Nearly every expert agrees: The AI revolution will truly be massive. Understandably, many investors are racing to find companies that will benefit from this rare growth opportunity, one that could persist for decades to come. According to the United Nations, the AI market should hit a value of $4.8 trillion by 2033, up from just $189 billion in 2023.
Want to make sure your portfolio benefits? The two stocks below offer very different types of exposures, but both should see sales soar in the years to come thanks to AI spending.
Every AI investor should own this stock
When it comes to artificial intelligence stocks, Nvidia (NVDA 3.23%) is king. The company produces critical components for the rest of the AI industry. Without Nvidia, it's doubtful that we would be seeing as much growth in AI demand and innovation as we are seeing today. Put simply, Nvidia invested early in the space, and those investments are paying off big. And due to its developer ecosystem, there's a good chance that Nvidia's early lead can be sustainable through this decade and beyond.
What exactly are the critical AI components that Nvidia makes? They're called graphics processing units, or GPUs. These chips allow for huge amounts of data to be processed -- a critical requirement for building, training, and executing AI applications. Right now, Nvidia has a 70% to 95% market share for AI-specific GPUs, a reflection of its early investments in the space. Competitors are already catching up to the performance standards of Nvidia products. But even when performance parity is achieved, Nvidia's CUDA developer suite stands a great chance of keeping the company on top.
CUDA stands for Compute Unified Device Architecture. It essentially allows customers to customize Nvidia chips for their specific needs. This integrates Nvidia's hardware into its customers' software offerings, creating a level of "stickiness" to its products. Right now, customers want Nvidia chips because they're the best. But even once they're not the clear best in terms of performance, the fact that customers tailored their products around Nvidia's hardware should keep them loyal to the company.
Nvidia stock isn't cheap at 40 times earnings, but its central position in the AI revolution should keep its growth rates high enough to eventually justify that premium valuation.
Nvidia stock is a must-own for AI investors. Image source: Getty Images.
Amazon will be a major AI winner
Most people think of Amazon (AMZN 0.45%) as an e-commerce business. And that's certainly the case. Most of Amazon's sales still come from its online marketplace. Most of its operating profits, however, stem from its Amazon Web Services division, more commonly referred to simply as AWS.
Like Nvidia, AWS is a huge enabler of the AI revolution. It's the largest cloud infrastructure operator in the world, with an estimated 30% market share. Whenever an AI application is developed or deployed, there's a good chance that AWS' servers made it possible. Last quarter, AWS produced $11.8 billion in operating profit. Total operating profit, meanwhile was just $18.4 billion, meaning most of Amazon's operating profit stems from its AWS division, not its e-commerce business.
Amazon's cloud business isn't as irreplaceable as Nvidia. There are many other cloud infrastructure providers to choose from with similar performance capabilities, while Nvidia's chips remain in a class of their own. But with deep pockets and a global reach, Amazon has the ability to outbuild the competition in the decade to come to meet the rapidly rising needs of the AI industry. Most investors still think of Amazon as an e-commerce play. But insightful investors realize that long term, this is one of the best stocks to buy to expose your portfolio to the magic of AI.
