There’s no denying that technology titan Nvidia (NASDAQ: NVDA) has been many investors’ favorite way of plugging into the artificial intelligence (AI) craze over the past 18 months. And rightfully so. Its processors form the backbone of most AI platforms.
As is so often the case though, time and reality are catching up with Nvidia. Competitors are diligently working to close the market-share gap, and (because it’s already so big) accelerated Nvidia’s growth pace is set to slow. Its shares are also very expensive as measured by some metrics … a premium that has some investors questioning how much further it can go near-term.
Translation: It may be time to start shopping around for other ways to invest in the next stage 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 user-friendly chat platforms like OpenAI’s ChatGPT, Alphabet’s Google Gemini, or Microsoft‘s Copilot, you probably agree they’re clever applications. But generative AI doesn’t exactly seem like technology that should be the basis for an entire industry.
However, these AI-powered chatbots are far from the only way to commercialize artificial intelligence solutions. Far more marketable to industry and institutions are AI platforms built from the ground up to help them sift through mountains of digital data to make better-informed decisions.
Enter Palantir Technologies (NYSE: PLTR), a stand-alone AI software name (meaning it’s solely dedicated to AI-driven decision-making solutions) that’s becoming a major player in this young industry. It did $2.2 billion worth of business last year and turned a little over $200 million of that into net income.
That’s not a ton of money, particularly for a company sporting a market cap of more than $50 billion. The bullish key here, however, is the trajectory of these results. Analysts expect Palantir’s top line to grow at an average of more than 20% per year for the next several years, creating the amount of scale that pushes up-and-coming companies well out of the red and deep into the black.
Driving this prospective growth is the still-growing willingness to pay for everything decision-making AI can do. Technology market research outfit Precedence Research forecasts the AI software market is set to grow at an annualized pace of 23% through 2032.
Given that Palantir Technologies already serves a slew of high-profile customers including networking name Cisco Systems, the U.S. Army, and energy giant ExxonMobil, odds are good it’s already positioned to capture at least its fair share of this growth.
2. IonQ
Silicon-based binary code computing has been around for decades now. And it’s more than adequately evolved as the tasks thrown at it become more complex. We’re reaching a point, however, where commonplace computing hardware can no longer handle the sort of software experts are able to conceptualize and then create. Quantum computers that utilize subatomic particles rather than silicon to interpret and calculate digital information are the new frontier of computers. To the extent this comparison will have any meaning, quantum computers can be on the order of thousands if not millions of times faster than traditional computers, depending on the task they’re performing. This of course has enormous implications for AI.
IonQ (NYSE: IONQ) is one of a handful of outfits developing such computing platforms. It’s already developed and commercialized them, in fact; now it’s just improving them. Its IonQ Tempo platform in development right now will utilize an integrated 64 superconducting qubit chip (a central element for the computing functions of quantum computers), versus the IonQ Harmony unveiled back in 2020 that only employed 11 such quantum particles in each chip.
Don’t misunderstand though. The world’s not waiting on the next-generation tech. The company already boasts plenty of paying customers and developmental partners ranging from Lockheed Martin to Microsoft to Airbus to the Oak Ridge National Laboratory just to name a few. Last quarter’s top-line revenue of only $7.6 million is still 77% better than the year-earlier quarterly comparison, with the company largely being held back by a lack of capacity to build more systems and offer more service. It’s coming, however, in response to demand. Precedence Research predicts the quantum computing market will expand at a compound annual growth rate of 37% through 2030.
There’s above-average risk here to be sure. That is, quantum computing is still a relatively young science. Its landscape could change quite a bit in the near and distant future.
The prospective reward measures up to this risk though. The current consensus price target for IonQ stands at $14.98. That’s 85% above the stock’s present price.
3. Apple
Last but not least, add Apple (NASDAQ: AAPL) to your list of artificial intelligence stocks other than Nvidia to buy. It’s a suggestion that might surprise some investors. While it’s the United States’ most profitable publicly traded company for good reason, it’s not exactly been seen as a major AI player. (Saudi Arabia’s state-owned oil company Saudi Aramco is the world’s most profitable company.)
That’s about to change though. At February’s shareholder meeting CEO Tim Cook made a point of pointing out that “every Mac that is powered by Apple silicon is an extraordinarily capable AI machine. In fact, there’s no better computer for AI on the market today.” Cook also highlighted Apple’s work in generative AI. To this end, he also told the world to look for new AI functionalities from its tech later this year.
What that meant wasn’t entirely clear at the time, though details are slowly coming to light. In May, for instance, 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 developers conference this week, the company announced that OpenAI’s ChatGPT would soon be able to be integrated with Apple’s newer devices. Perhaps most notably, Cook explained that Apple wouldn’t be collecting or storing any personal data from the usage of its new AI offerings.
At first glance, investors weren’t exactly stoked. They were expecting a little more, or at least expecting a little more detail about these and future AI-powered features. But 24 hours later, the stock was trading up 6% on the news.
Don’t be like those initial stock traders and underestimate the potential of what Apple just unveiled. This may be exactly what a bunch of Apple’s die-hard fans were waiting on before upgrading their iPhones. As such, don’t be surprised to see sales of the breadwinning device finally perk up again. This may also only be a glimpse of Apple’s bigger AI ambitions.
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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.
Forget Nvidia: 3 Artificial Intelligence (AI) Stocks to Buy Instead was originally published by The Motley Fool
Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
