Artificial intelligence (AI) is seeing solid adoption by organizations and governments across the globe. Even better, the proliferation of this technology is still in its early phases.
According to one estimate, AI adoption by different industries is reportedly growing at an annual rate of 20%, a trend that's likely to continue as those adopting this technology are witnessing a 3.7x return on each dollar spent on AI. Not surprisingly, Goldman Sachs expects AI to give the global economy a 15% boost over the next decade.
That's the reason why buying and holding on to solid AI stocks for the next 10 years could turn out to be a profitable move. Here's a closer look at a couple of top AI stocks that have the potential to deliver above-average returns to investors over the next decade.
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1. Nvidia
Nvidia (NVDA 0.90%) has been one of the biggest beneficiaries of the AI revolution. Its graphics cards saw huge demand over the past three years, with cloud service providers and governments lining up to buy its chips and systems to train and deploy AI models. As a result, Nvidia stock delivered stunning gains on the back of remarkable growth in revenue and earnings.
Data by YCharts.
Investors may now wonder if Nvidia can deliver comparable gains over the next 10 years, especially considering that it is the world's second-largest company (as of this writing) with a market cap of $3.5 trillion. A closer look at the multiple opportunities Nvidia is pursuing suggests the stock could still be a winner in the long run.
First of all, Nvidia's dominant stature in the AI chip market will be a big tailwind for the company over the next 10 years. It ended 2024 with 92% of the data center graphics processing unit (GPU) market under its control. Of course, Nvidia could lose some ground to rivals in this space, but the company's control over the supply chain suggests that it will remain the biggest player in AI chips going forward.
Nvidia reportedly secured 70% of the advanced chip packaging capacity of Taiwan Semiconductor Manufacturing for 2025. Given that TSMC enjoys a technological advantage over its rival foundries, Nvidia's close ties with the Taiwan-based foundry giant put it in a solid position to make the most of the AI chip boom.
Third-party estimates put the size of the global AI chip market at a whopping $846 billion in 2035. Nvidia's data center revenue stood at $115 billion last year, which means that there is still tremendous room for growth for the company in this niche over the next decade, considering its ability to sustain its healthy market share.
Nvidia is also primed for additional growth because of emerging opportunities in enterprise AI applications, automotive, digital twins, and cloud gaming. All these verticals are expected to become much bigger in the next decade, and Nvidia is gaining traction in some of these areas already. For instance, Nvidia's automotive revenue is expected to triple in size this year to $5 billion. It is partnering with multiple companies in the automotive market to develop self-driving and autonomous technologies, and it forecasts tremendous growth in this segment.
Nvidia's multiple growth engines could help it become an even bigger company in the next decade. That makes it a buy-and-hold option, especially considering its forward earnings multiple of 34 isn't all that expensive, given its tremendous growth and robust long-term prospects.
2. Palantir Technologies
Palantir Technologies (PLTR -0.85%) has been in crushing form on the market in the past year. Investors showed outsized interest in this software platform provider after it became evident that AI was moving the revenue needle in a big way for the company.
Palantir's growth rate increased in recent quarters thanks to a combination of growth in its customer base as well as spending growth by existing customers. Palantir now forecasts revenue will jump 36% this year to $3.9 billion. That's compared to 29% growth last year.
There are some concerns that Palantir's growth rate isn't high enough to justify its astronomical valuation. A trailing earnings multiple of 596 puts the stock way beyond value territory. It also exposes investors to volatility, as any signs of weakness in Palantir's growth could send the stock crashing. However, any pullback in Palantir stock can be treated as a buying opportunity, as it is considered to be the leading player in the AI software platforms.
The global AI software platforms market is forecasted to generate annual revenue of $153 billion in 2028. It is likely to get even bigger in the long run and grow at a nice pace over the next decade because of the productivity gains that customers deploying AI software are seeing. So, Palantir has the potential to clock healthy levels of growth for the next 10 years as it is scratching the surface of a massive end-market opportunity.
The company's leading position in the AI software platforms space should allow it to keep attracting more customers and corner a bigger share of this market in the future. Not surprisingly, Palantir's revenue growth expectations have been increasing of late.
Data by YCharts.
With the company sitting on $6 billion in remaining deal value at the end of the previous quarter, a figure that jumped an impressive 45% year over year, there is a good chance of its growth estimates heading higher in the future. As such, don't be surprised to see Palantir stock moving higher despite its expensive valuation.
If you're worried about the massive premium Palantir trades at, it would make sense to consider accumulating the stock on dips and holding it for the next 10 years, as the AI software market has the potential to supercharge its growth remarkably in the future.
