These companies are on track to reap significant profits in lucrative niche markets thanks to AI.
Investing in solid companies and holding them for the long term is a powerful strategy that can help investors significantly grow their wealth over the long term and build multi-million dollar portfolios. This strategy allows investors to not only benefit from the power of compound interest, but also to take advantage of disruptive, long-term growth trends.
For example, suppose you want to invest $10,000 in the following stocks: Nvidia Its price 10 years ago is now worth a whopping $1.94 million. A big reason why Nvidia has made investors richer over the past decade is because of secular growth trends in its gaming and data center sectors, with the advent of artificial intelligence (AI) accelerating the company's growth.
Of course, it will be difficult for other AI stocks to deliver returns like Nvidia's, but investing in companies that are on track to leverage AI developments can help investors become richer over the long term and potentially become billionaires. It could help you get closer to your goal of becoming. .
In this article, we will take a closer look Palantir Technologies (PLTR 0.51%) and taiwan semiconductor manufacturing (TSM -0.36%), two companies playing important roles in the AI space. Investing in these two stocks and incorporating them into a diversified portfolio could ultimately help an investor build his million-dollar portfolio in the long run. Let's see why.
1. Palantir Technologies
Palantir Technologies sees significant growth opportunities within the AI software market. According to Bloomberg Insights, demand for generative AI software could generate $280 billion in additional revenue by 2032. Palantir has generated $2.33 billion in revenue over the past 12 months, indicating it is at the beginning of an incredible growth curve within AI software. market.
The good thing is that Palantir is already starting to gain traction in the AI software space. This is evident from the metrics reported by the company for his 2024 Q1. Palantir was primarily known for providing data analytics and software platforms to government agencies, but it is now targeting commercial customers with its AI software platform. This has significantly increased our commercial customer base.
For example, in the first quarter of 2024, Palantir's commercial customer count in the U.S. grew an impressive 69% year over year. In addition, total U.S. business customer commitments increased 131% year-over-year to $286 million. The significant increase in contract value relative to the number of customers indicates that Palantir is increasing its spending from each customer.
Overall commercial customer count increased 53% year-over-year to 427 companies last quarter. Palantir's overall commercial revenue increased 27% year over year to $299 million in the first quarter, outpacing the company's 21% increase in overall revenue. Palantir executives said during the company's latest earnings call that the new customers they are acquiring are “expanding their work with us.”
Quote Home Improvement Retailer Name lowe'sPalantir says the company has “accelerated its efforts from an AI-free starting point to leveraging production-grade AI for over 1,000 customer service agents, resulting in a 75% reduction in overdue tasks.” “It has been reduced,” he said.
Unsurprisingly, Palantir says more customers are expanding their use of its AI software, which is contributing to the company's revenue growth.
This is evidenced by the fact that Palantir's remaining performance obligations (RPO), a measure of the total amount of Palantir's outstanding contracts, increased 38% year over year last quarter. It is not surprising that this indicator will rise further in the future thanks to the long-term growth opportunities of the AI software market, especially considering that Palantir is one of the top two players in this field. .
All of this explains why analysts expect Palantir's revenue to grow at an impressive annual rate of over 85% over the next five years. It shows that the AI software market has long-term growth opportunities and has the potential to sustain impressive growth for a long time to come. That's why investors looking to add an AI stock to their portfolio that could help them become a millionaire should consider buying Palantir before the stock price soars.
2. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing Co., Ltd. (commonly known as TSMC) is playing a pioneering role in the adoption of AI. Nvidia may be in the spotlight for its dominance in the AI chip market, but without TSMC, the graphics specialist company would not have been able to achieve such impressive growth in revenue and revenue.
That's because Nvidia is a semiconductor company that only designs chips, not manufactures them. Manufacturing is done by foundries such as TSMC. This explains why TSMC is witnessing an upturn in its fortunes.
TSM Revenue (TTM) Data by YCharts
The semiconductor market shrank by 8.2% last year due to weak demand for chips from the smartphone and personal computer (PC) markets. However, the market returned to growth in the fourth quarter of 2023, with sales increasing by 11.6% year-on-year. This can be attributed to AI-driven chip demand.
Semiconductor industry revenues are expected to increase by 13% this year. AI will play a central role in this turnaround, as the AI chip market is expected to grow at an annual rate of 38% until 2030, with annual revenue reaching $207 billion by the end of the forecast period. . TSMC is poised to take advantage of this long-term growth opportunity as it is one of the world's leading semiconductor foundries with a 61% market share.
In addition to Nvidia, TSMC's manufacturing services are used by other companies, including: intel and AMD. All of this explains why TSMC reported impressive growth last quarter. What's more, April revenue was up a whopping 60% year-over-year, demonstrating the incredible momentum we're currently seeing.
TSMC is working to produce more advanced chips, including 3-nanometer chips that it hopes will help develop products worth $1.5 trillion over five years. There's a good chance the company will continue to be the foundry of choice for chipmakers looking to ride the AI boom.
That makes TSMC the top semiconductor stock investors can buy right now to take full advantage of the rise of AI. The company's stock trades at just 24 times forward P/E. Nasdaq-100has an earnings multiple of 30x (using the index as a proxy for tech stocks). Analysts expect the company's earnings to grow 21.5% over the next five years, which could lead to a final profit of $13.74 per share in 2028.
If TSMC were trading at a P/E ratio of 30x at that point, the stock could rise to $412, an increase of 182% from current levels. Investors can expect this stock to deliver even greater returns over the long term, and could even help them become millionaires if purchased as part of a diversified portfolio.
