Stocks to buy

From Six Figures to Seven: 3 AI Stocks Set to Make Millionaires

Amid the recent AI surge, many investors are scrambling to gain exposure to top AI stocks. Many contenders vie for prominence in this expanding market. While the full extent of AI’s impact on the global economy remains uncertain, forecasts suggest significant GDP contributions from this sector over the coming decade. That underscores the promising prospects ahead, particularly in the realm of generative AI.

The market is underestimating several stocks with potential long-term benefits from AI expansion. Some companies employ AI for practical applications, while others supply essential components for the AI industry’s growth. Additionally, firms supporting AI chip production and data center operations are undervalued despite their crucial roles.

Here are three of the best AI stocks to add to your portfolio now for better gains.

Nvidia (NVDA)

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In the world of AI semiconductors, Nvidia (NASDAQ:NVDA) is the dominant name, and all investors know it. Indeed, the company is one of the significant businesses benefitting from this AI boom, including crypto and blockchain. Its focus on energy-efficient hardware and generative AI systems cemented its leadership position.

Nvidia’s Q4 2023 results were terrific and only strengthened its investors’ confidence. Earnings came in at $22.1 billion, with its revenue from data centers surging 409%. The company also remained in the spotlight with its strong confidence and support from Wall Street. Nvidia’s incredible stock price surge, in which shares more than tripled last year, is on pace for similar returns in 2024. That indicates just how much of a picks-and-shovels play this company has been.

Nvidia’s recent release of its Blackwell chip at its GTC conference highlights the company’s push forward in innovation. The chip could be more than four times more powerful than the next most powerful AI chip, allowing Nvidia to corner the market further in the high-performance computing space.

For those thinking long-term, there simply aren’t companies as dominant as Nvidia in the AI space to consider right now, so it’s going to remain king of this sector for some time. Until the narrative changes, NVDA stock is one to own.

Amazon (AMZN)

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Due to its large scale, Amazon (NASDAQ:AMZN) has some investors questioning whether its bubble could burst anytime soon. However, Amazon and its AI-driven business model have continued to show consistent growth and resilience in the past months. In fact, its 2023 financials were strong and impressive, with a whopping $575 billion in revenue for the year.

Moreover, the company’s advertising sector also showed significant increases, with Q4 revenues sitting at $14.7 billion, mostly due to solid streaming segments. That suggests Amazon’s growth trajectory remains strong, defying doubts about its scalability.

The company will also host its inaugural Big Spring Sale from March 20 to 25, open to all customers, not just Prime members. The event will offer discounts on seasonal items, including decor, furniture and devices fitting the springtime theme. The movement will attract more customers and fight off inflation concerns that have been looming around in the e-commerce space.

A less attractive AI stock perhaps relative to the peers on this list, I think Amazon is a sneaky way investors can benefit from the AI revolution. Due to the vertically integrated nature of its business model, this is a stock to own for the long term, in my view.

Advanced Micro Devices (AMD)

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Aside from Nvidia, Advanced Micro Devices (NASDAQ:AMD) is also one AI and chip stock investors should have in their portfolio for substantial gains.

KeyBanc analyst John Vinh reiterated an Overweight rating on AMD, setting a price target of $270. Vinh observed modest growth for AMD in February, particularly with Genoa’s strong performance. AMD processor instances showed a 1% increase month-on-month and a 24% rise year-on-year. Genoa instance growth remained robust at 19% month over month, primarily driven by Amazon’s AWS. Vinh’s price target is based on a 30-times multiple of his 2025 EPS estimate of $9.05. Despite this, AMD’s trading multiple remains lower than its peers, suggesting a potential upside.

With Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) planning to switch to AMD’s upcoming MI300 chips, the Nvidia-AMD competition in the AI sector intensifies, offering significant growth potential. While Nvidia’s recent release could limit demand for these chips moving forward, it’s also true many developers and companies are looking for lower-cost options. As the market grows, I think there’s room for more than one player, and AMD is the key runner-up to Nvidia worth considering.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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