It’s time to start thinking about the winners of the next chapter of the artificial intelligence movement.
It cannot be denied that the titan of technology Nvidia (NVDA 1.93%) has been the preferred way for many investors to get in on the artificial intelligence (AI) craze over the past 18 months. And rightfully so. Its processors form the backbone of most AI platforms.
However, as is often the case, time and reality are catching up with Nvidia. Competitors are working hard to close the market share gap, and (because it’s already so large) Nvidia’s accelerating pace of growth is set to slow. Its stock is also very expensive, as measured by several metrics … a premium that has some investors questioning how much further it can go in the short term.
Translation: It might be time to start shopping around for other ways to invest in the next phase of the AI revolution. Here are three other AI stocks to consider instead of (or at least in addition to) Nvidia.
1. Palantir Technologies
If your experience with (and awareness of) AI is limited to chat-friendly platforms like OpenAI’s ChatGPT, Alphabet’s Google Gemini, or Microsoft‘s Copilot, you probably agree that they are smart apps. But generative AI doesn’t exactly seem like technology that should underpin an entire industry.
However, these AI-powered chatbots are far from the only way to commercialize AI solutions. Far more marketable to industry and institutions are AI platforms built from the ground up to help them wade through mountains of digital data to make more informed decisions.
Sign in Palantir Technologies (PLTR -2.10%), an independent AI software name (meaning it is dedicated only to AI-driven decision-making solutions) that is becoming a major player in this new industry. It did $2.2 billion worth of business last year and turned just over $200 million of that into net income.
That’s not a ton of money, especially for a company that has a market cap of more than $50 billion. The key bullish here, however, is the trajectory of these results. Analysts expect Palantir’s top line to grow at an average of more than 20% annually for the next several years, creating the measure of scale that pushes growing companies out of the red and deep into the black.
Driving this future growth is the ever-increasing willingness to pay for everything decision-making AI can do. Technology market research outfit Precedence Research predicts that the AI software market will grow at an annual rate of 23% through 2032.
Given that Palantir Technologies already serves a host of high-profile clients including the network name Cisco SystemsThe US military and the energy giant ExxonMobilchances are good it is already positioned to capture at least its fair share of this growth.
2. IonQ
Silicon-based binary computing has been around for decades now. And it has more than adequately evolved as the tasks performed on it become more complex. However, we are reaching a point where mainstream computer hardware can no longer handle the kind of software that experts are able to conceive and then create. Quantum computers that use subatomic particles instead of silicon to interpret and calculate digital information are the new frontier of computing. To the extent that this comparison will make any sense, quantum computers can be on the order of thousands, if not millions of times faster than traditional computers, depending on the task they are performing. This of course has huge implications for AI.
IonQ (IONQ -3.40%) is one of a handful of outfits developing such computing platforms. They have already been developed and commercialized, in fact; now it’s just improving them. Its IonQ Tempo platform in development will now use an integrated 64 superconducting qubit chip (a central element for the computational functions of quantum computers), versus the IonQ Harmony unveiled in 2020 that used only 11 such quantum particles on each chip.
Don’t get it wrong though. of the world NO waiting for the next generation technology. The company already boasts many paying customers and development partners ranging from Lockheed Martin to Microsoft for it Airbus at Oak Ridge National Laboratory just to name a few. Last quarter’s topline revenue of just $7.6 million is still 77% better than the year-ago quarter, with the company largely held back by a lack of capacity to build more systems and offer more services . However, it comes in response to demand. Precedence Research predicts that the quantum computing market will expand at a compound annual growth rate of 37% through 2030.
There is an above average risk here to be sure. That said, quantum computing is still a relatively new science. Its landscape may change slightly in the near and distant future.
However, the potential reward outweighs this risk. The current consensus price target for IonQ stands at $14.98. This is 85% above the current share price.
3. Apple
Last but not least, add Apple (AAPL -0.36%) on your list of AI stocks besides Nvidia to buy. It’s a suggestion that may surprise some investors. While it’s the United States’ most profitable publicly traded company for good reason, it hasn’t exactly been seen as a major AI player. (Saudi Arabia’s state oil company Saudi Aramco is the most profitable company in the world.)
However, this is about to change. At the February shareholder meeting, CEO Tim Cook noted that “every Mac powered by Apple silicon is an incredibly AI-capable machine. In fact, there is no better AI computer on the market today.” Cook also highlighted Apple’s work in generative AI. To that end, it also told the world to look for new AI functionality from its technology later this year.
What that meant wasn’t entirely clear at the time, though details are slowly coming to light. In May, for example, reports surfaced that the company was working on its own AI data center processors (rather than relying on third-party chips like those made by Nvidia). Then, at its annual developer conference this week, the company announced that OpenAI’s ChatGPT will soon be able to integrate with Apple’s newest devices. Perhaps most importantly, Cook explained that Apple would not collect or store any personal data from the use of its new AI offerings.
At first glance, investors weren’t exactly happy. They expected a little more, or at least they expected a little more detail about these and future AI-powered features. But 24 hours later, shares were trading up 6% on the news.
Don’t be like those novice stock traders and underestimate the potential of what Apple just revealed. This may be just what a group of die-hard Apple fans were waiting for before upgrading their iPhones. As such, don’t be surprised to see bread machine sales finally pick up again. This may also be just a glimpse of Apple’s larger AI ambitions.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Cisco Systems, Microsoft, Nvidia and Palantir Technologies. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.