2 stocks linked to the world of artificial intelligence (AI) have the potential to generate mind-blowing returns over the long term.
2 stocks appear to have exciting growth prospects ahead of them in the years to come.
They both belong to the tech sector, with a focus on the development of artificial intelligence. Just as Microsoft has established itself as a point of reference in the world of computers and Amazon in the e-commerce sector, 2 companies are emerging as a point of reference in the AI field.
We are talking about Super Micro Computer (SMCI) and Snowflake (SNOW), which have long since become fundamental in the development and growth of technology linked to artificial intelligence.
According to the experts at The Motley Fool, the respective securities currently have all the potential to generate high returns in the long term and move on the market at attractive prices.
Two titles, these, potentially capable of making their investors millionaires.
2. Snowflake
For months the market has focused on the world of chips, leading Nvidia shares to its laurels.
Yet, another factor is very crucial in the development of AI: data and the ability of models to manage it.
And it is precisely in this field that Snowflake could play a fundamental role in the coming years. The company has a cloud-based platform to store, analyze, and access data. Its customers can also access third-party data, so companies can efficiently manage and access all their data as needed.
The company has two fields ahead of it in which it can grow. First of all, the customer base: Snowflake currently has 9,400 customers, an increase of 22% in the last fiscal year. Then, storage space. Data grows exponentially, and more customers mean more needs for processing and storage resources over time.
Allowing us to take for granted, by now, that artificial intelligence will continue to be increasingly crucial in the world, every company - potentially - could need the support of AI to compete in its reference market.
There are hundreds of thousands of companies in the world, which suggests that Snowflake is only at the beginning of its customer acquisition journey. Potentially, therefore, the company could see its revenue rise at a double-digit rate in the coming years. It should be considered that the business has an excellent cash flow: to date around 42% of revenues are liquidated as free cash flow.
- Snowflake stock price
- Since May 2021
Snowflake shares are still trading above the IPO price of $120, but are down more than 60% from the all-time high reached in late 2021 ($392.15). The company is growing much slower today than it was a few years ago, and this slowdown is attributable to a number of factors.
First, Snowflake’s business has matured, so ensuring continued breakneck growth is increasingly difficult. Second, the cloud computing company is grappling with macroeconomic challenges resulting from the burden of inflation and high interest rates, which push companies to reduce expenses and postpone investments in new technologies.
It is difficult to say whether Snowflake shares have definitively reached their lows, but the strong bearish push seems to have run out, looking at the prospect of a rate cut by the Fed and more balanced inflation. In the long term, the stock has the potential to be able to support the performance of your investment portfolio.
1. Super Micro Computer
Artificial intelligence requires effective and high-performance data centers, a job that many companies cannot do themselves. This is where Super Micro Computer comes in. Supermicro, the name under which it operates in the sector, sells turnkey data center systems built on proprietary server hardware.
Over the last year and a half, the systems developed by Supermicro have been in great demand, a boom in demand that has also had a clear impact on the stock market listing.
- Super Micro Computer stock price
- Since May 2021
The moment the exponential growth started, it was immediately followed by an exponential increase in investment returns. Shares have grown by over 2,000% in the last three years alone.
To date, the stock is trading well below the highs of the last 52 weeks, the PE
However, there is a solid argument that stocks are not expensive today. The shares have fallen significantly from their 52-week high and the P/E ratio is 33. Management is targeting 152% year-over-year revenue growth for the fourth quarter of fiscal 2024 and analysts are convinced that the profits can grow by more than 50% per year over the next 3-5 years. In light of this contextualization, the title does not appear that expensive.
To support the positive prospects for the company we also find market data. According to recent estimates by Newmark, the demand for US data centers will double between now and 2030. An advantage for Supermicro, it continues to be the company with the highest growth rate in the sector. It seems that Supermicro is becoming the point of reference in the world of data centers exactly as Nvidia is for AI chips.
Returning to Supermicro’s valuation, assuming that analysts are right about future earnings growth, the stock’s current PEG ratio (ratio between P/E and the company’s expected growth rate) of 0.6 leads one to think that current prices are affordable compared to expected growth.
There is no certainty that Supermicro will be able to achieve the enormous results expected, but even coming just a little closer to expectations could produce extremely attractive returns for long-term investors.
|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since only he knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|
Original article published on Money.it Italy 2024-05-11 13:55:00. Original title: Queste 2 titoli azionari possono farti diventare milionario (secondo gli esperti)
