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Artificial intelligence (AI) is already driving solid growth for many companies involved in popularizing the technology, including semiconductor companies deploying chips for AI training and inference applications. At the same time, many companies are working hard to integrate AI into their products and services to provide more productive tools to their customers and grow their businesses.
marvel technology (MRVL 4.57%) and trade desk (TTD -0.43%) There are two companies that fit the description above. Let’s take a closer look at how these two tech stocks can deliver healthy long-term returns for investors thanks to AI.
1. Marvel Technology
AI is already starting to contribute to chipmaker Marvell Technology’s revenue as major cloud service providers look to the company to make custom chips. Marvell specializes in manufacturing application-specific integrated circuits (ASICs) based on advanced 3 nanometer (nm) and 5nm process nodes, deployed in data centers, automotive, telecommunications, and more.
It was in 2020 that Marvell launched a new generation of ASICs to accelerate AI workloads. We are now reaping the benefits. During a November 2023 fiscal 2024 third-quarter earnings conference call, Marvell management noted that its data center business is benefiting from “better-than-expected AI revenue.”
Marvell previously predicted its AI business would reach $200 million in quarterly revenue by the end of fiscal 2024. However, the company added in its last conference call that “demand continues to grow, and we expect our AI sales to reach $200 million by the end of 2024.” The fourth quarter is expected to significantly exceed our expectations. ”
So there’s a good chance that Marvel’s fiscal year 2025 (though it’s early days) revenue could exceed $1 billion. Don’t be surprised if Marvel’s AI business improves this year, though. It appears to be capitalizing on the growing demand for custom AI chips. The company has already started building a custom chip for one of its cloud customers and plans to begin mass production for another AI customer this year.
JP Morgan Analyst Harlan Sarr predicted the advanced ASIC market was worth between $13 billion and $18 billion last year. He further added that the advanced ASIC market could see 20% annual growth in the future due to AI-driven generative demand. Marvell’s ASIC market share is his 12%, meaning he is well placed to profit from this market.
This probably explains why Marvel’s sales are expected to grow by double digits in fiscal 2025, following an estimated 7% contraction to $5.5 billion in fiscal 2024.
MRVL revenue estimates for current year data by YCharts.
Furthermore, as the chart above shows, Marvell’s revenue growth is expected to accelerate significantly in the next fiscal year. If Marvell reaches sales of $7.31 billion in fiscal 2026 and maintains its current price-to-sales ratio of 12 at that point, its market cap could jump to $88 billion within two years. This would represent a 31% increase from current levels.
But if the market decides to reward Marvell’s AI-driven growth with a richer price-to-sales multiple, the stock could deliver even bigger gains.
2. Trade Desk
AI is predicted to play an important role in digital advertising. Data Bridge Market Research predicts that the adoption of AI in the digital marketing sector could increase at an annual rate of 28% until 2028.
The Trade Desk, a programmatic advertising company, operates a platform that enables ad buyers and marketers to use data to buy ad inventory in real time, allowing them to reach targeted audiences across multiple channels and invest more. You can increase your profitability. The company has been using his AI in its platform since 2016.
In an earnings call last month, the Trade Desk said that it is using AI “distributed across our platform to help our clients make better choices among 15 million ad impression opportunities per second and which ads meet their needs.” “We’re trying to help people understand what’s most relevant to them.” Understand your audience segments at any time. ” The company wants to position itself as a “leader in ad tech AI,” and the good news is that its efforts seem to be bearing fruit.
The Trade Desk reported better-than-expected results for the fourth quarter of 2023, sending its stock price soaring. The company ended the year with sales of $1.95 billion, an increase of 23%. It is noteworthy that the company grew at a much faster pace than the 10.7% growth of the digital advertising market in 2023. The Trade Desk’s current quarter revenue forecast of $478 million points to a 25% year-over-year increase. This suggests that the company’s growth may accelerate in 2024.
Given that this year’s digital advertising market is predicted to grow an additional 13.2% from the boom in 2023, it’s no surprise that The Trade Desk will do even better in 2024. . After all, the company is cornering a larger share of the market. Digital advertising market. Total advertiser spending in 2023 increased from $7.8 billion in 2022 to $9.6 billion, an increase of 23%.
The introduction of AI-centric tools such as Kokai will give advertisers access to millions of ad impressions per second, allowing them to buy the right inventory at the right time at the right price and reduce the amount of ad dollars spent. will be able to maximize profits. Trade Desk will capture an even larger share of the digital advertising market in the future. Perhaps this is why analysts have high expectations for the company.
TTD revenue forecast for current year data by YCharts.
Assuming the company’s growth accelerates in 2026 and sales jump to $3.57 billion, its market cap could increase to $77 billion, based on its current price-to-sales ratio of 21.5. This would represent a jump of 88% from current levels.
Some may argue that the stock is overvalued, but it’s cheap compared to its five-year average sales multiple of 23.7x. The stock also looks cheap compared to the impressive revenue growth The Trade Desk has recorded.
TTD PS Ratio data by YCharts.
As such, investors looking to buy AI stocks to take advantage of the adoption of this technology in the digital advertising industry should consider buying AI stocks as The Trade Desk’s improved growth could lead to solid long-term returns. , you should consider taking a closer look at The Trade Desk.
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