Unless you have been hiding under a rock for the past year, you are probably aware that artificial intelligence (AI) and machine-learning stocks have been leading the markets. Machine learning technology is advancing at a rapid pace. Many believe that AI will eventually replace a majority of mundane and monotonous human tasks. For corporations looking to cut costs, that is music to their ears.
Although AI has dominated the headlines recently, we are still in the early innings of what could be a trillion-dollar market in just a few years. Being an early investor in these companies can lead to exponential gains in the future. As with any emerging technology, these can be volatile stocks to hold but those patient enough should be rewarded in the long run. Here are three machine-learning stocks that could make early investors rich!
Nvidia (NVDA)
It probably comes as no surprise that we start this article off with Nvidia (NASDAQ:NVDA). Wall Street analysts have a street-high price target of $150, which implies about 15% upside from the current price.
Nvidia is the global leader in GPU chip production. These chips are used to power machine-learning infrastructure and some of the most powerful computers in the world. Nvidia just underwent a 10-for-1 stock split earlier this month. While it does not intrinsically change anything about the stock, the lower share price does make this an attractive time to load up on Nvidia stock. After a parabolic run we could see a pullback at some point but holding this stock for the next few decades should pay off in spades.
One argument from the bears against Nvidia is how expensive it is. If you compare it to its peers, Nvidia only trades at 54x forward earnings which is cheaper than both Advanced Micro Devices (NASDAQ:AMD) and Broadcom (NASDAQ:AVGO). If there is one machine-learning stock to buy early and own forever, it is Nvidia.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR) has been a controversial stock since it went public in 2020. Don’t believe us? The current one-year price target range from Wall Street analysts ranges between $9 to $35. Palantir is trading slightly above its average price target of $21.45 after gaining more than 40% so far in 2024.
The main question that always comes up with Palantir is about what the company does as a business. Palantir sells data analytics software platforms to enterprises and governments around the world. This platform can instantly organize and analyze large sets of data while using machine learning to complete these tasks more efficiently for the user. In late 2023, Palantir was named the world’s top vendor for AI and machine learning software.
One problem with Palantir’s stock is how expensive it trades compared to the company’s growth rate. Shares trade at 19.4x forward sales and 71x forward earnings. These multiples put Palantir well ahead of other similarly sized software. You will often pay a premium for industry leaders and Palantir is on track to being the top machine-learning software provider in the world.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) is another stock that has had a controversial start to its public tenure. The stock debuted on Wall Street around the same time that Palantir did but the two stocks have gone in opposite directions since then. Analysts remain bullish on the stock with an average price target of $209.97 and a street-high target of $600!
Throughout the years, Snowflake and Palantir have often been compared to each other. Both companies produce software platforms that provide data analytics for their users. Snowflake offers plenty of different machine-learning tools including its Snowpark ML platform. The company has partnered with Nvidia to provide users with generative AI in the data cloud. Snowflake’s enterprise-grade large language models (LLM) known as Arctic also use Nvidia’s powerful AI software to provide optimized performance.
All of that is to say that Snowflake is emerging as a machine-learning powerhouse at a time when its stock has struggled. It is trading at historically low multiples, including at 13.9x sales compared to its five-year average multiple of 42.9x. Snowflake is also trading at 47x free cash flow compared to its five-year average of 906x. The stock still isn’t cheap, but years from now this dip will be looked at as the opportunity of a lifetime.
On the date of publication, Ian Hartana and Vayun Chugh 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.