John Ballard, The Motley Fool
5 min read
In This Article:
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AI is expected to add trillions of dollars in value to the global economy in the coming years.
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Nvidia has built a solid competitive advantage by fulfilling key hardware and software needs for AI data centers.
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Meta Platforms could benefit significantly from using AI to improve ad targeting and increase user engagement with its social media platforms.
Artificial intelligence (AI) is sweeping across every industry. Researcher IDC forecasts that AI will contribute a total of nearly $20 trillion to the global economy over the next five years. By 2045, AI could drive enormous returns for investors who invest in the right stocks.
Here are two stocks that could deliver tremendous returns over the next 20 years.
Nvidia's (NASDAQ: NVDA) dominance in the market for graphics processing units (GPU) -- vital hardware for handling AI workloads -- has placed it in a lucrative position. Even after its meteoric rise over the last few years, the chipmaker still has plenty of growth ahead.
Two years ago, on the company's fiscal Q4 2023 earnings call, CEO Jensen Huang stated, "I believe the number of AI infrastructures is going to grow all over the world." He expected to see more AI data centers built, and that Nvidia's chips, networking products, and software systems would help accelerate AI computing by a factor of 1 million times over the coming 10 years.
Nvidia's latest quarterly report shows that Huang's prediction is continuing to play out. In a quarter where its revenue grew 69% year-over-year, Nvidia saw accelerating deployments of AI-purposed data centers, aka AI factories. There are nearly 100 Nvidia-powered AI factories in progress right now -- twice as many as there were a year ago.
These specialized data centers are being built across every industry and geography. Nvidia is in a solid competitive position with its in-demand full-stack solutions that cover hardware, networking components, software, and systems. Its networking revenue alone jumped 64% over the previous quarter, reflecting a massive jump in demand for networking components to handle the massive growth in data processing and AI workloads that's happening now.
Industry estimates pointing to a $1 trillion data center opportunity could be underestimating the actual long-term opportunity for Nvidia. Nvidia has generated more than $148 billion in trailing 12-month revenue and its top line is still growing by more than 50% year over year. That trajectory for a company of this size indicates an enormous opportunity.
