Investors eager to capitalize on the artificial intelligence (AI) surge have more choices than just Nvidia and Palantir.
Experts widely believe that AI will reshape the global economy in a way that’s reminiscent of the Internet boom in the 1990s. Just as the Internet opened doors to new business models and expanded market reach, AI offers significant investment potential, paving the way for companies like Alphabet, Meta Platforms, and Netflix.
The AI revolution is being touted as another monumental investment opportunity, potentially boosting economic productivity by automating routine tasks. While Nvidia and Palantir are essential players in the AI landscape, owning stocks like Amazon and Pure Storage can also yield profits.
Here are a couple of essential insights to consider.
1. Amazon
Amazon maintains a robust presence across three major industries. It’s the largest online marketplace in North America and Western Europe by total product volume. Additionally, it ranks as the world’s biggest retail advertiser by revenue and leads in cloud computing services based on infrastructure spending.
AI plays a critical role in the growth strategies across these areas. For instance, in retail, Amazon has developed over 1,000 AI applications focused on enhancing tasks like inventory management, demand forecasting, and customer service. In terms of advertising, Amazon provides generative AI tools that enable brands to create visuals, audio, and video content.
On the cloud computing front, Amazon has engineered custom AI chips and rolled out new services, like Bedrock for developing generative AI applications and Amazon Q for boosting productivity. Interestingly, IT consulting firm Gartner rated Amazon Q as the second most capable AI coding assistant, just behind Microsoft’s GitHub Copilot.
Looking ahead, Wall Street anticipates Amazon’s profits will grow by 18% annually over the next three years. This projection makes the current P/E valuation of 33 seem quite justifiable. Yet, there’s potential for exceeding these forecasts, as Morgan Stanley identifies Amazon’s retail segment as notably undervalued in terms of AI advantages, making it a compelling investment option.
2. Pure Storage
Pure Storage specializes in all-flash storage systems and corresponding software, enabling businesses to manage data across both public clouds and private data centers. Their offerings include products for block, file, and object storage, and their DirectFlash technology enhances efficiency by managing flash memory at the system level, unlike conventional solid-state drives.
By cutting down on redundancy, Pure Storage’s DirectFlash provides two to three times the storage density while consuming significantly less power than rivals. Their Evergreen architecture further sets them apart by allowing clients to upgrade storage solutions seamlessly, without any downtime.
Gartner acknowledges Pure Storage as a leader in primary block storage and file/object storage platforms. Analysts note that its FlashBlade system boasts the highest storage density and lowest energy consumption in the market, making it a strong fit for AI applications. This could explain Meta Platforms’ choice of Pure Storage as its main storage provider.
While Pure Storage recently reported impressive third-quarter results, with both sales and profits surpassing expectations, the stock took a 27% hit following the announcement. This decline appears to stem from an overvaluation and growing concerns over falling profit margins next year due to increased research and development spending.
Market pullbacks can create favorable buying opportunities. Projections suggest that adjusted earnings might increase by 30% annually until May 2027, which makes the current P/E valuation of 39 seem reasonable. In fact, many analysts have set a median price target of $100 per share, indicating a potential 45% upside from its current price of $69.
