Just today, artificial intelligence (AI) fooled me. I was listening to YouTube when a great cover of Paul McCartney’s “Goodbye Yellow Brick Road” caught my eye.
The only problem? Sir Paul never recorded the song – it was a creation of artificial intelligence. Yet, I, a mega Beatles fan, couldn’t tell the difference.
The world is changing and AI is a big reason why. So, let’s look at three stocks that are poised to take advantage of this: Nvidia (NVDA -1.11%), Crowd hit Holdings (CRWD -3.95%)AND Amazonia (AMZN 1.21%).
Image source: Getty Images.
1.NVIDIA
Let’s be clear: no company will benefit more from Nvidia’s AI revolution. This is because AI requires massive amounts of computing power to train large language modelsand supercomputers behind user-facing AI applications.
Therefore, the data center giants (i.e., Microsoft,AmazoniaANDAlphabet) are turning to Nvidia to provide the computational “gut” to make their AI better, smarter, and faster. The workhorse they’re looking for is Nvidia’s H100 chip, sometimes rated at eye-popping $40,000 in secondary market sales.
The insatiable demand that’s driving those sky-high prices is delivering huge sales and profits for Nvidia. In the company’s most recent quarter (three months ended April 30, 2023), Nvidia reported $7.2 billion in revenue, about 10 percent more than Wall Street expected. Similarly, adjusted earnings per share were $1.09, about 18% above estimates.
In addition to these impressive quarterly results, the company issued revenue guidance for the second quarter that was about 50% higher than analysts expected. That move sent the stock up about 25%, while Nvidia’s stock is up more than 167% year-to-date.
However, owning Nvidia isn’t without risk; the shares are currently trading at a record price-to-sale ratio of 39.5. To justify this type of valuation, the company must continue to deliver impressive results every quarter. And with the AI revolution still in its infancy, Nvidia should have plenty of room to run.
2. CrowdStrike Participations
The world is still grappling with how AI will revolutionize the economy. However, there is one area where advances in AI are already dramatically changing the landscape: cybersecurity.
Artificial Intelligence has taken a leading role in the never-ending game of cat and mouse between reputable organizations and hackers. And CrowdStrike Holdings is one company driving this innovation.
The company offers cloud-based security modules that rely on crowdsourced data and artificial intelligence to identify threats and thwart attacks before systems are compromised.It has never been more important as the cost of cybercrime continues to skyrocket. A recent federal report found that US banks potentially processed over $1 billion in ransomware payments in 2021 alone.
As a young company, CrowdStrike remains early in its growth cycle. Over the past 12 months, it generated $2.2 billion in revenue and is expected to grow revenue at an average annual rate of about 32% over the next two years. For investors looking for a niche AI game, CrowdStrike Holdings is a name to consider.
3. Amazonia
Sure, some investors might not think of Amazon as an AI stock. However, once you scratch the surface, it’s clear: Amazon not only has exposure to AI but, in some ways, it has major advantages over other tech giants who are also playing the AI game.
Let’s start with this: Winning the AI battle is going to require tons of data—the more personal, the better. And on that front, Amazon has a solid lead. By shopping on Amazon, customers transmit valuable data to the company (e.g. location, spending habits, favorite brands, etc.).
Furthermore, just as Alphabet has largely captured the search market by force of habit, winning brand loyalty in AI can hinge on familiarity. And with over 100 million Alexa-enabled smart speakers already sold, Amazon’s AI assistant is already the oracle of reference in many homes.
Adding to Amazon’s appeal is its rating. Shares currently trade well below their 10-year selling price and purchase price averages, meaning investors can hoard shares at historically cheap levels.
In summary, Amazon has all the tools to compete in the battle for AI dominance. Most importantly, investors who are willing to buy and hold shares of this tech giant could just set themselves up for life.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, serves on the board of directors of The Motley Fool. Jake Lerch has positions in Alphabet, Amazon.com, CrowdStrike and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon.com, CrowdStrike, Microsoft and Nvidia. The Motley Fool has a disclosure policy.
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