In 2023, tech stocks are on fire, with the S&P 500 IT (information technology) index up by 33% year-to-date. Obviously, AI stocks are leading the charge, driving the urgency to invest in big tech.
It’s vital to remember that these stocks won’t climb endlessly. Based on the overall sentiment from Wall Street experts, we should expect corrections and a probable second rally. Some of the top AI stocks have been slowing down, leaving an opportunity for investors to hop on board.
AI’s global economic impact is projected to be worth approximately $15.7 trillion by 2030. I, for one, think that sounds like a profitable proposition, and I suspect it sounds to you, too.
Given how fast the tech industry has grown, these big AI players are set to deliver huge returns in the next five years, while technology only continues to advance in the meantime…
NVIDIA Corp (NVDA)
Nvidia (NVDA) stands out as a prime AI stock choice as it comes to mind right away. With shares recently stabilizing a little under the stock’s high of $502, there’s an opportunity for gradual accumulation and potential averaging down. NVDA’s vast addressable market, estimated by executives to be worth $600 billion, positions it for substantial growth in the expanding AI sector. NVDA is making strategic moves into markets like India, partnering with Reliance Industries and Tata Group to tap into AI’s burgeoning potential on a global scale. Already surging more than sixfold since early 2020, NVDA’s GPUs remain in high demand for generative AI applications (which aren’t going away), making it a compelling AI stock.
NVDA is currently up year-to-date by 194.72%, has a PEG (price/earnings to growth) ratio of 1.55x, a positive 20/200 day SMA (simple moving average), and a TTM (trailing twelve-month) momentum growth measure of 242.33%. For Q2, NVDA reported EPS and revenue that exceeded analysts’ estimates by 30.31% and 21.78%, respectively; it also posted year-over-year revenue growth (+101.48%), net income (+849.23%), EPS (+853.85%), and net profit margin (+367.93%). With a low D/E (debt to equity) measure of 35.29%, NVDA carries a free cash flow of nearly $10 billion. NVDA has a modest 0.04% annual dividend yield and a quarterly payout of 4 cents ($0.16/year) per share. With a 10-day average trading volume of 43.14 million shares, NVDA has a median price target of $625, with a high of $1,100 and a low of $525; this range represents the potential for a price increase of over 155% from its current position.
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Alphabet Inc (GOOGL)
Alphabet (GOOGL), the parent company of Google, has the potential to one day be seen as the most significant contributor to the AI revolution. Like Tesla, GOOGL’s potential role in the “robotaxi” market is substantial, particularly with its Waymo unit actively operating autonomous ride-hailing services and expanding to more locations. Moreover, like NVDA, Google is advancing in AI chip development, showcasing its cutting-edge tensor processing unit (TPU) chip that boasts superior speed and energy efficiency compared to Nvidia’s A100 GPU. GOOGL’s Cloud is excelling in the realm of generative AI integrated with different platforms, outpacing competitors like Azure and AWS in sales growth. The highly anticipated upcoming release of Gemini, a powerful generative AI tool, could position GOOGL as a strong contender against Microsoft (MSFT) and OpenAI, further accentuating its potential in the AI domain.
GOOGL is up year-to-date by 49.95%, has a positive 20/200 day SMA, a positive TTM momentum growth measure of 33.88%, a PEG ratio of 1.24x, and a very low D/E measure of 5.25%. For its Q2 2023 earnings call, GOOGL beat analysts’ on EPS by 7.29% and revenue by 2.54%, or approximately $2 billion; during this same period, it also reported year-over-year revenue growth (+7.06%), net income (+14.79%), EPS (+19.01%), net profit margin (+7.23%), and operating income (+12.27%). Scheduled to report Q3 earnings on October 24th, GOOGL is expected to post $74.7 billion in sales at $1.36 per share, with a 3-5 year EPS growth rate of 21.8%. With a 10-day average volume of 26.23 million shares, GOOGL has a median price target of $150, with a high of $200 and a low of $121; this implies over 51% price upside potential.
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Meta Platforms Inc (META)
Meta Platforms (META) presents a strong case as an AI stock to consider. They’ve successfully implemented AI to boost user engagement on Facebook. META AI-driven content recommendations lead to a 7% increase in user time spent on the platform, enhancing monetization through Reels. Notably, almost all advertisers are leveraging AI-powered tools, which include audio creation, ad performance prediction, and improved targeting. META CEO Mark Zuckerberg hints at forthcoming groundbreaking AI products. With AI adoption in digital marketing poised to grow by nearly 27% annually through 2030, META is well-positioned to expand its digital ad market share. Analysts anticipate annual earnings growth of 30%, with META’s stock price reaching around $1,100 in five years. Up year-to-date by 152.64%, META’s stock has a PEG ratio of 0.75x, a low D/E figure of 14.78%, a positive 20/200 day SMA, and a whopping 121.53% in TTM momentum growth. META carries a free cash flow of $20.25 billion and a positive ROE of 17.35%. For its Q2 earnings, META reported EPS and revenue that surpassed analysts’ projections by 3.20% and 3.12%, respectively; at the same time, it showed critical year-over-year growth in revenue (+11.02%), net income (+16.46%), EPS (+21.14%), net profit margin (+4.91%), and operating income (+21.70%). For Q3, META is expected to report $31.2 billion in sales at $3.04 per share, with a 3-5 year EPS growth rate of 6.2%; we’ll see that come November 1st. With a 10-day average volume of 21.85 million shares, META has a median price target of $380, with a high of $435 and a low of $100; this suggests the potential for a price increase of more than 43% over its current price.
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