Artificial intelligence (AI) is sweeping across the corporate landscape, increasing labor productivity and the speed of innovation. This technology is projected to have a $20 trillion impact on the global economy by 2030, according to IDC. Here are two AI stocks to profit off this opportunity.
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1. CoreWeave
There are billions of dollars pouring into data centers to prepare for an AI-driven economy. But many of the world's data centers are equipped with legacy equipment and not up-to-date for the demands of AI workloads. This is a huge opportunity for CoreWeave (CRWV +3.29%), one of the leading operators of purpose-built data centers for AI.
CoreWeave just completed its initial public offering this year, but its first earnings report as a public company reveals incredible demand for its cloud computing services. Revenue is soaring, increasing from $189 million in the first quarter of 2024 to $982 million in the 2025 first quarter.
Moreover, it had a massive and growing revenue backlog worth $25.9 billion in the first quarter, an increase of 63% over the year-ago quarter. Much of this year-over-year increase was driven by a recent $11.9 billion deal with ChatGPT maker OpenAI.
NASDAQ: CRWV
Key Data Points
The growing revenue backlog indicates significant long-term financial commitments for the company's services. It generates revenue either on a contractual basis or on demand, but most of its revenue comes from contracts, which can extend over several years. Investors are usually willing to pay high price-to-sales multiples for companies that have a high visibility to future revenue like CoreWeave.
One risk investors will want to watch is whether it can secure enough power over time to run its data centers and meet growing demand. Large data centers need a significant amount of electricity, and that could create challenges with growing demand for AI.
CoreWeave appears to be in good shape on this front. It says it has 420 megawatts of power supporting 33 AI-optimized data centers across the U.S. and Europe. It has also contracted to receive additional power, providing it with up to 1.6 gigawatts over a multiyear period.
The stock's market cap sits at $53 billion at the time of this writing. Based on the company's 2025 revenue outlook, this represents a forward price-to-sales ratio of 11, which seems fair for a fast-growing infrastructure-as-a-service provider. As the company continues to report strong growth, this valuation can support new highs for the stock in 2025 and beyond.
2. Advanced Micro Devices
Nvidia has been the leading AI chip supplier for data centers, but it can't control 100% of this $500 billion opportunity. There is also growing demand for chips from Advanced Micro Devices (AMD 0.67%), and its stock trades at an attractive valuation that makes it a compelling buy ahead of this long-term opportunity.
NASDAQ: AMD
Key Data Points
AMD has experienced mixed results across its business segments over the past year. While its data center and client segments (including sales of PC chips) are seeing strong growth, its gaming and embedded segments (including sales to industrial markets) have been underwater.
In the first quarter, AMD's revenue fell 3% over the previous quarter but soared 36% year over year, driven by data centers and strong demand for its Ryzen processors for PCs. The high margins from data center chips contributed to a robust 55% year-over-year increase in adjusted earnings, which shows the company can still drive tremendous growth even when some segments are experiencing weak demand.
The data center momentum makes the stock a compelling buy. There were recently more than 30 computing workloads launched using its fifth-generation EPYC Turin chip across the leading cloud providers, including Alibaba, Amazon, Alphabet's Google, and Oracle.
The company also made an important strategic move to narrow the competitive gap with Nvidia. Its recent acquisition of ZT Systems will allow it to provide AI computing systems combining chips, networking, and software. Nvidia has offered a full-stack solution to gain a strong foothold in the data center market, but AMD will now be able to offer something similar to win more business.
With management seeing a recovery in the second half of the year for its embedded chip business, AMD could see strong momentum by this time next year. The stock seems to be underestimating its growth prospects, trading at just 28 times 2025 earnings estimates.
