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The artificial intelligence (AI) revolution has taken the world by storm. The next phase of AI is shaping up to be transformative, with advancements that go far beyond traditional machine learning and pattern recognition.
In an interview with CNBC last month, Nvidia CEO Jensen Huang discussed how we are at the start of the next wave of AI. He went on to say that the next wave of AI will be the biggest one yet, with companies using generative AI to become more productive and efficient. They will accomplish this by altering the way they create products and the types of products they create.
While companies across industries navigate the next wave of AI, here are two supercharged stocks to buy to capitalize on AI's massive potential.
#1. Nvidia Stock
Chip giant Nvidia (NVDA) has dominated the first phase of AI. Renowned for its advanced GPUs (graphics processing units), NVIDIA has evolved into a powerhouse driving innovation in AI and high-performance computing.
With a market capitalization of $3.47 trillion as of writing, Nvidia is nearly tied with Apple (AAPL) as the world's largest company. It should come as no surprise that Nvidia is my top pick among supercharged stocks to buy for the next phase of AI.
So far this year, Nvidia stock has surged 174.6% year-to-date, wildly outperforming the S&P 500 Index’s ($SPX) gain of 25.5%.
Initially, Nvidia rose to fame as its GPUs transformed the gaming experience. Over time, the company used its GPU architecture for broader applications such as AI, machine learning, and high-performance computing. Its A100 and H100 GPUs are regarded as best-in-class in the industry.
Nvidia's ability to respond to market trends and capitalize on the AI revolution has resulted in phenomenal revenue growth and profitability. In the third quarter of fiscal 2025, total revenue of $35.1 billion increased 94% from the prior-year quarter. Plus, adjusted earnings per share (EPS) increased by 103% to $0.81.
The Data Center segment, which accounts for the majority of Nvidia's revenue, increased 112%, driven by the Hopper computing platform and other generative AI applications. Revenue in the Gaming and AI PC and Professional Visualization segments increased by 15% and 17%, respectively, over the previous year's quarter. The automotive and robotics segment is also slowly gaining traction, thanks to self-driving platforms. The segment's revenue increased 72% year on year.
Shipments of both Hopper and Blackwell systems are expected to begin in the fourth quarter of fiscal 2025. Huang stated, “AI is transforming every industry, company, and country. Enterprises are adopting agentic AI to revolutionize workflows. The age of AI is in full steam, propelling a global shift to NVIDIA computing.”
Nvidia’s balance sheet remains strong, despite its aggressive growth plans. It had a cash balance (cash, cash equivalents, and marketable securities) of $38.5 billion at the end of Q3.
In fiscal 2025, analysts forecast Nvidia’s earnings to increase by 128%, followed by another 48.6% in fiscal 2026. Valued at 32 times forward earnings, Nvidia stock isn't cheap.
NVIDIA’s future is deeply tied to the evolution of AI, gaming, autonomous vehicles, and other cutting-edge technologies, offering numerous scopes and stronger years ahead for the company. While the valuation is steep, Nvidia will only prove to be a worthwhile investment in the long run.
Overall, Wall Street analysts remain strongly bullish about Nvidia stock, as they were before earnings. Out of the 43 analysts covering NVDA stock, 37 have rated it a "strong buy," two suggest a “moderate buy,” and four rate it a “hold.”
The stock’s average target price of $164.70 implies a 21% upside potential from current levels. Further, it has a high target price of $220, which suggests the stock could gain as much as 61% over the next 12 months.
#2. Snowflake Stock
Snowflake (SNOW) is a leading AI cloud-based data platform that allows for seamless data sharing and analytics across multiple clouds. With its innovative technology and strong market presence, the company has garnered a lot of attention in the data warehousing and management industry.
SNOW stock has dipped 13.9% YTD, compared to the tech-heavy Nasdaq Composite’s ($NASX) gain of 26.9%, making now the right time to buy at the dip.
Snowflake's core product is Data Cloud, a platform that allows businesses to store, analyze, and share data seamlessly across multiple cloud providers such as Amazon (AMZN) Web Services (AWS), Microsoft (MSFT) Azure, and Alphabet's (GOOGL) Google Cloud. Unlike traditional data warehouses, Snowflake's platform is highly scalable, allowing users to access data in real-time without requiring extensive infrastructure or complex integrations.
Furthermore, its pricing model is consumption-based, which means customers only pay for the storage and computing resources they use. This model generates recurring revenue for the company.
In the third quarter of fiscal 2025, product revenue, which accounts for a portion of Snowflake's total revenue, increased by 29% year on year to $900.3 million. The net revenue retention rate, which shows the company's customer retention capacity, stood at 127%. Furthermore, its remaining performance obligations (RPO), or contracted revenue yet to be realized, increased by 55% year on year to $5.7 billion in the quarter.
While the growth rate is impressive, consistent profitability remains a challenge, as is typical for a high-growth company. Snowflake continues to make significant investments in sales, marketing, and research and development (R&D), and posted a net loss of $0.98 per share for the quarter.
Despite operating losses, Snowflake generated an adjusted positive free cash flow of $86.8 million in the quarter, indicating strong operational efficiency and the effectiveness of its consumption-based pricing model.
The company expects a 29% increase in product revenue in fiscal year 2025. Analysts predict a 27.7% increase in total revenue to $3.6 billion, with a loss of $0.70 per share. However, the company may turn a profit of $0.99 in fiscal 2026, followed by a 23.4% increase in revenue, according to consensus estimates. Snowflake, valued at 12x forward 2026 sales, remains a reasonable AI stock to buy right now.
The global data ecosystem is rapidly expanding, driven by the need for AI to analyze massive amounts of data on a daily basis. Snowflake's compatibility with multiple clouds gives the company a competitive advantage. Overall, its innovative platform, strong growth trajectory, and alignment with key industry trends position it as a standout player in this competitive space.
Overall, Wall Street analysts remain moderately bullish about Snowflake stock. Out of the 41 analysts covering SNOW stock, 25 have rated it a "strong buy," three suggest a “moderate buy,” 11 rate it a “hold,” and two recommend a “strong sell.”
The stock’s average target price of $181.64 implies about 6% upside potential from Monday's close. Further, it has a high target price of $220, which suggests the stock could gain as much as 28.3% over the next 12 months.
