In the past decade, AI has been one of the most significant developments in the tech sector, and companies focusing on it have been flourishing.
Meanwhile, the coronavirus crisis, which has been disrupting many industries, may actually speed up the adoption of AI. After all, AI has touched almost every sphere, including advertising, healthcare, robotics, retail, video streaming, gaming and urban development.
The AI market, anyhow, is poised to see 46.2% average annual growth rate between 2019 and 2025, per Grand View Research.
And such promising AI prospects, let us look at the top five AI stocks that investors could benefit from.
NVIDIA Corporation (NVDA - Free Report
) is one of the biggest names when it comes to graphics processing units (GPUs), which are more or less used by all major tech firms to help servers implement machine learning services, which again is an integral part of the broader AI market.
By the way, AI is now widely used in autonomous cars or smart electronic gadgets. Notably, NVIDIA is actively involved in the autonomous vehicles industry, which is expected to reach a worth of $60 billion by 2035. And NVIDIA’s expected earnings growth rate for the current quarter and year is a solid 49.2% and 29.5%, respectively.
Microsoft Corporation (MSFT - Free Report
) is looking to make AI more accessible through cloud computing. After all, AI in the cloud is anticipated to increase at an annualized rate of 50% through 2025. Microsoft is making use of this great opportunity through its Azure cloud service.
Microsoft, by the way, has built a huge supercomputer for AI work, giving a new direction to its Azure cloud computing service. The machine has 85,000 processor cores boosted by 10,000 graphics chips.
Microsoft CEO Satya Nadella has said that the company is in the “process to democratize AI” and bring the technology to more industries such as healthcare, education and manufacturing.”
The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 1.1% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 19.8% and 9.1%, respectively.
Intel Corporation (INTC - Free Report
) has made solid advances in AI-centric markets. Since the acquisition of the Mobileye, it is much into the self-driving space. The company also provides chips to American autonomous driving technology development company, Waymo LLC.
Waymo originated as a project of Google-parent Alphabet Inc. (GOOGL - Free Report
) and became a stand-alone company in December 2016.
Intel has consistently raised the dividend payout over the years in the tech industry. Now, Intel’s venture into AI should certainly boost dividend growth.
Intel currently has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its next-year earnings has moved 0.2% north over the past 30 days. The company’s expected earnings growth rate for the next five-year period is 7.5%.
Advanced Micro Devices
Advanced Micro Devices, Inc. (AMD - Free Report
) is currently the only chipmaker that manufactures both central processing units (CPUs) and GPUs. Needless to say, both these processors are significantly used in computing applications like AI.
The growing clout of GPUs on account of increasing adoption of AI techniques in industries like cloud gaming and supercomputing domain certainly holds promise for AMD.
In case of CPUs, AMD has gained more market share than rival Intel in producing leading-edge 7nm chips. In fact, AMD has taken most of the market share in laptops over the last 10 quarters.
Thus, the company’s expected earnings growth rate for the current quarter and year is 100% and 57.8%, respectively. For the next year, its expected earnings growth rate is at 46.5%. AMD currently has a Zacks Rank #3.
With the arrival of AI, a vast amount of storage and processing capabilities is needed. That means chips that will do more work and require less space in servers are the need of the hour.
And it’s Lam Research Corporation (LRCX - Free Report
) that makes etch and deposition machines that help chipmakers manufacture smaller but more powerful chips.
Additionally, Lam’s exposure to memory and opportunity in logic and foundry is a positive. At the same time, the company has a strong balance sheet, with cash and short-term investments of approximately $5.4 billion at the end of the fiscal third quarter versus $4.7 billion in the prior quarter.
The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings has moved up 0.1% for the past 30 days. The company’s expected earnings growth rate for the current quarter and year is 15.8% and 5.8%, respectively. Its projected earnings growth rate for the next year is 11.4%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.