Artificial intelligence (AI) adoption has the potential to boost productivity growth significantly, according to Goldman Sachs (NYSE:GS). These three rapidly growing AI stocks offer immense potential, with their current stock prices yet to fully reflect it. The global AI market is projected to reach $1,812 billion by 2030, making it an opportune time to consider investing in AI stocks.
Of course, not all AI stocks may be good buys in the near or medium term. Valuations across the sector have run hot, meaning this is a difficult sector to time right now.
However, for those thinking truly long-term, here are three top picks in this sector that may be worth holding onto and buying for the next decade or two.
Nvidia (NASDAQ:NVDA) is a leader in the AI space, and its products are used for data centers, gaming, and autonomous driving. The world’s largest chip maker by market capitalization has been the top-performing stock in the S&P 500 during the first half of 2023, with a 211% gain. The company’s success can be attributed to its chips and semiconductors driving artificial intelligence applications. The market value of NVDA has crossed $1 trillion, reaffirming the business’s status as a mega-cap software corporation.
Despite the impressive performance, analysts believe there is still potential for growth as Nvidia continues to capitalize on the AI trend, including the introduction of the powerful DGX GH200 supercomputer.
Analysts at KeyBanc (NYSE:KEY) have increased their price target for Nvidia, recognizing the company’s success in the semiconductor industry and its strong presence in artificial intelligence. Wall Street analysts are still optimistic about Nvidia amid worries about the stock’s price due to the sector’s explosive development in artificial intelligence. Nvidia holds at least an 80% market share in AI chips and is favored by major companies like Google and Microsoft.
The increasing demand for AI chips has contributed to Nvidia’s strong financial performance and positive guidance. Analysts have raised their price targets for Nvidia, indicating the potential for further growth.
Microsoft (NASDAQ:MSFT) has the potential to reach $400 per share, driven by its potential acquisition of a renowned video game developer and its integration of generative artificial intelligence tools. While there are no guarantees, Microsoft is expected to provide growth and value to its investors.
MSFT stock reaching $400 in the near future should come as no surprise, given Microsoft’s reputation as an early adopter of AI technology. The ongoing acquisition of Activision Blizzard (NASDAQ:ATVI) is a significant catalyst in the equation. Microsoft has advanced against legal hurdles, winning recognition from the U.S. and clearance from the U.K.’s Competition and Markets Authority. The recent rejection of the FTC’s attempt to block the deal further strengthens Microsoft’s position. These developments bode well for Microsoft and its stakeholders.
Moreover, Microsoft’s stock has experienced a 44% year-to-date rise. It was partially fueled by the strong growth of its cloud computing platform Azure, which grew by a whopping 27% in Q1. Microsoft is well-positioned to benefit from the burgeoning computer science sector because of its strong cloud software and IT skills.
Despite lagging behind other tech stocks, such as Meta Platforms (NASDAQ:META) and Nvidia, Amazon (NASDAQ:AMZN) presents a potential opportunity for investors seeking undervalued stocks. With a 50% gain since January and its stock below its 52-week high, there may still be room for Amazon to recover and experience further growth.
Wall Street believes that Amazon still has untapped growth potential. While the company may not be making headlines for groundbreaking AI integrations, it has been using AI to enhance its core businesses for years. From product recommendations to improving retail experiences, Amazon sees the value in leveraging generative AI algorithms to better serve customers. This ongoing enthusiasm and dedication to AI-driven innovation position Amazon for continued success in the market.
As far as long-term tech juggernauts are concerned, Amazon remains among the most steady long-term picks investors can buy at relatively attractive valuations. In Amazon’s case, the company’s valuation isn’t cheap, but relatively cheap compared to its historical average. This is one stock I hold for the long term, and I think it is worth buying up to its previous all-time high.
On the date of publication, Chris MacDonald held a long position in AMZN, META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.