can fall but they inevitably hit bottom and skyrocket back to new highs over time, providing handsome gains for investors who ride through the volatility.
If you've got $3,000 you don't need for other life priorities like reducing debt, this is a great opportunity to invest in competitively positioned companies at better prices. The technology sector will continue to churn out monster winners over the long term. Spending on artificial intelligence (AI) is expected to reach $1.1 trillion by 2031, according to Statista. Here are two stocks to profit off this trend over the long term.
1. Nvidia
Nvidia (NVDA +1.67%) is enabling the rapid adoption of AI. Its graphics processing units (GPUs) are used in everything from playing video games to powering the largest data centers, where the AI magic happens. It has led the GPU market for many years and continues to dominate, making it one of the best AI stocks to consider holding for the long term.
NASDAQ: NVDA
Key Data Points
CEO Jensen Huang will go down as one of the great business leaders of the 21st century. He started Nvidia over 30 years ago and instilled a corporate culture that constantly looks for new opportunities. This is how Nvidia adapted its GPU technology from running video games to powering entire computing systems for training large language AI models.
Nvidia's share of the AI chip market is estimated to be over 80%. It is seeing growing demand from several markets. Leading cloud service providers make up about half of its data center revenue. Nvidia also expects revenue for its autonomous vehicle solutions to reach $5 billion this year. Leaders in healthcare like Mayo Clinic and Illumina are using Nvidia's technology to speed up drug development and AI-powered health services.
Competition will intensify, as other semiconductor companies and cloud leaders are making their own custom AI chips. But Nvidia is a good bet for the long term based on its pace of innovation. In addition to chip hardware, Nvidia also offers software tools like CUDA and TensorRT, which help customers get the most out of Nvidia's GPUs for a given task. Nvidia offers everything needed to build a data center for the AI era.
Nvidia is strong financially. It earned $73 billion in net income on $130 billion of revenue last year. The company has $35 billion of net cash sitting in the bank. These resources are enabling it to continue innovating to meet growing demand for advanced computing systems.
With Nvidia seeing demand across multiple markets like healthcare and automotive, the stock is a good buy on the dip and should continue to reward long-term investors.
2. Snowflake
Snowflake (SNOW +0.30%) is a leading cloud-based platform that helps companies gather valuable insights from their data. Its data management services are offered through the leading cloud services, including Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, and it is starting to see strong adoption for AI offerings.
NYSE: SNOW
Key Data Points
Its cloud-agnostic position is an advantage. Companies can use Snowflake's data services across multiple clouds, which enables more collaboration and positions the business to capture market share as demand for AI software increases. Over 4,000 customers are now using Snowflake's AI and machine learning tools on a weekly basis.
The stock's recent decline sets up a great buying opportunity. Snowflake continues to report strong revenue growth and sees existing customers spending more on its services. This is noted by a 28% year-over-year increase in product revenue last quarter, with a 126% net revenue retention rate. Snowflake now has 580 customers generating more than $1 million in product revenue, up from 461 a year ago.
Competition is tight in the cloud market, but a key sales pitch for Snowflake's services is cost savings. Management said on its last earnings call that it is seeing more customers save over 50% by moving their data from other providers to Snowflake.
AI adoption is pushing more companies to find cost-effective ways to use AI with their data so they don't get left behind. This is a huge opportunity for Snowflake. The market for enterprise infrastructure software is expected to double from 2023 levels to reach $342 billion by 2028, according to Gartner.
Snowflake is not profitable on a net income basis, but it generated $884 million of free cash flow on $3.4 billion of product revenue last year. The company's growth on top of a lower share price has brought its price-to-sales multiple down to 12, which is reasonable for a fast-growing cloud leader and should set the stage for attractive long-term gains.
