The potential for AI investors goes far beyond the semiconductor giants.
Perhaps no stock has benefited more from the artificial intelligence (AI) boom than Nvidia. The company’s dominance in the AI chip market has redefined the direction of the company and the entire industry.
Unfortunately, many AI investors missed the Nvidia boom. The good news is that most analysts expect AI-driven growth in the technology market to continue for years to come.
To that end, three Motley Fool contributors have ideas for where investors should look next to reap these gains. Palantir Technologies (PLTR 4.49%)Metaplatform (meta -0.40%)tesla (TSLA 8.19%).
Advance the AI revolution
Jake Larch (Palantir Technologies): I’ve been bullish on Palantir for a while, and I see no reason to change my mind after the company’s latest earnings report. The bottom line is that it’s performing at a level that all investors are paying attention to.
The company operates an AI-driven platform for government and commercial customers and is at the forefront of the AI revolution. Helps organizations implement language models at scale. very specific the purpose.
For example, the company has helped insurance companies expedite the underwriting process and the military manage battlefield assets, among other tasks.
Evidence of Palantir’s success can be seen in its results. In the most recent quarter (three months ended September 30), the company achieved:
U.S. sales increased 44% to $499 million.
Total revenue increased 30% to $726 million.
Adjusted operating margin was 38%.
The number of customers increased by 39%.
Analysts expect growth to continue. we just start with The AI revolution is on the horizon, but many organizations have yet to fully consider how they can leverage AI to drive efficiencies.
Consensus estimates project Palantir’s revenue to grow 23% in 2025 to about $3.4 billion. These estimates have increased since the company’s impressive earnings report, and I believe so. perhaps they are It will continue to increase towards 2025.
PLTR revenue forecast for next year. Data by YCharts.
So Palantir is my first choice for an AI company to own in 2025.
Buy it for your advertising business and hold it for the potential of AI.
Justin Pope (Meta Platforms): There was nothing wrong with Meta Platforms’ stock price. It’s up more than 380% since the beginning of last year. But I think there’s still a lot to narrow down here.
First, the stock remains a bargain given its growth. Meta has a price-to-earnings ratio (P/E) of 25. And analysts predict that the company’s revenue will grow by an average of 20% annually over the next three to five years.
Assuming Meta reaches that number, its price-to-earnings ratio (PEG) is just 1.3, a bargain for a company as strong as Meta.
Let’s take a closer look. Meta is one of the world’s leading advertising companies, selling ads to billions of social media users, including Facebook, Instagram, and WhatsApp. The company’s family of apps had 3.29 billion daily active users in the third quarter, an increase of 5% year over year.
Mid-single-digit user growth is impressive considering that nearly half of the world’s population already uses these apps. User growth and advertising prices are a powerful combination for sustainable revenue growth.
Meta is leaning heavily into AI, including open sourcing the Llama AI model and implementing AI tools into its advertising operations. We’ve built an entire AI-focused business unit, Reality Labs, but it’s still unprofitable due to the continued huge investments in accumulating computing resources.
Over time, as revenues increase and investments decrease, the division should become profitable. At that point, Metaplatform’s broad-based revenue growth could accelerate. Therefore, investors can buy Meta now based on its already compelling valuation proposition and hold for eventual AI tailwinds that could continue to drive earnings growth in the future. Masu.
AI could drive electric vehicle (EV) maker’s next growth spurt
Will Healy (Tesla): Most consumers know Tesla best about Elon Musk and his efforts to make the automaker the most successful EV company in history.
But the business that will shift Tesla into a higher gear may be self-driving. The company just introduced its fully self-driving CyberCab to the market, and Musk predicts production of these vehicles will reach 2 million a year by 2026.
Cybercab is just one application of the company’s AI and robotics research that has the potential to revolutionize driving and other human activities. Fully self-driving (FSD) relies on inference chips, and the Dojo system powers Tesla’s data centers. It also conducted research into robots that could handle repetitive and dangerous tasks, turning the automaker into a technology powerhouse.
There are many hopes for the technology, with investment groups such as Cathie Wood’s ARK Invest believing that Tesla will ultimately make most of its revenue from selling its robotaxi technology as a service. are. This technology is estimated to boost the stock price to $2,600 per share by 2029, nearly nine times its current level.
Automotive sales now account for 88% of Tesla’s $25 billion in sales in the third quarter of 2024, an 8% increase from the same period last year. But efforts to cut operating expenses boosted profits, with net income for the quarter at $2.2 billion, up 17% from a year earlier.
The company is planning a boxless manufacturing strategy for robotaxis, increasing efficiency by building subassemblies in separate areas before assembling the final product.
Despite these efforts, EV stocks are down nearly 30% from their 2021 highs. Still, optimism about the company’s future has kept its price-to-earnings ratio at 82x, making ARK Invest’s prediction of nearly 9x over the next five years a realistic target if it succeeds with robotaxis. There is a possibility that it will happen.
