The global Artificial Intelligence (AI) market is poised to become a $1.4 trillion opportunity by 2029, from around $387 billion currently. That’s a mind-boggling number, so how can investors harness the huge potential of AI?
There might be an easy way. Look no further than how Nvidia (NVDA 0.32%), The trading post (TTD -2.92%)and Amazon (AMZN -0.12%) are using AI to power their businesses and you’ll see why these stocks look like good long-term bets on AI.
1. Nvidia is making AI a reality
Nvidia has long been a leader in the semiconductor market with its graphics chips, but big tech companies are also leveraging Nvidia’s chip know-how for their AI systems. Nvidia’s graphics cards are good at processing a lot of complex data within AI and the company continues to push further into the space. Earlier this year, the company introduced a new line of AI-specific chips for data centers.
That’s important to Nvidia and its investors, because in the most recent quarter, which ended July 31, Nvidia data center sales soared 61% to $3.8 billion. The new chips will help the company further tap into the AI chip market, which will be worth approximately $195 billion in 2030, growing at a compound annual growth rate of 37%.
And data center chips aren’t the only market Nvidia will benefit from. The company also develops AI systems for semi-autonomous vehicles. As cars become smarter and rely more on chips that make complex driving decisions, Nvidia believes it will have a total addressable market of $300 billion in the automotive market.
Nvidia’s stock isn’t exactly cheap right now, with the company’s 12-month price-to-earnings ratio at 40, compared to the semiconductor industry average of around 16. But investors should consider that the company’s stock looks much more attractive at this current valuation than its P/E of 92 just over a year ago.
With the company’s shares cheaper than in the recent past and Nvidia still in the early stages of tapping into the massive AI market, investors may want to consider grabbing some of the company’s shares. right now.
2. The Trade Desk helps businesses sell
The Trade Desk is an advertising platform for companies looking to place their ads on the internet, mobile apps and connected TV platforms.
An advertising platform might seem like an odd suggestion on this list of AI stocks, but The Trade Desk deserves a place here because it uses artificial intelligence and algorithms to help advertisers automate the research and development process. purchase of advertising spots on the Internet.
The massive Trade Desk opportunity has just emerged as the company taps into the rapidly growing digital advertising market which will be worth around $315 billion in 2025, up from $240 billion this year.
The company is also already posting impressive numbers. Sales rose 35% in the second quarter to $377 million and came at a time when some of its advertising peers were experiencing slowing sales.
Trade Desk shares are trading at around 21 times the sell, which is above the software industry average of around 9. But with the company’s current P/S well below the 43 it was about a year ago and its $1.2 billion in cash. , the company is in good financial health.
3. Amazon has many angles
Amazon is best known for its e-commerce website, but some investors may not know how AI is getting into that site — and many of Amazon’s other businesses.
The company uses complex machine learning to give shoppers product and transaction recommendations on its site, uses algorithms and AI for immediate release technology in its Amazon Go stores, and offers AI services to developers through its Amazon Web Services (AWS).
The good news for investors is that Amazon’s integration of AI into many of its businesses has helped the company become a leader in e-commerce and cloud computing.
And the company’s recent performance proves that Amazon continues to grow at a healthy pace, with total sales up 7% in the second quarter to $121 billion. Amazon management also released a strong third-quarter revenue forecast of $125 billion to $130 billion, representing 15% year-over-year growth at the midpoint.
Amazon’s P/S ratio of 2.4 may make the stock expensive for some investors, but it’s important to note that the average P/S ratio for the internet and direct marketing industry is 4.1.
Keep this in mind when buying these stocks
There’s a lot of pessimism in the market right now as investors take in a lot of news about high inflation and the Federal Reserve’s aggressive rate hikes to bring it down.
Falling stock prices have caused some investors to sit on the sidelines, but history shows that was probably a mistake. Buying big companies and keeping them for five years or more remains one of the best ways to build wealth.
Investors may experience greater stock price volatility in the short term, but once the market rebounds – and history shows it always does – investors will likely be glad they bought Amazon, The Trade Desk and Nvidia as the market was down. .
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Chris Neiger has no position in the stocks mentioned. The Motley Fool holds positions and recommends Amazon, Nvidia and The Trade Desk. The Motley Fool has a disclosure policy.