Building significant wealth through consistent investments in growing companies can be a highly effective strategy, and one of the most promising sectors today is artificial intelligence (AI). As the AI market is poised for substantial expansion over the next decade, now is an excellent time to capitalize on growth opportunities within this space. For investors with some spare capital, here are two standout stocks that offer significant growth potential in AI.
1. Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ: AMD) stands to benefit greatly from the rise of data centers, which are essential for supporting the computational power required by AI technologies. AMD estimates its data center chip business could tap into a $500 billion opportunity, and right now, the stock is available at an appealing valuation.
AMD shares are currently priced about 45% below their peak, presenting a potentially lucrative entry point for investors. While the company experienced a 122% year-over-year surge in data center revenue for the third quarter, certain segments—such as chips for industrial markets and video game consoles—have been affected by macroeconomic challenges. These weaker areas of the business have contributed to the stock’s decline in the past year.
However, AMD’s prospects remain strong. The soaring demand for graphics processing units (GPUs) led to an 18% year-over-year growth in total revenue during the third quarter. Additionally, demand for Ryzen consumer PC processors remains robust. As the other sectors recover, AMD’s growth trajectory is poised to accelerate.
A notable advantage for AMD is its high-memory data center GPUs, which are particularly suited for the next phase of AI development: inferencing. This technology will enable real-time data processing, enhancing AI’s ability to function autonomously. Analysts predict a 44% annualized earnings growth for AMD in the coming years, yet its shares are trading at a market-average forward price-to-earnings ratio of 25, making it an attractive buy at current levels.
2. Lam Research (LRCX)
Another stock that presents an exceptional growth opportunity is Lam Research (NASDAQ: LRCX). As a leader in providing equipment and services to the semiconductor industry, Lam Research plays a crucial role in the AI revolution by facilitating the manufacturing of advanced chips. In many ways, Lam is the “pick-and-shovel” supplier of the AI boom.
Lam has a proven track record of profitability, with earnings growing at an impressive 20% annualized rate over the last decade. The increasing complexity of chip manufacturing, driven by AI’s needs, ensures a bright future for the company. Lam’s cutting-edge equipment enables chip manufacturers to produce faster processors and smaller devices, driving high margins for the business. In fact, last year, Lam earned $4 billion in net income on over $15 billion in revenue, achieving a profit margin of 26%.
Currently, Lam’s stock is trading 26% below its recent high, largely due to uncertainties surrounding the recovery in the memory chip market, which accounted for 35% of the company’s revenue in the last quarter. However, as data centers require more memory capacity, demand for Lam’s services is expected to grow, making the current dip a great buying opportunity.
With the stock trading at 23 times this year’s earnings estimate, Lam Research presents an appealing investment at a time when analysts project the company’s earnings to grow by 16% annually over the next few years.
A Final Word on AI Investment
For investors hesitant about missing out on successful stocks, this may be the perfect opportunity to enter the market. Over time, strategic investments have the potential to generate immense returns. For instance, those who invested $1,000 in Nvidia in 2009 would have seen their investment soar to $369,816, while early investors in Apple and Netflix also reaped substantial rewards.
Currently, there are “Double Down” stock recommendations for three companies primed for substantial growth. Don’t miss out on the chance to capitalize on these potential high-flyers before it’s too late. The numbers show that seizing the opportunity today could lead to significant wealth in the future.
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