The stock market saw strong growth in the first half of the year. Nasdaq Composite Index The stock index is up about 19% since Jan. 1, but it's not too late to invest in companies that are likely to continue growing over the next six months.
Despite rapid growth since last January, the artificial intelligence (AI) market remains an attractive place to get into: According to Grand View Research, the industry hit $197 billion last year and is on track to hit nearly $2 trillion by the end of the decade.
Since the beginning of last year, the AI industry has created a number of billionaires, but it doesn't seem to be done yet: Demand for AI services and the high-performance chips needed to run them continues to grow, boosting revenues for some major companies.
Get in before it's too late: Here are two millionaire-making AI stocks to buy in 2024.
1. NVIDIA
NVIDIA (NASDAQ: NVDA) Since the AI boom began in early 2023, NVIDIA has created more than a few billionaires, and the company's stock price has risen 745%. The company already had a reputation as a reliable growth stock thanks to its success in gaming, consumer products and data centers. But NVIDIA's involvement in AI has taken its business to a new level. The company became the first chipmaker to surpass $3 trillion in market capitalization this year.
Some analysts question how much bigger the company can realistically grow given how fast it has grown, but its near-unbeatable dominance in AI chips and growing cash reserves that dwarf its rivals suggest its lead is unlikely to fade anytime soon. Meanwhile, developers are only just scratching the surface of what's possible with AI, suggesting that demand for chips is far from plateauing.
Advanced Micro Devices and Intel It is Nvidia's biggest rival in the AI chip market. Despite both companies making big investments last year, Nvidia still holds an estimated 90% market share in AI chips. Moreover, the financial gap between the two companies is widening due to skyrocketing revenues.
This chart shows that Nvidia's quarterly operating profit and free cash flow have far outpaced the same metrics for AMD and Intel over the past year, indicating that Nvidia is far more capable of investing in its business and maintaining its lead in AI for many years.
Nvidia has the capital and brand power to continue expanding well into the future, and despite the recent stock rally, its price-to-earnings growth ratio remains below 1, meaning it may still be trading at a discount relative to its potential.
As a result, Nvidia has become a millionaire-making stock you can't miss in 2024.
2. Alphabet
Nvidia is showing overwhelming strength in AI chips, alphabet (Nasdaq: GOOGL) (Nasdaq: GOOG) Google is investing heavily in the software side of the market as it faces stiff competition from the cloud giants. Microsoft and AmazonBut stock valuation and recent earnings make Alphabet the obvious investment this year.
Cloud platforms play a key role in AI, with businesses around the world increasingly turning to these services to boost productivity with AI-generated technologies. With Google Cloud, Alphabet holds the third-largest market share in cloud computing (behind Microsoft and Amazon). But Alphabet is expanding rapidly, outpacing its competitors. Google Cloud revenue grew 28% year over year in Q1 2024, outpacing Microsoft Azure's 21% growth and Amazon Web Services' 17% growth.
It was eight years ago that Alphabet said it was moving forward as an AI-first company, but the company has stepped up its development over the past year: Alphabet released its Gemini AI model this year, enabling it to add AI capabilities across its product lineup, while its AI research subsidiary, DeepMind, is transitioning into an AI product factory, developing commercial services.
Moreover, despite its share price rising more than Amazon and Microsoft over the past 12 months, Alphabet's stock remains the cheapest of the three. The table above shows that Alphabet has the lowest forward price-to-earnings and price-to-free cash flow ratios among its competitors, meaning its stock is the most valuable.
With a stock price up 522% since 2014, Alphabet has created many billionaires, but given the company's potential in AI and its massive financial resources, it's not done yet and is worth considering this year.
Should I invest $1,000 in Nvidia right now?
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Suzanne Frey, an executive at Alphabet, 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. Dani Cook has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The article 2 Millionaire-Making Artificial Intelligence (AI) Stocks to Buy in 2024 was originally published by The Motley Fool.
