Machine learning stocks are seeing a surge in interest in 2024 thanks to innovations like ChatGPT, which are making investors take notice of the impressive financial growth of Palantir (NYSE:PLTR), Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD). All three outpace the rest of their sector in revenue and EPS growth in the next three to five years.
The industry’s expansion will also help these machine learning stocks; by 2030, the sector will increase at a 17% annual rate (CAGR 2024-2030) and reach $528 billion. However, all the selections we examine will attract investors for different reasons.
For example, Palantir is well-known for its ties to the U.S. Department of Defence; a recent $178.4 million transaction is an example. However, U.S. commercial revenues will surpass $640 million by 2024, giving it a dual focus. Meanwhile, Nvidia is driving today’s tech boom, primarily because over 85% of the market is cornered for generative AI.
Lastly, although trailing Nvidia, AMD continues to gain attention because of innovations like its Ryzen 8040 Series CPUs and Instinct MI300X AI accelerator.
Palantir (PLTR)
Palantir is one of the best machine learning stocks thanks to its strong ties with the U.S. Department of Defense. However, a strong dependence on government contracts usually leads to criticism from a certain section of investors. Usually, investors will read the latest earnings report only to see if the balance is shifting toward commercial.
On that end, Palantir deserves credit for boosting the number of healthcare, energy, and finance clients. U.S. commercial revenue increased 70% to $131 million in Q4 2023. As a result of this growth, Palantir’s total U.S. commercial revenue for 2023 was $457 million. Palantir projects that its U.S. commercial sales will surpass $640 million in 2024, indicating a 40% growth rate from 2023.
Palantir’s recent partnership with Oracle (NYSE:ORCL) is a good example of its ongoing commercial success. This agreement allows users to take advantage of Palantir’s Gotham and AI platforms while operating the Oracle cloud.
Apart from its success in the commercial realm, Palantir continues to see healthy growth in terms of government contracts. The latest example is a $178.4 million deal to develop the next-generation targeting system, TITAN. Under this deal, ten TITAN prototypes—ground stations that link Army units to space and high-altitude sensors for targeting data—will be developed and manufactured.
Nvidia (NVDA)
Nvidia is responsible for the 2024 tech stock boom; the stock is up 82% YTD. It controls more than 85% of the generative AI industry accelerators. The business’s yearly sales of AI chips are about $20 billion, highlighting its critical role in expanding AI-driven companies.
Owing to its AI chip dominance, Nvidia beat analyst estimates ten out of the last 12 times. A 588% increase in net income and a 206% increase in sales YOY in Q3 of fiscal 2024 is startling growth for a legacy company.
The H100 processors added $37.5 billion to sales in the third quarter of fiscal 2024, becoming a key to its success, and my colleague Chris MacDonald says potential chip sales in the current year can net $93 billion if they make up the majority of chips sold.
Nvidia’s strong order backlog from Indian companies demonstrates demand is not solely local. Many nations are seeking ways to circumvent U.S. export restrictions so they may purchase Nvidia processors, even if these restrictions are driving up the price of the company’s chips.
Nvidia, though, is not resting on its laurels; the GB200 Grace Blackwell Superchip and GH200 Grace Hopper platform are good examples. The former will help reduce lags in AI workflows, and the latter will help develop faster AI models. AWS, Google Cloud and Microsoft Azure are already on the Blackwell-powered train. Meanwhile, top manufacturers expect systems running on the Grace Hopper Superchip in Q2 2024.
Despite the stock reaching an all-time high of $950 earlier this year, analysts are projecting upside of 13%.
Advanced Micro Devices (AMD)
Nvidia holds the top spot in the AI chip industry, but perennial number two is also a good investment. Shares are up over 22%, but analysts suggest more upside for the Lisa Su-led company, 18% versus Friday’s close.
The newly launched Instinct MI300 accelerators and Ryzen 8040 Series CPUs will have a big influence on sales growth; according to the most recent quarterly data, sales have increased 10% year over year, so there is definitely a need for a boost. Meanwhile, the Instinct MI300X, an AI accelerator processor, is predicted to help generate $2 billion in 2024 AI chip sales.
Focusing on machine learning, AMD’s GPUs with the RDNA 3 architecture will simplify processes in this segment. Via the Microsoft DirectML API for Windows, the technology may be used with ONNX, PyTorch and TensorFlow. Developers can also use the platform with the AMD ROCm platform, Linux and Windows Nod.AI SHARK platform.
Separately, AMD ROCm 6.0 is increasing the capability of AI and machine learning by supporting additional GPUs, including the Radeon PRO W7800 and Radeon RX 7900 GRE.
Lastly, AMD earnings are to grow 34% in 2024 and 58% in 2025. Additionally, all investors will appreciate its debt reduction efforts, which shows sound financial management.
On the date of publication, Faizan Farooque did not have (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.
