The stock market has seen considerable growth in the first half of the year, with the Nasdaq Composite index rising about 19% since Jan. 1. However, it’s not too late to invest in companies that are likely to continue growing over the next six months.
Despite an explosion of growth since last January, the artificial intelligence (AI) market remains a compelling place to start. According to Grand View Research, the industry hit $197 billion last year and is expanding at a rate that would see it reach close to $2 trillion by the end of the decade.
The industry has made a lot of millionaires since the start of last year, but it is likely not done yet. Demand for AI services and the high-powered chips needed to run them is continuing to rise, boosting the earnings of some key companies.
So, get in before it’s too late. Here are two millionaire-maker AI stocks to buy in 2024.
1. Nvidia
Nvidia (NASDAQ: NVDA) has made more than a few millionaires since a boom in AI kicked off at the start of 2023, with its stock up 745%. The company had already gained a reputation as a reliable growth stock thanks to success in gaming, consumer products, and data centers. However, Nvidia’s involvement in AI has taken its business to another level. It became the first chipmaker to achieve a market cap above $3 trillion this year.
Some analysts have questioned how much more growth the company could realistically offer after rising so high. However, its nearly unrivaled dominance in AI chips and growing cash reserves, which are far ahead of its rivals, suggest its lead is unlikely to dissipate anytime soon. Meanwhile, developers have only scratched the surface of what’s possible with AI, indicating chip demand is nowhere near hitting its ceiling.
Advanced Micro Devices and Intel are Nvidia’s biggest rivals in the AI chip market. Despite significant investments over the last year from both of them, Nvidia maintains an estimated 90% market share in AI chips. Additionally, soaring earnings have widened the financial gap between these companies.
This chart shows that Nvidia’s quarterly operating income and free cash flow dwarfed the same metrics for AMD and Intel over the last year. The figures suggest Nvidia is far more capable of investing in its business and maintaining its lead in AI for years.
Nvidia has the cash and brand power to continue expanding long into the future. Despite recent stock growth, its price/earnings-to-growth ratio remains at less than 1, which could mean it is still trading at a value compared to its potential.
As a result, Nvidia is a millionaire-maker stock that is too good to pass up in 2024.
2. Alphabet
While Nvidia is crushing it in AI chips, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is investing heavily in the software side of the market. The Google company has steep competition from cloud giants Microsoft and Amazon. However, stock valuations and recent earnings make Alphabet a no-brainer investment this year.
Cloud platforms have taken on a critical role in AI, as businesses worldwide are increasingly turning to such services to boost productivity with the generative technology. Alphabet holds the third-largest market share in cloud computing with Google Cloud (after Microsoft and Amazon). However, Alphabet is expanding quickly and outpacing its rivals. In the first quarter of 2024, Google Cloud revenue increased by 28% year over year, beating Microsoft Azure’s 21% rise in sales and Amazon Web Services’ 17% growth.
It’s been eight years since Alphabet announced it would move forward as an AI-first company. However, the company has ramped up development over the last year. Alphabet launched its Gemini AI model this year, which has allowed it to add AI features throughout its product lineup. Meanwhile, its DeepMind AI research subsidiary has transitioned into an AI product factory, developing commercial services.
Moreover, despite delivering more stock growth than Amazon or Microsoft over the last 12 months, Alphabet’s stock remains the biggest bargain among the three companies. The table above shows that Alphabet has the lowest forward price-to-earnings ratio and price-to-free cash flow among its competitors, meaning the company’s stock offers the most value.
With 522% stock growth since 2014, Alphabet has created many millionaires. However, its potential in AI and its vast financial resources suggest it’s not done yet and is worth considering this year.
Should you invest $1,000 in Nvidia right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Millionaire-Maker Artificial Intelligence (AI) Stocks to Buy in 2024 was originally published by The Motley Fool
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