Two AI Stocks That Have the Potential to Make You a Millionaire
Artificial intelligence (AI) represents a significant opportunity for investors, with the potential for considerable gains in the market. Although many AI stocks have recently lost some value due to economic uncertainties and concerns around AI spending, these dips are creating attractive chances for investors looking to strengthen their portfolios with solid AI companies.
As we approach May, several AI stocks are gaining attention. Among these, two particular companies stand out for their unique positioning and growth potential.
Not Just Nvidia: The Case for Advanced Micro Devices
Advanced Micro Devices (AMD) is a company often overshadowed by the dominance of Nvidia, which holds roughly 95% of the market share in data center graphics processing units (GPUs). Despite this, AMD deserves a closer look due to its growing relevance in the tech industry.
AMD’s strength lies in its desktop and laptop central processing units (CPUs), where it has been gaining ground against its main competitor, Intel. The introduction of new AI-optimized processors in the Ryzen lineup is particularly promising, showcasing AMD’s innovative edge. In addition to CPUs, the company produces chips for mobile devices and various applications, including gaming and autonomous vehicles.
Although data center chips are a crucial segment of AMD’s operations, they comprise a rapidly expanding part of the business, boasting an impressive 94% year-over-year revenue growth projected for 2024. AMD’s overall revenue and earnings per share saw increases of 14% and 25%, respectively, in 2024, contributing to a forecasted growth trend in the coming years. Moreover, the stock trades at about 22 times forward earnings, a price point that suggests potential value, especially considering its previous peaks during the AI boom.
Applied Materials: A Key Player in Semiconductor Manufacturing
Applied Materials (AMAT) may not be a widely recognized name in the consumer market, but it plays a critical role in the semiconductor industry. The company manufactures and services essential equipment used by top chipmakers, including Nvidia. As semiconductor designs evolve and become more sophisticated, the demand for specialized manufacturing equipment grows.
One emerging trend in chip manufacturing is the move toward backside power delivery, where power connections are optimized at the base of silicon wafers. This shift alone could open up an estimated $1 billion market opportunity for Applied Materials. Given that the global semiconductor industry is forecasted to nearly double by 2032, the growth potential for Applied Materials seems promising.
From a financial standpoint, the company is also sound, with a net margin of 23% over the last four quarters. Its effective capital allocation strategies, including stock buybacks, further strengthen its market position. With its stock trading at only 16 times forward earnings, Applied Materials presents a compelling case for investors interested in the AI sector and semiconductor growth.
Managing Expectations in a Volatile Market
Investing in these stocks comes with its set of risks, particularly due to ongoing economic uncertainty that stems from fluctuating interest rates, trade policies under the previous administration, and potential recessionary concerns. Additionally, the market for AI investments might continue to face skepticism regarding spending. Therefore, if you choose to invest in AMD, Applied Materials, or similar stocks, it’s crucial to prepare for potential fluctuations in stock performance.
