The artificial intelligence (AI) market exploded last year. The launch of OpenAI’s ChatGPT reignited interest in the technology and highlighted just how far AI had come.
The Nasdaq-100 Technology Sector is up 51% year over year, fueled almost entirely by excitement over AI. And the market’s potential suggests it’s nowhere near hitting its ceiling.
Data from Grand View Research shows the AI market hit a valuation nearing $200 billion last year and is projected to expand at a compound annual growth rate of 37% through 2030. For reference, that trajectory will see the industry reach nearly $2 trillion by the decade’s end.
So it’s not too late to invest in this budding industry and profit from its development for years to come. Here are two AI stocks that could set you up for life.
1. Intel
Intel (INTC 0.35%) has hit a few roadblocks in recent years. The company was responsible for more than 80% of the central processing unit (CPU) market for at least a decade and was the primary chip supplier for Apple‘s MacBook lineup for years. But Intel’s dominance made it complacent, leaving the company vulnerable to more-innovative competitors.
Chip rival Advanced Micro Devices started gradually eating away at Intel’s CPU market share in 2017, and that share is now down to 63%. Then, in 2020, Apple cut ties with Intel in favor of more powerful in-house hardware designs. As a result, Intel’s stock is down about 34% over the last three years.
However, the fall from grace seemed to light a fire under Intel again, and it is making moves to come back strong in the coming years. Last June, Intel announced a “fundamental shift” to its business, adopting an internal-foundry model that it believes will help it save $10 billion by 2025.
Moreover, Intel is investing heavily in AI. The company debuted a range of AI chips last December, including Gaudi3, a graphics processing unit (GPU) designed to challenge similar offerings from Nvidia. Intel also showed off new Core Ultra processors and Xeon server chips, which include neural processing units for running AI programs more efficiently.
Intel has a mountain to climb to catch its rivals in AI. But it is on a promising path that could pay off in a major way over the long term.
Data by YCharts; EPS = earnings per share.
The chart above indicates earnings could achieve nearly $3 per share over the next two fiscal years. When you multiply that figure by the company’s forward price-to-earnings (P/E) ratio of 30, you get a stock price of $90, projecting an increase of 120% by fiscal 2026.
With a promising shift in Intel’s business model and growing prospects in AI, the stock is a screaming buy right now and could set you up for life.
2. Amazon
Since its founding almost 30 years ago, Amazon (AMZN 0.40%) has grown into a tech behemoth. It has expanded into the far reaches of the industry by becoming a leader in e-commerce and the cloud market, developing space satellites, and venturing into grocery, gaming, consumer tech, and more.
But all eyes have been on Amazon’s AI efforts over the last year. As the operator of the world’s biggest cloud service — Amazon Web Services (AWS) — the company has the potential to leverage its massive cloud data centers and steer the generative AI market.
In 2023, AWS responded to increased demand for AI services by introducing a variety of new tools. The platform launched Bedrock, a program that helps customers build generative AI applications. It also unveiled CodeWhisperer, capable of generating code for developers, and HealthScribe, a tool that can transcribe patient-physician conversations.
Amazon is even using AI to boost its retail site. It announced an AI shopping assistant dubbed Rufus ahead of its latest earnings release.
In the fourth quarter of 2023, AWS revenue rose 13% year over year to $24 billion. And it was responsible for 54% of the company’s operating income, despite earning the lowest portion of revenue among Amazon’s three segments.
The tech giant is on a promising growth path, and estimates for earnings per share (EPS) seem to support its significant potential.
Data by YCharts.
The chart above indicates that Amazon’s earnings could achieve nearly $7 per share by fiscal 2026. When multiplying that by its forward P/E of 42, you get a stock price of $294.
This would see Amazon’s stock rise 67% from its current value over the next two fiscal years. With exciting prospects in AI, Amazon’s stock is worth considering right now before it’s too late.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
