The Future is Now
Artificial intelligence (AI) is revolutionizing multiple sectors of the economy, and its impact is expected to be substantial. According to various estimates, AI has the potential to add trillions to the world’s gross domestic product. Investors are already witnessing this growth in top AI hardware and software companies, which have reported significant expansion in their businesses and revenues over the past few years.
Two Stocks to Consider
To help you profit from this opportunity, we recommend considering two stocks that are well-positioned to supply the growing need for AI infrastructure in the years to come. These stocks are:
1. Nvidia (NVDA)
Nvidia is a leading supplier of graphics processing units (GPUs), which are essential for AI training and inferencing in data centers. The company sees a $1 trillion opportunity for its business, as data centers upgrade legacy computing systems to AI-optimized hardware.
The Growth Story
AI is changing the way businesses operate, and Nvidia has called it the next industrial revolution. The company’s annual revenue has quadrupled over the last three years, with analysts expecting it to report $129 billion in total revenue for fiscal 2025 (ending in January), representing a year-over-year increase of 112%, according to Yahoo! Finance.
Key Statistics
- Nvidia controls over 70% of the AI chip market.
- The company has generated $56 billion in free cash flow on $113 billion of revenue over the last four quarters.
- Management noted that demand for its upcoming Blackwell computing platform is ‘staggering.’
Why Invest in Nvidia?
While investors shouldn’t expect Nvidia’s revenue to continue doubling every year, it should remain a rewarding investment that compounds in value with the growth of the business.
2. Dell Technologies (DELL)
The market for AI technology is so strong that it has propelled Dell Technologies back to growth stock status. About half of its business comes from sales of PCs, workstations, and branded peripherals, which have struggled to grow due to a weak PC market. The other half of Dell’s business is booming, with strong demand for AI-optimized servers fueling growth in its infrastructure solutions group.
The Growth Story
Dell’s infrastructure business posted Q3 revenue growth of 34% compared to the year-ago quarter. Consistent with McKinsey’s estimate for data center capacity to continue growing, the momentum in AI servers is not slowing down. Dell reported a strong AI server backlog of $4.5 billion, with its five-quarter pipeline growing 50% over the previous quarter!
Why Invest in Dell?
Dell offers several services that help pad the bottom line, including power management, cooling solutions, networking switches, and other maintenance and professional services. Management calls these add-on sales opportunities ‘profit pools,’ which should continue to benefit Dell’s margins over time as it sells more servers.
Should You Invest in Nvidia?
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Investment Opportunity
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Investing in AI Stocks
The market for AI technology is expected to continue growing, and we recommend considering two stocks that are well-positioned to supply the growing need for AI infrastructure: Nvidia (NVDA) and Dell Technologies (DELL). These stocks have strong growth potential and should remain rewarding investments that compound in value with the growth of the business.
Conclusion
The exponential growth of artificial intelligence is expected to add trillions to the world’s gross domestic product. Investors can already see this playing out, with top AI hardware and software companies reporting significant expansion in their businesses and revenues over the past few years. We recommend considering two stocks that are well-positioned to supply the growing need for AI infrastructure: Nvidia (NVDA) and Dell Technologies (DELL).
References
- Yahoo! Finance
- McKinsey & Company
Disclaimer
The information provided is for general informational purposes only and should not be considered as investment advice. Investors should do their own research and consult with a financial advisor before making any investment decisions.
Note: The numbers and statistics mentioned in the article are subject to change and may not reflect the current market situation.