The unfolding narrative of artificial intelligence (AI) has been nothing short of a thriller in the last year. OpenAI’s ChatGPT burst onto the scene, catalyzing a resurgence of interest in AI and spotlighting the technology’s remarkable advancements.
The Nasdaq-100 Technology Sector has surged 51% year over year, largely attributed to the fervor surrounding AI. This fervor shows no signs of waning, with projections indicating that the industry is far from its peak.
Data from Grand View Research demonstrates that the AI market escalated to a valuation approaching $200 billion last year, and it is anticipated to expand at a compound annual growth rate of 37% through 2030. By the close of the decade, this trajectory could lead the industry to a near $2 trillion magnitude.
The time is ripe for investment in this burgeoning sector, with two AI-powered stocks poised to set investors up for potential lifelong prosperity.
Intel Rises from Ashes: A Phoenix in the Making
Intel (NASDAQ: INTC) encountered rough waters in recent times. Despite dominating over 80% of the central processing unit (CPU) market for a significant period and serving as the prime chip provider for Apple’s MacBook lineup, Intel’s supremacy bred complacency, leaving it open to assaults from more innovative rivals.
Advanced Micro Devices began chipping away at Intel’s CPU market share in 2017, diminishing it to 63% today. Furthermore, Apple’s departure from Intel in 2020 in favor of internally crafted, potent hardware designs sent Intel’s stock plummeting by 34% over the last three years.
Nonetheless, Intel’s fall from grace appears to have rekindled a fighting spirit within the company. Last June, Intel unveiled a comprehensive overhaul in its business strategy, transitioning to an internal-foundry model anticipated to yield $10 billion in savings by 2025.
Embracing AI fervently, Intel launched a suite of AI chips in December, including Gaudi3, a graphics processing unit (GPU) positioned to rival analogous offerings by Nvidia. Additionally, Intel introduced novel Core Ultra processors and Xeon server chips integrated with neural processing units to enhance the efficacy of AI applications.
While Intel faces a daunting ascent to match its competitors in the AI realm, its current trajectory holds immense promise for a substantial payoff in the long haul.
The chart below projects that Intel’s earnings could ascend to nearly $3 per share across the upcoming two fiscal years. Factoring this forecast into the company’s forward price-to-earnings (P/E) ratio of 30 hints at a potential stock price of $90 by fiscal 2026, translating to a 120% surge.
With a transformative shift in its business model and burgeoning AI prospects, Intel emerges as an irresistible investment opportunity.
Amazon’s Audacious AI Odyssey
Maturing over nearly three decades, Amazon (NASDAQ: AMZN) has evolved into a titan in the tech realm. The company’s domain extends across e-commerce, cloud services through Amazon Web Services (AWS), satellite technology, and ventures into groceries, gaming, consumer tech, and beyond.
Amazon’s foray into AI has captivated audiences in recent times. Operating the juggernaut Amazon Web Services (AWS), the company possesses the potential to harness its vast cloud data centers to steer the generative AI market.
Responding to escalating demand for AI services, AWS unveiled a range of tools in 2023. Noteworthy launches include Bedrock, facilitating the construction of generative AI apps; CodeWhisperer, a developer tool for code generation; and HealthScribe, a transcription tool for patient-physician interactions.
Bolstering its retail platform with AI, Amazon introduced Rufus, an AI shopping aide, just prior to its latest earnings announcement.
In the fourth quarter of 2023, AWS witnessed a 13% year-over-year revenue surge to $24 billion, accounting for 54% of the company’s operating income while generating the lowest revenue proportion among Amazon’s three segments.
The forecasted earnings per share (EPS) point to Amazon’s substantial upside potential. Projections suggest earnings could climb to nearly $7 per share by fiscal 2026. Calculating this against the forward P/E of 42 translates to a projected stock price of $294, implying a 67% escalation from the current valuation across the next two fiscal years.
With enticing prospects in AI, Amazon’s stock emerges as a compelling option for investors seeking to tap into the future of technology.