Perhaps no stock has benefited more from the boom in artificial intelligence (AI) than Nvidia. The company’s dominance of the AI chip market has redefined the direction of the company and much of the industry as a whole.
Unfortunately, many AI investors missed Nvidia’s boom. The good news is that most analysts expect AI-driven gains in the technology market in the coming years.
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To that end, three Motley Fool contributors have ideas on what investors should look for next for these gains: Palantir Technologies (NYSE:PLTR), Metaplatforms (NASDAQ: META)And Tesla (NASDAQ: TSLA).
Jake Lerch (Palantir Technologies): I’ve been bullish on Palantir for a while now, and the company’s most recent earnings report gives me no reason to change my mind. In short, the execution is at a level that should give any investor pause for thought.
The company, which operates an AI-driven platform for government and commercial customers, is at the forefront of the AI revolution. It helps organizations implement large language models very specific purposes.
For example, the company has helped with jobs as diverse as speeding up the underwriting process for insurance companies and managing battlefield assets for the military.
The proof of Palantir’s success can be seen in its results. In the most recent quarter (the three months ended September 30), the company achieved the following:
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US sales rose 44% to $499 million.
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Total revenue grew 30% to $726 million.
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The adjusted operating margin was 38%.
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The number of customers grew by 39%.
Analysts expect growth to continue. We are ordinary get started the AI revolution, and many organizations have yet to fully explore how to increase efficiency with it.
Consensus estimates suggest Palantir’s revenues will rise 23% to about $3.4 billion in 2025. Those estimates have risen since the company’s stellar earnings report, and I believe that’s true it is likely that they will continue to increase as we move into 2025.
In short, Palantir is my top choice as an AI company in 2025.
Justin Pope (metaplatforms): There’s nothing wrong with Meta Platforms shares, which are up more than 380% since the start of last year. Still, I think there’s still a lot of juice to be squeezed here.
First, the stock remains a bargain for the growth you get. Meta trades at a price-to-earnings (P/E) ratio of 25. And analysts estimate the company will grow earnings at an average annual rate of 20% over the next three to five years.
Assuming Meta hits that number, the stock’s price-to-earnings-growth (PEG) ratio is just 1.3, which is cheap for a company as strong as Meta’s.
Now let’s look deeper. Meta is one of the world’s leading advertising companies, selling ads to billions of social media users on Facebook, Instagram and WhatsApp. The company’s app family had 3.29 billion daily active users in the third quarter, up 5% year over year.
The mid-single-digit user growth is impressive considering almost half of the world’s population already uses these apps. User growth and ad prices are a powerful combination for sustainable revenue growth.
Meta is leaning heavily on AI, including open sourcing its Llama AI model and implementing AI tools into its advertising business. It built an entire business unit focused on AI, Reality Labs, which is still unprofitable due to the huge ongoing investments to accumulate computing resources.
Over time, that unit should become profitable as revenues increase and these investments decrease. At that point, it could boost Meta Platforms’ broader earnings growth. So investors can buy Meta today for its already compelling valuation proposition and hold for any AI tailwinds that could continue to drive earnings growth in the future.
Will Healy (Tesla): Most consumers know Tesla best for Elon Musk and his work to make the automaker the most successful EV company in history.
The business that could shift Tesla into high gear, however, may be autonomous driving. The company just launched its fully autonomous Cybercab, and Musk predicts that production of these vehicles will reach 2 million units annually by 2026.
The Cybercab is just one application of his AI and robotics research that could revolutionize driving and other human activities. The full self-driving system (FSD) relies on the inference chip, while the Dojo system will power Tesla’s data centers. It also conducted robotics research that can handle repetitive or dangerous tasks, helping the automaker become a technology powerhouse.
Much hope is pinned on this technology, and investment groups such as Cathie Wood’s ARK Invest believe that Tesla will ultimately make the majority of its revenue from selling its robotaxi technology as a service. There is speculation that this technology could take the stock price to $2,600 per share by 2029, a nearly ninefold gain from current levels.
For now, auto-related sales accounted for 88% of Tesla’s $25 billion in the third quarter of 2024, up 8% from year-ago levels. But efforts to reduce operating costs boosted operating income, leaving net income of $2.2 billion in the quarter 17% higher than the previous year.
It plans an ‘unboxed’ manufacturing strategy for its robotaxis, increasing efficiency by building sub-assemblies in separate areas before putting them all together to build the final product.
Despite such efforts, EV stock is down just under 30% from 2021 highs. Still, optimism about the future has kept the price-to-earnings ratio at 82, and succeeding with robotaxis could mean ARK Invest’s prediction for an almost ninefold profit in the next five years becomes a realistic ambition.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Nvidia and Tesla. Justin Pope has no position in any of the stocks mentioned. Will Healy has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Meta Platforms, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.
Missed Nvidia? Buy these 3 AI stocks. was originally published by The Motley Fool
