INTC - 2 Artificial Intelligence (AI) Stocks That Could Go Parabolic
2024-07-01 20:09:00 ET
This article first appeared on our U.S. website and was written by Dani Cook.
The artificial intelligence (AI) market has surged since the start of 2023. The debut of OpenAI’s ChatGPT illustrated key advances in generative AI technology and demonstrated its potential to change all aspects of tech.
As a result, an array of companies have ventured into the AI space, attempting to take slices of a pie that was worth close to $200 billion last year, and that Grand View Research forecasts will grow at a compound annual rate of 37% through 2030. And even though many stocks involved have already experienced meteoric rises, the potential of AI suggests it’s not too late to invest in the trend and accrue major gains over the long term.
Tech giants have barely scratched the surface of what’s possible with AI, suggesting now could be the best time to invest in the companies pushing the industry forward. So, here are two artificial intelligence stocks that could go parabolic.
1. Intel
You might be surprised to see me recommending Intel ( NASDAQ: INTC ) , given that its stock is down 39% year to date. However, the company appears to be staging a comeback that could send its share price soaring in the coming years.
After a challenging decade, Intel is restructuring its business to regain its competitive edge. The company is investing heavily in AI, debuting a range of new AI processors this year. Meanwhile, the chip giant is expanding its manufacturing division, a move that it believes will help it reach non-GAAP gross margins of 60% and save it between $8 billion and $10 billion by 2025.
Restructuring is costly, and it will take time for Intel to see significant returns on its investment. However, recent results indicate the company is on the right track. In the first quarter, its revenue increased 9% year over year to $13 billion — a sharp contrast to the 16% decline in sales it posted in 2023. The chipmaker also delivered non-GAAP earnings of $0.18 per share, beating expectations by about $0.04 per share.
Intel has a lot of work ahead as it goes up against Nvidia in the AI chip market and expands its foundry division. However, it’s on a promising growth trajectory. In addition to positive earnings, the company’s trailing 12-month free cash flow has increased by about $2 billion since January.
Trading at a forward price-to-earnings ratio of about 28 and a stock price that’s near its lowest point in months, Intel is a screaming buy this month.
2. Apple
Apple ‘s ( NASDAQ: AAPL ) share price has popped by more than 10% since last month as Wall Street grew bullish on the company again. The iPhone maker hit some speed bumps over the past year, when tumbling product sales led to declines in revenue. However, recent developments gave investors a peek into Apple’s plan to boost product revenue with the help of AI.
On June 10, the company unveiled Apple Intelligence, a platform that will bring generative AI features to its devices. However, the catch is that to take advantage, users will need at least an iPhone 15 Pro, or a Mac or iPad equipped with an M1 to M4 processor. The move could drive millions of consumers to upgrade to the company’s latest devices.
Despite recent challenges, Apple remains a behemoth in consumer tech. The company has built up nearly unrivaled brand loyalty within its user base, which could see it become a major growth driver in the public’s adoption of AI. While companies like Microsoft and Amazon prioritized catering to the business sector’s AI needs, Apple’s focus on consumers could position it to dominate that part of the AI space.
In addition to its products, Apple has a booming services business that could also be bolstered by AI. The company has entered into a partnership with OpenAI that will see Siri hand off users to ChatGPT for answers to specific questions. However, this appears to be only the start. Down the line, OpenAI’s technology could help Apple offer a range of paid-for AI services to improve the usability of its products.
Data by YCharts.
Moreover, Apple’s stock is trading at a bargain forward P/E level compared to some of its rivals in AI. The company’s gradual expansion in AI has induced a more moderate stock price rise than Microsoft and Amazon have experienced over the last year. Yet, the iPhone maker far outperforms both of them on free cash flow, indicating it could be better equipped to keep investing in its business.
As a result, Apple is a no-brainer right now.
The post 2 Artificial Intelligence (AI) Stocks That Could Go Parabolic appeared first on The Motley Fool Canada .
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 Amazon, Apple, and Microsoft. 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 .
2024