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The artificial intelligence (AI) market is expected to grow at a compound annual growth rate of 37% through 2030, and is expected to exceed $1 trillion within 10 years, according to data from Grand View Research. . It’s no surprise, then, that countless technology companies are restructuring their operations to prioritize AI, creating multiple ways to invest in the up-and-coming industry.
Despite the sharp rise in AI stocks over the past year, the market’s immense potential shows that it’s not too late for new investors to reap big profits from the market. On the other hand, companies that have recently undergone a stock split often experience significant growth afterwards, making them an attractive option.
Here are two stock split stocks that could crush AI stocks in 2024.
1. Nvidia
Nvidia‘s (NVDA -0.20%) The business has grown explosively in recent years, with the company’s stock price soaring more than 1,300% since 2019. In response to impressive growth, management implemented a 4-for-1 stock split in July 2021, marking the company’s fifth stock split since 2000. And the company appears to be on the verge of turning a profit. started.
Over the past 12 months, Nvidia has emerged as one of the biggest players in artificial intelligence, achieving an estimated 90% market share in AI chips. The company’s long-standing dominance in graphics processing units (GPUs) gave it a head start. AMD and intel I haven’t caught up yet.
Nvidia’s revenue soared due to increased demand for AI graphics processing units (GPUs). In the third quarter of fiscal 2024 (ending October 2023), Nvidia recorded a revenue growth of 206% due to a surge in chip sales in its data center division, and operating profit increased by more than 1,600%.
Data by YCharts
This chart shows that NVIDIA’s earnings could reach $24 per share by fiscal year 2026. Multiplying this number by the forward price/earnings ratio of 45 gives us a potential stock price of $1,080, implying 97% growth over the next two fiscal years.
As a leading chipmaker, Nvidia has a lucrative role in AI and technology in general. The company will have to contend with increased competition this year as other companies release new chips. However, its dominance is difficult to overcome.
Meanwhile, the market’s growth potential suggests there is plenty of room for Nvidia to maintain its lead and welcome new entrants. As a result, this stock split stock is too good to pass up in the new year.
2. Alphabet
There’s no denying that it’s home to powerful brands like Google, Android, and YouTube. alphabet‘s (GOOG 0.40%) (Google 0.40%) A strong role in the technology field. The company’s stock price has increased 402% over the past 10 years, with the last split taking place in July 2022 with a 20-to-1 split.
Much of the company’s success over the years is due to the billions of users its services have attracted. Alphabet has leveraged its vast user base to build a profitable digital advertising business that accounts for approximately 25% of the $740 billion digital advertising market. Popular platforms like Google Search and YouTube provide the company with nearly limitless advertising opportunities and have contributed to its revenue surge in recent years.
Since 2019, Alphabet’s annual revenue has increased by 75% and operating profit has increased by 108%. Meanwhile, the company’s free cash flow has increased 200% over the past five years to $78 billion, giving Alphabet the cash to invest heavily in research and development and expand into fast-growing technology areas such as AI. It shows that there is.
In December, the tech giant announced its long-awaited AI model, Gemini, which is expected to compete with OpenAI’s GPT-4. The new model could open the door to countless growth opportunities in AI for Alphabet.
Gemini and the popularity of platforms like Google Search, the cloud, and YouTube can be a powerful combination. The company gains an edge with AI as it creates a search experience similar to ChatGPT, adds new AI tools to Google Cloud, serves more efficient ads, and can better track viewing trends on YouTube. can do.
Data by YCharts
These charts show that Alphabet’s stock price is significantly lower than that of its biggest competitor in the AI space, the cloud giant. microsoft and Amazon. The company has low numbers in two major valuation indicators: future P/E ratio and price-to-free cash flow (P/FCF) ratio. The forward P/E ratio is calculated by dividing a company’s current stock price by its expected future earnings per share. On the other hand, P/FCF divides market capitalization by free cash flow. For both metrics, the lower the number, the better the value.
Forward P/E and P/FCF are great ways to determine the value of a company’s stock because they take into account the financial health of the stock relative to its price. In this case, Alphabet is a much better deal than Microsoft or Amazon.
In addition to a solid outlook in the AI space and consistent financial growth, Alphabet is a screaming buy in 2024.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
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