Investing in artificial intelligence (AI) has become an increasingly attractive opportunity, with the technology’s potential to revolutionize various industries. Despite the saturation of AI-related news, the market is still in its early stages, offering ample room for growth and profitability. In this article, we highlight two AI stocks that could potentially yield substantial returns.
1. Advanced Micro Devices (AMD):
AMD, a prominent player in the chip market, initially faced challenges in keeping up with the AI boom. The surge in demand for AI models led to a corresponding increase in the demand for graphics processing units (GPUs), essential for AI applications. While AMD has a strong foothold in the GPU industry, it lagged behind Nvidia in supplying GPUs to AI developers in 2023.
However, AMD’s focus on central processing units (CPUs) has been highly successful, with the company consistently gaining market share from Intel since 2017. AMD’s CPU business has proven more efficient than Intel’s, despite holding a smaller market share in data center CPUs. In 2024, AMD launched new GPUs to compete with Nvidia, attracting notable customers such as Microsoft’s Azure, Meta Platforms, and Oracle.
The company’s expansion into AI GPUs has already paid off, with a significant 115% increase in revenue in the data center segment during Q2 2024. Although AMD’s stock has already seen a remarkable 376% growth in the last five years, its potential in AI suggests further growth is possible. With a forward price-to-earnings (P/E) ratio below its 12-month average, AMD presents an intriguing investment opportunity.
2. Apple:
Apple has taken a more cautious approach to AI compared to its peers. While companies like Microsoft and Alphabet have aggressively entered the AI industry, Apple is preparing to launch its most significant AI product to date. Apple Intelligence, a software overhaul, will introduce language, image, and audio generation features to iPhones, Macs, and iPads.
The release of Apple Intelligence follows the launch of the iPhone 16, designed with AI capabilities, in September. Apple has limited the availability of Apple Intelligence to newer and more powerful devices, requiring specific models and chips. The company’s recent earnings results for Q3 2024 indicate that new AI-focused product releases, such as the revamped iPad line, have the potential to boost sales.
While competitors have primarily focused on AI in the business sector, Apple’s emphasis on consumer accessibility could position the company strongly in the industry. With a high forward P/E ratio but substantial free cash flow and a strong brand, Apple’s stock remains an appealing investment option for those interested in AI.
