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Headlines
- AI Market Growth: AI's rapid expansion has driven many tech stocks to new highs, with notable players like Nvidia and Microsoft leading the sector.
- Promising Alternatives: AMD, SentinelOne, and Innodata present promising options in the AI space, each with unique strengths and potential for growth.
- Future Prospects: These companies offer diverse opportunities in AI technology and services, potentially benefiting from ongoing advancements and market trends.
3 Notable Artificial Intelligence (AI) Stocks to Watch for Future Growth
The explosive growth of the artificial intelligence (AI) market has propelled many technology stocks to new highs in recent years. Nvidia (NASDAQ:NVDA), the world's leading supplier of AI accelerator chips, and Microsoft (NASDAQ:MSFT), with its significant stake in OpenAI, are well-known beneficiaries of this trend.
While Nvidia and Microsoft remain key players, other noteworthy companies are also positioned for future gains. Here’s a closer look at AMD (NASDAQ:AMD), SentinelOne (NYSE:S), and Innodata (NASDAQ:INOD)
- AMD
AMD is the world’s second-largest producer of x86 CPUs and discrete GPUs. Although it doesn't receive as much attention as Nvidia in the AI chip sector, AMD has significantly increased its production of Instinct GPUs for data centers. Its latest MI300 Instinct chips, built on Taiwan Semiconductor Manufacturing's 5nm and 6nm nodes, deliver performance comparable to Nvidia’s H100 GPUs but at a lower cost. This affordability makes AMD a viable alternative for data centers facing high prices and supply issues from Nvidia.
AMD’s data center chip sales, including Epyc CPUs and Instinct GPUs, saw a remarkable surge in 2024, rising 80% in the first quarter and 115% in the second quarter. These sales now constitute 48% of its revenue, up from 24% a year ago. Despite slower sales in other segments, AMD’s robust growth in data center solutions has propelled its overall performance. Analysts forecast a 20% compound annual growth rate (CAGR) in revenue from 2023 to 2026, with earnings per share expected to grow at a 105% CAGR.
- SentinelOne
SentinelOne, a cybersecurity firm, focuses on replacing human analysts with AI-powered algorithms through its Singularity extended detection and response (XDR) platform. It offers services via both on-site appliances and cloud-based solutions.
Despite more than doubling its revenue in fiscal 2022 and fiscal 2023, SentinelOne’s growth slowed to 47% in fiscal 2024. This deceleration, attributed to challenging macroeconomic conditions, is expected to continue with growth projected between 29% and 31% in fiscal 2025. The stock has declined significantly from its IPO price and all-time high, but it appears historically undervalued at less than 9 times this year’s sales. Analysts anticipate a 27% CAGR in revenue from fiscal 2024 to fiscal 2027, with expectations for narrowing net losses as the company benefits from economies of scale. Recent issues faced by a competitor, CrowdStrike, could drive more interest towards SentinelOne and other AI-driven cybersecurity solutions.
- Innodata
Innodata, which went public in 1993, was previously seen as a slow-growth IT services and enterprise software provider. However, from 2019 to 2023, its revenue grew at a 12% CAGR. Analysts project a continued strong performance with a 33% CAGR from 2023 to 2026, and the company expects at least 40% organic revenue growth in 2024.
The company has revitalized its growth profile with new generative AI services and has signed master service agreements with several leading tech companies. Despite recording GAAP losses in recent years, its adjusted EBITDA turned positive in 2023, with analysts forecasting a 64% CAGR through 2026. Innodata’s stock, which has already surged 1,450% over the past five years, remains attractively valued at 5 times this year’s sales, indicating potential for further gains as the generative AI market expands.
