The Next Wave of Stocks to Benefit From AI

For investors that missed Nvidia’s (NVDA) incredible triple-digit return of 145% in 2024 and the stock’s five-year return of over 2,000%, many feel as though they may have missed the artificial intelligence (AI) boom. The good news is that the AI revolution spans several sectors, from cloud computing and semiconductor manufacturing to software development and automation.

Nvidia still has tremendous room for long-term growth as well as a number of other companies in the semiconductor industry as AI relies heavily on specialized hardware for processing large datasets and running complex models.

Advanced Micro Devices (AMD) also produces powerful graphics processing units (GPUs) and processors for AI workloads and Intel (INTC) is developing new AI-centric chips that are focusing heavily on AI-related hardware.

As far as cloud infrastructure companies, cloud computing and data center stocks should benefit as they provide the necessary computing power and storage for AI applications. The biggest three in this arena are well-known and established blue-chip players: Amazon (AMZN), Alphabet (GOOGL) and Microsoft (MSFT).

Amazon provides cloud computing thru its Amazon Web Services (AWS) services that power many AI applications. Microsoft’s Azure is a leader in cloud computing and offers AI tools and infrastructure for businesses adopting machine learning and AI. And finally, Google’s Cloud also has a growing AI focus, providing AI tools and cloud infrastructure to developers.

AI-enabled automation is transforming industries from manufacturing to customer service, and the companies providing automation solutions are seeing rapid growth.

UiPath (PATH) develops robotic process automation (RPA) software, enabling businesses to automate repetitive tasks using AI. Cognizant (CTSH) offers AI and automation consulting services, helping clients integrate AI into their business processes.

Companies that create the software and platforms used to build, deploy, and manage AI models will also be crucial players going forward. A few names to add to your Watch List are Palantir Technologies (PLTR) and International Business Machines (IBM).

Palantir develops data analytics platforms that help organizations leverage AI for decision-making and predictive analytics. IBM’s Watson is a leader in enterprise AI applications, and the company continues to enhance its AI offerings for industries like healthcare, finance, and retail.

And finally, with the increase in data and digital transactions, AI is becoming a key player in cybersecurity, helping companies identify and mitigate threats more effectively.

CrowdStrike (CRWD) is a cybersecurity company using AI to detect and respond to threats in real-time. Palo Alto Networks (PANW) uses AI to strengthen its cloud-based cybersecurity platforms.

Investors should keep in mind that the AI market is still evolving, and certain companies may experience volatility as they scale and integrate AI technologies. Long-term, however, companies at the intersection of AI, automation, and emerging technologies are positioned to capitalize on AI-driven growth.

By focusing on these sectors, investors can align themselves with the growing demand for AI technology, whether through hardware, software, or services that power the AI revolution.