Artificial Intelligence (AI) is here to stay as the range of AI applications expands. Many analysts believe AI growth stocks have plenty more potential. This is despite already generating fabulous returns. Even the more enthusiastic analysts acknowledge that much of how it can be monetized has not been achieved yet.
A recent report from Bloomberg Intelligence suggests that Generative AI alone could become a $1.3 trillion business over the next ten years. This implies a 42% compound annual growth rate (CAGR). Demand for large language models, digital ads, and specialized software services are among the applications expected to grow explosively in the medium to long term.
Many software companies will likely not see profits from their investments in AI until next year. However, these investments have driven demand in other areas, such as chipmakers, semiconductor manufacturers, data center infrastructure specialists and other service providers.
That implies that there are many AI stocks with explosive growth potential, including relatively cheap AI growth stocks that could offer more upside. Here are three such AI growth stocks.
Intel (INTC)
Intel (NASDAQ:INTC) is one of the companies focused on capturing growth opportunities in the AI market. The chipmaker lost server CPU market share in previous years and was slower than competitors in expanding its AI product portfolio.
Yet, Intel has regained momentum with three consecutive quarters of rising server CPU market share, now at 64% compared to AMD’s (NASDAQ:AMD) 33%. Recently, it launched its new Xeon 6 line of processors targeting the AI sector, which is currently dominated by Nvidia (NASDAQ:NVDA) and AMD.
The company is working to streamline operations and increase earnings growth faster than sales. Last quarter, its client computing division, which provides CPUs for consumer devices, saw a 31% revenue jump. Intel also boosted gross margin, signaling stronger profitability.
Analyst sentiment has turned more positive, with a majority now rating Intel stock a buy. The average price target stands at $38.67, implying a 26% upside potential. Intel remains undervalued at a price-to-earnings (P/E) ratio of 31.7x compared to the 47.8x multiple for the broader tech sector. This combination earns Intel a place as one of the AI growth stocks to buy.
RIOT Platforms (RIOT)
The Bitcoin (BTC-USD) mining company Riot Platforms (NASDAQ:RIOT) showcases the versatility of AI and how it can enable unexpected business changes that are hard to foresee. Due to reduced mining rewards from the Bitcoin halving, small crypto miners have struggled to maintain profitable operations.
AI demands significant computing power, however. Riot Platforms has computing resources from Bitcoin (BTC-USD) mining and data center infrastructure available. Last year, it began supplying excess power to the electrical grid through ERCOT’s distribution platform, generating revenue from “saved” power. The company also stated it would look into the supply of computation power to the AI sector.
Currently, Riot Platforms is pursuing the acquisition of Bitfarms (NASDAQ:BITF) to expand infrastructure and realize greater economies of scale if completed. Trading at a P/E ratio of 23.4x, Riot Platforms’ valuation remains relatively low compared to the tech industry. All analysts recommend RIOT stock as a buy and forecast an average target price of $18.14 per share, indicating over 93% upside potential. Combined with the rest, this explosive growth makes RIOT one of the AI growth stocks to buy.
Opera (OPRA)
The Opera (NASDAQ:OPRA) web browser has remained popular among technology enthusiasts, though its market share has been surpassed by Chrome. Still, Opera’s focus on AI integration is noteworthy.
Earlier this year, the company invested over $20 million to build an AI computing cluster powered by renewable energy in Iceland. This makes it the first and currently only browser designed with on-device AI capabilities. Since implementing this AI strategy, the company’s average revenue per user has increased by 24%. Further developing AI features could potentially broaden Opera’s appeal.
While Opera’s financials have not fully benefited as one of AI growth stocks, analysts recognize the company’s potential. OPRA stock is trading below analysts ‘ expectations with a P/E ratio of only 7.4x while boasting an uncommon dividend yield of 5.9% for a technology company.
Analyst ratings are unanimously positive, with an average price target representing over 60% upside from current levels. Opera’s focus on AI integration positions it for significant growth as the potential of AI applications continues to be realized.
On the date of publication, Stavros Tousios 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
