The artificial intelligence (AI) market is rapidly developing, and industries are evolving across the globe. The industry offers unprecedented potential to transform how businesses are done worldwide by offering efficiency and lower costs. This has resulted in the adoption of AI by more and more businesses.
Given the industry's rosy prospects, it could be wise to consider sound AI stocks NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), and Meta Platforms, Inc. (META) for potential gains.
Artificial Intelligence (AI) is continuously reshaping diverse industries and economies, resulting in rapid transformation and robust growth. Industries and companies are striving to innovate and explore the full potential of AI and implement it to the best use for boosting productivity, improving efficiency, and fastening digitalization.
Industries like healthcare, biotech, education, finance, advertising, consumer goods, and industrial segments are increasingly utilizing AI to improve their business efficiency. With this, the contribution of AI is expected to rise at a rapid pace in the future. A research by Exploding Topics stated that over 77% of companies are either using or exploring the use of AI in their businesses.
With its wide range of applications and demands, AI is expected to create over 97 million new jobs by the next year. Also, notably the technology is anticipated to contribute $15.70 trillion to the global economy by 2030. With its features like automating business operations like consumer service, fraud detection, and quality control, AI creates new industry opportunities.
Statista projects the AI market will reach around $184 billion in 2024, with the United States leading globally at $50.16 billion.
Considering the conducive industry trends, let's delve deeper into the fundamentals of quality AI stocks such as NVDA, MSFT, and META, which are transforming industries.
NVIDIA Corporation (NVDA)
NVDA provides graphics, computing, and networking solutions worldwide. The company operates through two segments: Compute & Networking and Graphics. It offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms.
On October 28, NVIDIA announced that xAI’s Colossus supercomputer cluster comprising 100,000 NVIDIA Hopper Tensor Core GPUs in Memphis, Tennessee, achieved massive scale with the help of NVIDIA Spectrum-X™ Ethernet networking platform, designed to deliver superior performance to multi-tenant, hyperscale AI factories.
On October 21, NVDA expanded its collaboration with Microsoft to support AI startups, emphasizing healthcare and life sciences. The announcement was made at the HLTH healthcare innovation conference. The initiative integrates NVDA’s Inception program with Microsoft for Startups, allowing access to cloud credits, AI development software, and expert technical and business support.
The strategic partnership is projected to increase the demand for the company’s AI hardware and software solutions, thereby boosting revenues.
NVDA's revenue increased 122.4% year-over-year to $30.04 billion for the second quarter, which ended on July 28, 2024. Its non-GAAP operating income rose 156.4% from the year-ago value to $19.94 billion. The company reported non-GAAP net income of $16.95 billion and $0.68 per share, indicating increases of 151.5% and 151.8% year-over-year, respectively.
In addition, the company’s free cash flow rose 122.9% from the prior-year quarter to $13.48 billion.
According to the company’s outlook for the third quarter fiscal 2025, NVDA projects revenue of $32.50 billion, plus or minus 2%.
Street expects NVDA's revenue for the third quarter (ended October 2024) to increase 81.8% year-over-year to $32.94 billion, while its EPS for the same period is expected to improve 84.5% year-over-year to $0.74. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
NVDA’s shares have gained 47.7% over the past six months and 197.4% over the past year to close the last trading session at $136.05.
NVDA's bright prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NVDA has an A grade for Sentiment and a B grade for Quality. Within the Semiconductor & Wireless Chip industry, NVDA is ranked #42 out of 91 stocks.
Click here to access additional ratings of NVDA for Growth, Value, Stability, and Momentum.
Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices, and solutions globally. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing. It offers Office, Exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft Viva, Microsoft 365 Copilot, and Office consumer services.
On October 10, MSFT unveiled several Microsoft Cloud for Healthcare innovations to connect care experiences, enhance team collaboration, empower healthcare workers, and unlock clinical and operational insights.
Through new healthcare AI models in Azure AI Studio, capabilities for healthcare data solutions in Microsoft Fabric, the healthcare agent service in Copilot Studio, and an AI-driven nursing workflow solution, Microsoft Cloud for Healthcare is supporting healthcare organizations in their journey toward shaping a healthier future.
On October 3, MSFT and Rezolve AI, a global leader in AI-powered commerce solutions, announced a strategic partnership to empower retailers with advanced capabilities for digital engagement.
Under the collaboration, Rezolve AI’s Brain Suite, including Brain Commerce, Brain Checkout, and Brain Assistant will be powered by Microsoft Azure and available globally via Microsoft’s Azure Marketplace and co-sell channels.
MSFT's total revenues rose 16% year-over-year to $65.58 billion for the fiscal first quarter that ended September 30, 2024. The company's operating income grew 13.6% from the year-ago value to $30.55 billion. Also, its net income and EPS totaled $24.67 billion and $3.30, reflecting increases of 10.6% and 10.4% from the prior year's quarter, respectively.
Furthermore, the company's total assets stood at $523.01 billion as of September 30, 2024, versus $512.16 billion as of June 30, 2024.
Street expects MSFT's revenue and EPS for the second quarter (ending December 2024) to increase 11.3% and 7.2% year-over-year to $69.03 billion and $3.14, respectively. Furthermore, it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
MSFT’s stocks have surged 14.6% over the past year to close the last trading session at $408.46.
MSFT's robust growth prospects are reflected in its POWR Ratings. The stock has a B grade for Quality and Stability. Within the Software - Business industry, MSFT is ranked #17 out of 39 stocks.
Click here to access additional ratings of MSFT for Value, Growth, Momentum, and Sentiment.
Meta Platforms, Inc. (META)
META engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. The company operates in two segments: Family of Apps and Reality Labs.
META’s trailing 12-month gross profit margin and EBIT margin of 81.50% and 41.61% are 58.3% and 356.9% higher than the industry averages of 51.49% and 9.11%, respectively. Also, its trailing-12-month net income margin of 35.55% is significantly higher than the 2.61% industry average.
On May 31, META’s Board of Directors declared a quarterly cash dividend of $0.50 per share of its outstanding Class A common stock and Class B common stock, paid on June 26, 2024, to stockholders of record as of the close of business on June 14, 2024. META pays an annual dividend of $2, which translates to a yield of 0.35% at the current share price.
For the third quarter that ended September 30, 2024, META’s revenue increased 18.9% year-over-year to $40.59 billion. The company’s income from operations grew 26.2% from the year-ago value to $17.35 billion. Its net income and earnings per share of $15.69 billion and $6.03 indicate growth of 35.4% and 37.3% from the prior year’s quarter, respectively.
In addition, the company’s free cash flow increased 13.8% year-over-year to $15.52 billion.
Analysts expect META's revenue and EPS for the fourth quarter (ending December 2024) to increase 17.1% and 25.8% year-over-year to $46.96 billion and $6.70, respectively. Moreover, the company topped the consensus revenue and EPS estimates in all four of the trailing quarters.
Shares of META have surged 20.4% over the past six months and 77.5% over the past year to close the last trading session at $560.68.
META’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Quality and Sentiment. META is ranked #17 among 52 stocks in the A-rated Internet industry.
To access additional META ratings for Growth, Value, Stability, and Momentum, click here.
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NVDA shares fell $0.30 (-0.21%) in after-hours trading Tuesday. Year-to-date, NVDA has gained 182.59%, versus a 22.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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