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I don’t think there is any debate on the point that Nvidia (NASDAQ:NVDA) has established itself as the godfather of AI. As growth accelerates for Nvidia in a big addressable global market, the company’s stock has skyrocketed by 220% year-to-date (YTD). I would certainly look at buying NVDA stock on corrections. At the same time, several other AI stocks can be outperformers in the coming years.

Talking about the importance of artificial intelligence, it’s estimated that AI could contribute up to $15.7 trillion to the “global economy by 2030.” Further, the impact of AI will be across sectors. If companies want to remain competitive and survive, the adoption of AI is critical. The key point here is multiple companies will have enough headroom for growth and value creation.

This article focuses on three AI stocks likely to deliver multibagger returns in the next few years.

C3.ai (AI)

C3IoT (AI) website displayed on a modern smartphone

Source: Piotr Swat / Shutterstock.com

C3.ai (NYSE:AI) stock has delivered stellar returns of 123% YTD. However, it’s worth noting that AI stock touched highs of $49 earlier this year. From those levels, the stock has witnessed a sharp correction to $24.75. The correction is a good entry opportunity, and with short interest at 39% of the free float, I expect a big short-squeeze rally.

For Q1 2024, C3.ai reported revenue of $72.4 million. Subscription revenue accounted for 85% of the total. It’s also worth noting that the company closed 12 generative AI agreements for the quarter. With a potential pipeline of “more than 140+ qualified C3 Generative AI enterprise opportunities,” the growth outlook is bullish.

However, AI stock corrected with the company providing guidance for an operating loss of $70 to $100 million for the 2024 financial year. However, that factor is discounted in the stock, and as new business deals are closed, subscription revenue will swell. I would not be surprised if there is a big reversal rally in the next few quarters.

Upstart Holdings (UPST)

Person holding smartphone with logo of U.S. fintech company Upstart Network Inc. (UPST) on screen in front of website. Focus on phone display. Unmodified photo.

Source: T. Schneider / Shutterstock.com

Upstart Holdings (NASDAQ:UPST) stock surprised investors with an almost 5x rally during the year. From January levels of $12.9, UPST stock touched highs of $72.6 in August. A sharp correction followed, with the stock currently at $27.6. In my view, the multibagger rally was a trailer of things to come from the value creation perspective. I would not dismiss the surge as a speculative rally.

As an overview, Upstart is a leading artificial intelligence lending platform. The objective is to “improve access to affordable credit while reducing the risk and costs of lending” for banks. The key point to note is that the total addressable market is worth $4 trillion in annual loan origination. If the company can make successful inroads, the revenue upside potential is multi-fold.

For Q2 2023, Upstart reported revenue of $135.8 million. It’s worth noting that the contributing profit margin was 67%, which was higher by 2,000 basis points on a year-on-year basis. If key business metrics continue to improve, UPST stock is poised to skyrocket again.

Schrödinger (SDGR)

Cells and molecules representing biology stocks.

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Schrödinger (NASDAQ:SDGR) stock is another interesting name among artificial intelligence stocks to buy. In the coming decades, AI is likely to play a big role in the healthcare and drug discovery industry. With the use of AI, the Schrödinger platform aims at accelerating the drug discovery program.

The company’s main business segments include software licensing, collaborations and a proprietary pipeline of drugs. The licensing business already has about 1,750 customers globally and is the revenue driver. The big names using the company’s platform include Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), and Novartis (NYSE:NVS), among others.

Currently, the company has 19 active programs in the proprietary pipeline. Positive results from drug discovery and development can provide a big revenue bump. Overall, Schrödinger looks interesting as the company leverages its platform to pursue global growth. With such a wide exposure, the addressable market seems significant.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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