• Sat. Dec 7th, 2024

2 Better Artificial Intelligence (AI) Stocks to Buy Now, According to Wall Street

2 Better Artificial Intelligence (AI) Stocks to Buy Now, According to Wall Street

Interest in artificial intelligence (AI) exploded following the launch of ChatGPT in late 2022. Nvidia has been one of the biggest winners in terms of revenue growth and share price appreciation. But while Wall Street still expects the stock to move higher over the next year, analysts forecast more upside in Amazon (NASDAQ: AMZN) and Vistra (NYSE: VST).

  • Nvidia has a median price target of $150 per share. That implies 6% upside from its current share price of $141.

  • Amazon has a median price target of $220 per share. That implies 17% upside from its current share price of $188.

  • Vistra has a median price target of $143.50 per share. That implies 16% upside from its current share price of $124.

I think Nvidia is a must-own stock for investors hoping to capitalize on the AI boom. But owning a basket of AI stocks is the most prudent strategy, so Amazon and Vistra certainly warrant consideration.

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The investment thesis for Amazon centers on its strong competitive presence in three markets. Specifically, the company operates the largest online marketplace in North America and Western Europe in terms of sales. Amazon is also the third-largest digital advertising company. And Amazon Web Services (AWS) is the largest public cloud.

Amazon is using artificial intelligence across its retail business to automate coding and supply chain management and surface product recommendations for shoppers. Morgan Stanley analysts believe the resultant cost savings could boost the company’s operating margin by several percentage points. But the company is particularly well positioned to monetize AI due to its leadership in cloud infrastructure and platform services (CIPS).

AWS accounted for 32% of CIPS spending in the second quarter, while Microsoft Azure ranked second with 23% market share and Alphabet‘s Google Cloud Platform ranked third with 12% market share, according to Synergy Research Group. AWS is leaning into its leadership with Amazon Bedrock, a cloud service that lets businesses fine-tune pretrained models and build custom generative AI applications.

Goldman Sachs analyst Kash Rangan estimates public cloud spending will grow at 22% annually to reach $2 trillion by 2030, and he believes up to 15% of that total could be spent on generative AI services. AWS is well positioned to benefit with Bedrock simply because it’s already the largest public cloud in terms of revenue, customers, and partners.

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