Investors are increasingly drawn to hot AI stocks amid rapid industry innovation and market growth. The overall AI space is predicted to soar from a $196.6 billion market in 2023 to more than $1.8 trillion by 2030. Accordingly, investors looking to capitalize on the growth of AI are increasingly looking at a wide range of sectors such as automotive, healthcare, finance, and manufacturing. Identifying undervalued AI stocks early is key to maximizing investment potential.
AI has rapidly emerged as a leading industry, which is poised for substantial long-term growth. With numerous companies integrating AI, now is an opportune moment to invest in promising AI stocks. However, selecting top contenders is challenging due to the industry’s infancy and evolving landscape. Thus, investors navigating AI stocks must carefully identify future industry leaders.
Symbotic (SYM)
Symbotic (NASDAQ:SYM) excels in warehouse robotics and AI, achieving robust Q2 2024 sales of $424 million. Importantly, Symbotic’s revenue growth rate has remained in the high doubled digits, supposed by recent deployments of three new systems and upgrades for existing operational ones. These moves have enhanced the company’s capacity and efficiency with advanced algorithms and AI chips. This positions Symbotic as a breakout stock, driven by rapid growth and technological innovation in logistics automation.
With Walmart (NYSE:WMT) as its major customer, Symbotic has a relatively stable long-term growth trajectory. Currently, Walmart drives about 90% of its $1.339 billion revenue last year. While there is some risk with customer concentration that should be considered, it’s clear Symbotic’s core technology is in high demand. Notably, Symbotic also recently launched Greenbox, a service module, through a $7.5 billion joint venture with SoftBank. Future launches should further bolster the company’s growth prospects moving forward.
Symbotic is positioned to lead in blue-collar industries amid the AI wave, targeting a vast market. In Q2, the company enhanced efficiency with new routing algorithms and AI chips, exceeding earnings and revenue expectations significantly. Growth catalysts include a new solutions and a logistics service deal with C&S Wholesale Grocers, suggesting strong future growth potential.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is a top semiconductor maker demanding a very high multiple in the world of chip makers. In fact, on a trailing basis, AMD’s price earnings multiple is higher than that of Nvidia (NASDAQ:NVDA), a shocking concept for many investors looking exposure to AI-related chip makers.
Some analysts have cited limited AI growth potential for AMD, preferring its competitors. However, the company’s new Ryzen™ processors with Neural Processing Units target AI applications, alongside projections to secure a $15 billion share in the data center GPU market, support buy ratings form analysts at Citi (NYSE:C) that have issued a buy rating and a $176 price target on AMD stock.
In current news, AMD announced it has acquired Silo AI, Europe’s largest private AI lab, for about $665 million in cash. This move strengthens AMD’s AI strategy with Silo AI’s renowned team of scientists and engineers specializing in custom AI models and solutions across cloud, embedded, and endpoint computing. Silo AI CEO Peter Sarlin will lead the team under AMD’s Artificial Intelligence Group, aiming to enhance AI solutions on AMD platforms. The acquisition is set to finalize in the latter half of 2024, supporting AMD’s goal to rapidly deploy advanced AI solutions worldwide.
AMD’s stock surged 153% from early 2023, driven by aggressive AI initiatives in response to Nvidia’s industry dominance. AMD has launched a number of competitive chips, securing mega-cap tech clients along the way. Shifting to annual chip releases, AMD unveiled the MI325X following the MI300X AI accelerator. Although there are bigger competitors like Nvidia who holds almost 95% of the market, AMD still holds strong growth potential in the world of AI.
Taiwan Semiconductor (TSM)
Joining recently the trillion-dollar club, Taiwan Semiconductor (NYSE:TSM) shows resilience and underscores the impact of AI in the chip sector. The company has now surpassed Tesla (NASDAQ:TSLA) as the seventh most valuable tech company. Other major tech giants have also hit record highs, with rankings continuing to fluctuate, which will remain the case moving forward.
CFRA analyst Angelo Zino highlighted that the semiconductor sector became the top industry in the S&P 500 in recent remarks, reflecting significant global shifts over the past 15 to 18 months. This surge, driven by soaring demand for chips amid the growth of generative AI, suggests ongoing industry expansion.
TSM saw Q1 gross margin rise to 53.1%, boosted by favorable product mix changes. Operating margin improved to 42%, driven by stringent expense controls. The company’s Q1 EPS hit TWD8.7 with a solid 25.4% return on equity, reflecting strong profitability. TSMC plans $28-32 billion in 2024 CapEx, focusing on advanced technologies and global expansion with new fabs in Arizona, Japan, and Europe, to meet rising AI market demands efficiently.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
