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Last year, there was only one thing you needed to know to make big bucks investing. It’s about buying large-cap artificial intelligence (AI) stocks. Almost all companies are making impressive profits.
chip manufacturer Advanced Micro Devices (AMD 2.14%) and Nvidia (NVDA -0.12%) This has been a particularly big winner.cloud service provider Amazon (AMZN -2.42%)Google’s parent alphabet (GOOG -1.50%) (Google -1.34%)and microsoft (MSFT -2.07%) also took off.
But those performances have now become history. Which of AMD, Amazon, Alphabet, Microsoft, or Nvidia is Wall Street most bullish on the future of AI stocks?
Analysts rate these AI stocks poorly
Two of these big AI stocks could be eliminated quickly. Wall Street doesn’t have high hopes for AMD or Nvidia in the short term.
Analysts’ average 12-month price target for AMD reflects a modest decline from current price. This isn’t all that surprising considering the stock has soared more than 130% in the past 12 months. Many analysts seem to think it’s time for AMD to take a breather.
It’s a similar story for Nvidia. The company’s stock has nearly tripled in the last year as demand for its graphics processing units (GPUs) soars. But while that demand doesn’t appear to be abating, the consensus on Wall Street is that Nvidia stock has no room for more. The average price target is slightly lower than the current stock price.
However, not all analysts are against these two AI chipmakers. The most optimistic analysts think AMD and Nvidia could soar nearly 40% and 60%, respectively, over the next 12 months.
contestants
Wall Street is optimistic about Microsoft. The tech giant’s average price target reflects more than 10% upside potential. One analyst predicts that Microsoft stock could rise more than 30% over the next 12 months.
Microsoft is looking to benefit from the AI boom in two major ways. The company has integrated OpenAI’s GPT-4 large-scale language model into its entire software application. This added functionality has the potential to attract more customers.
The company is also the second largest cloud service provider with its Azure platform. Organizations are flocking to the cloud to build and deploy AI apps, especially those focused on generative AI.
But analysts believe Alphabet has the potential to outperform Microsoft, AMD and Nvidia in the near term. The stock’s average 12-month price target is approximately 15% above its current price. The most bullish analysts expect Alphabet stock to rise nearly 30%.
What about Alphabet’s recent embarrassment when Google Gemini produced inaccurate images of historical figures? Wall Street doesn’t think this will be anything more than a temporary speed bump. Like Microsoft, Google is also integrating generative AI into many of its products. Google Cloud should also continue to benefit from AI adoption.
wall street favorite
That leaves one big AI stock that Wall Street loves most. Amazon’s 12-month average price target reflects nearly 17% upside potential. The company’s biggest fans in the analyst community believe the stock could rise nearly 30%.
AI stands out as one of the company’s key growth drivers. Amazon Web Services (AWS) holds the top market share in cloud services and enjoys the same AI tailwinds as Microsoft Azure and Google Cloud.
Analysts also note how Amazon’s focus on improving profitability and free cash flow is paying off. The e-commerce and cloud services giant’s fourth-quarter profit soared to $10.6 billion from $300 million a year earlier. Free cash flow for the 12 months ended December 31, 2022 was negative $11.6 billion, but free cash flow improved to $36.8 billion for the subsequent 12 months.
Is Wall Street right that Amazon will be the biggest winner of these 5 AI stocks over the next 12 months? Maybe. I agree that Amazon’s momentum should continue.
But in the long run, we expect AMD, Amazon, Alphabet, Microsoft, and Nvidia to continue winning. Looking back 20 years from now, he might still be able to say that one of the things investors needed to know to make big money was to buy large-cap AI stocks.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Keith Speights has held positions at Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
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