Artificial intelligence (AI) represents a huge opportunity for businesses and investors as it grows into an estimated $1.4 trillion market by 2029, a massive increase from its current size of $387 billion. of dollars. https://www.globenewswire.com/en/news-release/2022/09/13/2514767/0/en/AI-Market-Size-to-Reach-USD-1394-30-Billion-by-2029. html
To successfully harness AI, there are three big companies worth buying right now: The trading post (TTD 1.55%), Amazon (AMZN 2.14%)and Nvidia (NVDA 6.51%). Here’s why.
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1. The Trade Desk advances the advertising market with AI
If you’re unfamiliar with The Trade Desk, the company has an advertising platform that helps businesses buy ads across the internet, TV platforms, and mobile apps.
The Trade Desk’s AI angle comes from the company using algorithms and artificial intelligence to automate the types of ads displayed in different places online, making buying and placing ads easier and more efficient for its customers.
Even in the volatile advertising market, The Trade Desk’s business is booming. Sales soared 31% in the third quarter (ending Sept. 30) to $395 million and non-GAAP earnings (adjusted) rose 44% to $0.26 per share.
The quarter was impressive enough on its own, but it also came at a time when other businesses in the ad space saw declining ad sales.
The resilience of the Trade Desk shows that this company knows how to successfully exploit the growing digital advertising space, which will be worth an estimated $315 billion by 2025.
While The Trade Desk’s current price-to-sales (P/S) ratio of around 16 isn’t exactly cheap, it’s still much cheaper than its P/S ratio of around 40 around the same time. ‘last year.
2. Amazon is an AI powerhouse
Some investors may not be aware that Amazon is integrating AI into many aspects of its business. Amazon’s algorithms help recommend deals and products to online shoppers on the company’s massive e-commerce store and help the company optimize its complex delivery network.
AI is also on full display in the company’s Amazon Go stores, where machine learning (via cameras, sensors and algorithms) tracks the products people put in their carts and automatically loads them as they go. come out of the store.
Additionally, Amazon Web Services (AWS) – the company’s cloud computing business – offers AI services to its customers for everything from text-to-speech apps to online chatbots.
Amazon’s stock price has slid along with the broader tech sector over the past year as macroeconomic headwinds have put some pressure on the company. But long-term investors shouldn’t overlook the company’s current growth, including total Amazon sales in the third quarter (ending Sept. 30) up 15% to $127.1 billion and revenue from ‘AWS up 27% to $20.5 billion.
Amazon is using AI to take the lead in e-commerce and cloud computing, and the company’s stock price is currently looking pretty cheap. Amazon shares are trading at just 1.8 times the company’s sales, down from a P/S ratio of 3.9 at the same time last year.
3. Nvidia’s chips lead the AI revolution
Behind all the cutting-edge artificial intelligence technologies, there are physical microchips that make artificial intelligence a reality. And for many companies, their benchmark AI processors are made by Nvidia.
Nvidia’s processors have proven to be quite good at AI tasks, and the company’s data center sales have increased accordingly. Nvidia’s data center revenue rose 31% in the last quarter to $3.8 billion.
While Nvidia has faced headwinds with some of its other businesses, data center growth continues to unfold as the company’s processors tap into the massive AI chip market, which will be worth around $195 billion. by 2030.
In addition to its artificial intelligence opportunities in data centers, Nvidia is also helping automakers create smarter vehicles with more semi-autonomous driving capabilities. The company’s chips are helping to power the next generation of driver assistance systems and helping the company capture another AI market.
With Nvidia shares trading at around 68 times company earnings, Nvidia shares aren’t exactly cheap right now. But it’s below the price-to-earnings (P/E) ratio of 100 that the stock was trading at this time last year.
Play the long game of AI
Tech stocks are a little frantic right now, and more near-term instability could be ahead as investors try to figure out how the US economy is doing and where inflation is heading.
These are real concerns, but they shouldn’t worry long-term investors. Instead, investors should look for opportunities in the market right now – including in technology – and invest in big companies with competitive advantages.
Nvidia, Amazon, and The Trade Desk have all proven to have a unique angle in the AI space, and their stock price declines over the past year could be a good opportunity to buy for those looking to start an AI position.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Chris Neiger has no position in the stocks mentioned. The Motley Fool holds positions and recommends Amazon.com, Nvidia and Trade Desk. The Motley Fool has a disclosure policy.
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