From rags to riches: 3 machine learning stocks that could make early investors rich

If you haven't been hiding under a rock for the past year, you've probably heard of artificial intelligence (AI).artificial intelligence) and machine learning stocks are leading the market. Machine learning technology is advancing rapidly, and many believe that AI will eventually replace most mundane, repetitive human tasks. That's good news for companies looking to cut costs.

AI has been dominating the headlines lately, but it's still early days for what could be a trillion-dollar market in a few years. Investing in these companies early could see exponential gains in the future. Like any emerging technology, these stocks can be volatile to own, but patient investments should pay off in the long run. Here are three machine learning stocks that could make early investors very rich.

Nvidia (NVDA)

It is perhaps not surprising that I begin this article with the following words: NVIDIA (Nasdaq:NVDAWall Street analysts have a price target of $150, which would imply an upside of about 15% from the current share price.

Nvidia is the world leader in GPU chip manufacturing. These chips are used in machine learning infrastructure and some of the most powerful computers in the world. Nvidia completed a 10-for-1 stock split earlier this month. While the stock itself remains unchanged, the falling share price makes it an attractive time to buy more Nvidia shares. While the stock may fall at some point after a steep rise, holding this stock for the next few decades should provide you with some big gains.

One of the arguments against Nvidia bears is how expensive the company is: Relative to its peers, Nvidia trades at 54 times forward earnings, which is cheaper than both. Advanced Micro Devices (Nasdaq:Am) and Broadcom (Nasdaq:AVGO). If there's one machine learning stock to buy now and hold forever, it's Nvidia.

Palantir Technologies (PLTR)

Palantir Technologies (New York Stock Exchange:P.L.T.R.) has been a controversial stock since it went public in 2020. Don't believe it? The current one-year price target range from Wall Street analysts is $9 to $35. Palantir is up more than 40% so far in 2024 and is trading just above the average price target of $21.45.

The main question we're constantly asked about Palantir is what the company does as a business. Palantir sells a data analytics software platform to companies and governments around the world. The platform can instantly organize and analyze vast amounts of data, using machine learning to perform these tasks more efficiently. In late 2023, Palantir was named the world's top vendor of AI and machine learning software.

One problem with Palantir stock is that it's overpriced relative to the company's growth rate. The stock trades at 19.4 times projected sales and 71 times projected earnings. These multiples put Palantir well ahead of other similarly sized software companies. People often pay a premium for industry leaders, and Palantir is on its way to becoming the world's leading machine learning software provider.

Snowflake (SNOW)

Snowflake (New York Stock Exchange:snow) was another stock that was controversial when it first came out. It debuted on Wall Street at around the same time as Palantir, but the two stocks have been moving in opposite directions since then. Analysts remain bullish on the stock, with an average target price of $209.97 and a maximum target price of $600.

Over the years, Snowflake and Palantir have often been compared. Both companies develop software platforms that provide data analytics to users. Snowflake offers a range of machine learning tools, including its Snowflake ML platform. The company has partnered with Nvidia to provide generative AI to users on its data cloud. Snowflake's enterprise-grade large-scale language models (Master of LawsThe new platform, called Arctic, also uses Nvidia's powerful AI software to deliver optimized performance.

In short, Snowflake is emerging as a machine learning powerhouse at a time of stock market weakness. The company's stock is trading at historically low levels, at 13.9x sales, compared to a five-year average of 42.9x. Snowflake is also trading at 47x free cash flow, compared to a five-year average of 906x. The company's stock is still not cheap, but in a few years the dip will likely be viewed as a once in a lifetime opportunity.

On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com's Publishing Guidelines.