Missed Nvidia's Stock Price Rally? Check Out These 7 AI Stocks Instead – Forbes
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A year ago, you could have bought semiconductor stock Nvidia (NVDA) for about $277 per share. Today, the price is above $800. Investors, eager to capitalize on the company’s momentum in the artificial intelligence (AI) space, have driven NVDA up some 188%.
AI has been a topic of interest for investors since ChatGPT took the technology mainstream in late-2022. Since then, Nvidia has monetized AI more dramatically than any other public company. That’s great news for those who bought Nvidia stock before the end of 2023. The rest of us, sadly, missed the rally.
Fortunately, the AI revolution is just getting started. Let’s get motivated for AI investing redemption with a quick look at Nvidia’s recent trajectory, followed by an introduction to seven top AI stocks with double-digit upside.
Nvidia’s amazing rally over the past year had several catalysts. To start, the company reported four consecutive earnings surprises, ranging from 17% to 44%. Nvidia also grew its EPS from $0.88 in the April, 2023 quarter to $4.91 in the January, 2024 quarter.
The tech stock tripled in 2023, and then hit its steepest climb in January 2024. In that month, Nvidia announced graphics cards designed for use in “AI-ready” laptops and released its AI Workbench developer toolkit to beta. AI Workbench streamlines the creation and deployment of AI applications. Analysts responded to the new product splash by increasing their NVDA price targets and ratings.
By the time Nvidia announced 486% growth in its adjusted, diluted EPS between the fourth quarters of 2023 and 2024, the stock price had already eclipsed $700. After the last earnings release, NVDA climbed to $950 before moderating back to about $800.
Even at $800, the prevailing opinion is that the stock has already priced in investors’ strong expectations for future AI-related growth.
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Nvidia may have been the first to capitalize on AI enthusiasm, but it won’t be the last. The table below introduces seven stocks that are well-positioned to benefit from growing AI adoption.
Table data sources: Morningstar, Tradingview.
Here’s a look at TSM by the numbers:
Taiwan Semiconductor is the world’s largest contract manufacturer of semiconductor chips.
TSM enjoys an almost unshakeable market share, owning roughly 61% of global semiconductor production. Its customer list includes several companies with strong AI exposure in their own right, including Nvidia, Apple
As the world collectively demands better, faster computing chips, TSM will benefit. The company is gearing up for future growth with production capacity expansion efforts in Japan and the United States.
TSM pays a reasonable dividend yield of 1.3%, which is uncommon among AI stocks. You can also find TSM on my list of best stocks for 2024.
Here’s a look at TCEHY by the numbers:
China-based Tencent Holdings operates a collection of businesses that provide online advertising, streaming entertainment, fintech and business services.
Tencent debuted its generative AI product, called Hunyuan, last year. Like ChatGPT, Hunyuan is a general-purpose technology, but the company is positioning it as a platform for business-related AI applications.
In fiscal year 2023, Tencent grew revenues by 10% and operating profit by 24%. The company has momentum in the gaming side of its business, but an upgrade to its AI-powered ad tech platform was also a factor in the revenue growth.
Tencent pays a modest dividend and regularly repurchases its shares.
Here’s a look at NOW by the numbers:
ServiceNow develops and maintains a cloud-based workflow automation platform that businesses use to manage technology, operations, customer experience and human resources.
ServiceNow is delivering generative AI capabilities to its business customer base within its core Now platform. Those capabilities include the automation of repetitive tasks, identification of similarities across open tickets, work routing, recommendations for knowledge base content improvements and more.
Those features, collectively called Now Assist, are resonating with customers. In the quarter after Now Assist launched, ServiceNow reported 25.5% growth in subscription revenues and 15% growth in its customer base. It was the largest net increase in annual contract value associated with any product release in the company’s history.
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Here’s a quick look at SNPS by the numbers:
Synopsys makes software plus related tools and services used in the design and testing of silicon chips.
Synopsys’ software stack for chip design, called Synopsys.ai, uses generative AI to streamline the design process. At the company’s annual user group conference, CEO Sassine Ghazi said Synopsys.ai usage was growing rapidly on the strength of positive customer outcomes. The platform is delivering up to 10 times faster turnaround times plus a 10%-plus increase in performance, power and area—key variables in the optimization of chip design.
In its most recent earnings release, SNPS reported record revenue of $1.65 billion, representing a 21% gain over the prior-year result.
Here’s a quick look at CRWD by the numbers:
Crowdstrike delivers AI-powered cybersecurity solutions and workflow automation, primarily on a subscription basis, for businesses in the U.S. and around the world.
Crowdstrike went public in 2019 and has only recently delivered GAAP profits. When the company reported positive EPS in the quarters ending April and July 2023, analysts and investors were pleasantly surprised.
For the fourth quarter of fiscal year 2024, Crowdstrike reported 33% increases in total revenues and subscription revenues and a 34% increase in annual recurring revenue. Momentum in recurring revenue bodes well for the future, given the company’s 78% gross margin on subscriptions.
Crowdstrike is guiding to roughly $3.9 billion in revenues and $3.77 to $3.97 in adjusted, diluted net income per share for fiscal year 2025. Those numbers translate to revenue growth of about 27% and earnings growth of at least 22%.
Here’s a quick look at MRVL by the numbers:
Marvell Technology designs integrated semiconductors for use in data centers across multiple end markets.
For its fiscal year 2024, Marvell reported declines in revenue and non-GAAP EPS of 7% and 29%, respectively. The company also reported GAAP net losses for the fourth quarter and year. Soft demand in the consumer, carrier infrastructure and enterprise networking markets was a driving factor. That’s the bad news.
The good news is twofold. First, prior to fiscal year 2024, MRVL had been growing revenues, adjusted EPS and Ebitda. And second, in fiscal year 2024, MRVL grew its AI business substantially. The company’s AI revenue in the fourth quarter eclipsed $200 million, which was about 10% of total company revenues—up from 3% in the prior year.
The bullish view is that MRVL will turn around its income statement performance as AI becomes a larger piece of the business and the conditions in other end markets improve.
Here’s a quick look at DRKTF by the numbers:
Darktrace, like Crowdstrike, provides AI-powered cybersecurity solutions. Darktrace and Crowdstrike Falcon are often viewed as competing platforms, but they also integrate with one another.
Darktrace reported 27.4% revenue growth and 8,939% net profit growth in the first half of its fiscal year 2024 versus the year-ago period. Leadership cites a strategy change plus improved economic conditions as key contributors.
Thanks to double-digit growth in its annual recurring revenue, Darktrace also raised its revenue outlook for the full fiscal year by 50 basis points. The new expectation is a range of 23.5% to 25%. Going forward, the company will benefit from its 89% gross margin coupled with multiyear contracts and a flexible cost structure.
These seven stocks directly benefit from increased AI adoption. TSM and MRVL provide hardware that enables AI, while the rest deliver AI benefits to their customers. All seven companies are loved by analysts, have double-digit upside in share price and show positive momentum in their AI-related operations, if not company-wide.
Nvidia proved itself to be a wealth-building AI stock in the span of about 12 months. It’s likely a few other AI players will experience their own wild price rallies, particularly as more businesses realize quantifiable benefits related to their AI implementations. The fun thing is that even a modest AI position coupled with a rally can deliver a nice bump to your net worth.
The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download Forbes’ most popular report, 12 Stocks To Buy Now.
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