It’s time to start thinking about the winners in the next chapter of the artificial intelligence movement.
There’s no denying this tech titan Nvidia (NVDA 3.55%) has been many investors’ favorite way to connect with the artificial intelligence (AI) craze over the past 18 months. And rightly so. Its processors form the backbone of most AI platforms.
As is often the case, time and reality are catching up with Nvidia. Competitors are working diligently to narrow the market share gap, and (because it’s already so large) Nvidia’s accelerating pace of growth is about to slow. Its shares are also very expensive, as measured by some metrics…a premium that has some investors wondering how high it can go in the short term.
Translation: Maybe it’s time to start looking at other ways to invest in the next stage of the AI revolution. Here are three other AI stocks to consider instead of (or at least in addition to) Nvidia.
1. Palantir Technologies
If your experience with (and knowledge of) AI is limited to user-friendly chat platforms like OpenAI’s ChatGPT, Alphabet’s Google Gemini or Microsoft‘s Copilot, you’ll probably agree that these are smart apps. But generative AI doesn’t exactly seem like a technology that should form the basis of an entire industry.
However, these AI-powered chatbots are far from the only way to bring artificial intelligence solutions to market. AI platforms designed from the ground up to help them sift through mountains of digital data to make more informed decisions are far more marketable to industry and institutions.
Enter Palantir Technologies (PLTR -0.34%), a standalone AI software name (i.e. solely dedicated to AI-based decision-making solutions) that is becoming a major player in this young industry. Last year, it had revenue of $2.2 billion and turned just over $200 million into net profit.
That’s not a lot of money, especially for a company with a market cap of over $50 billion. However, the bullish key here lies in the trajectory of these results. Analysts expect Palantir’s revenue to grow by an average of more than 20% annually over the next few years, creating scale that will push emerging companies out of the red and black.
Driving this potential growth is the ever-increasing willingness to pay for everything decision AI can do. Technology market research firm Precedence Research forecasts that the AI software market is expected to grow at an annualized rate of 23% through 2032.
Since Palantir Technologies already serves a large number of high-profile customers, including network name Cisco Systemsthe US military and the energy giant ExxonMobilchances are it’s already positioned to capture at least its fair share of that growth.
2. IonQ
Silicon-based binary code computing has been around for decades now. And he has evolved more than adequately as the tasks assigned to him become more complex. However, we are reaching a point where mainstream computer hardware can no longer handle the type of software that experts are able to conceptualize and then create. Quantum computers that use subatomic particles rather than silicon to interpret and calculate digital information are the new frontier of computers. To the extent that this comparison makes sense, quantum computers can be thousands, or even millions of times, faster than traditional computers, depending on the task they perform. Of course, this has huge implications for AI.
IonQ (IONQ 1.02%) is one of the few companies developing such computing platforms. In fact, he has already developed and commercialized them; now it’s just about improving them. Its IonQ Tempo platform under development will use an integrated chip of 64 superconducting qubits (a central element for the computing functions of quantum computers), compared to the IonQ Harmony unveiled in 2020 which used only 11 of these particles quantum in each chip.
Don’t get me wrong though. In the world not while waiting for next generation technology. The company already has many paying customers and development partners ranging from Lockheed Martin to Microsoft for Airbus at Oak Ridge National Laboratory, to name a few. Most recent quarter revenue of just $7.6 million was still 77% higher than the year-ago quarter comparison, with the company largely held back by a lack of capacity to build more systems and offer more services. But it meets the demand. Precedence Research predicts that the quantum computing market will grow at a compound annual growth rate of 37% through 2030.
There is a higher than average risk here, of course. In other words, quantum computing is still a relatively young science. Its landscape could well change in the near or distant future.
The potential reward, however, is worth this risk. The current consensus price target for IonQ stands at $14.98. That’s 85% above the current stock price.
3. Apple
Last but not least, add Apple (AAPL 2.86%) to your list of non-Nvidia AI stocks to buy. It’s a suggestion that might surprise some investors. While it’s the most profitable publicly traded company in the United States for good reason, it’s not exactly considered a major player in AI. (Saudi Arabia’s state-owned oil company, Saudi Aramco, is the world’s most profitable company.)
But that is about to change. At the February shareholder meeting, CEO Tim Cook made a point of emphasizing that “every Mac powered by Apple silicon is an extraordinarily capable AI machine. In fact, there is no better computer for it.” ‘AI on the market today’. Cook also highlighted Apple’s work in generative AI. To that end, it also asked the world to look for new AI features from its technology later this year.
What that meant wasn’t entirely clear at the time, although details are slowly emerging. In May, for example, reports emerged that the company was working on its own AI data center processors (rather than relying on third-party chips like those made by Nvidia). Then, at its annual developer conference this week, the company announced that OpenAI’s ChatGPT could soon be integrated into Apple’s new devices. Perhaps most notably, Cook explained that Apple will not collect or store any personal data from the use of its new AI offerings.
At first glance, investors weren’t exactly thrilled. They expected a little more, or at least a little more detail on these and future AI-based features. But 24 hours later, the stock was trading up 6% on the news.
Don’t be like those first stock market traders and underestimate the potential of what Apple has just revealed. This may be exactly what many die-hard Apple fans were waiting for before upgrading their iPhones. As such, don’t be surprised to see sales of the family breadwinner finally pick up. This could also be just a preview of Apple’s bigger AI ambitions.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley holds positions at Alphabet. The Motley Fool holds positions and recommends Alphabet, Apple, Cisco Systems, Microsoft, Nvidia and Palantir Technologies. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.