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Artificial intelligence (AI) has been a hot topic in the investment world for quite some time now, with companies like Nvidia leading the charge and creating numerous billionaires along the way. However, with a market valuation of $3.3 trillion, Nvidia may not be the best bet for investors looking to make millions in the near future. Instead, there are other smaller companies in the AI space that have the potential for significant growth and could potentially result in huge gains for patient investors.
One such company is Arm Holdings, a leader in AI semiconductor technology. Arm’s chips are used in a wide variety of devices, including premium smartphones, connected cars, cloud-based devices, and IoT devices. Unlike traditional chipmakers like Intel and AMD, Arm does not actually manufacture chips; instead, it licenses its power-efficient designs to other chipmakers in exchange for royalties and fees. This has allowed Arm to establish itself as a dominant player in the mobile chip industry, with its designs being used by companies like Apple, Qualcomm, and MediaTek.
While much of Arm’s revenue currently comes from the smartphone market, the company is looking to diversify into other areas such as automotive and cloud computing. With the release of AI-optimized chip designs and forecasts of 23% sales growth and 88% EPS expansion from fiscal 2024 to fiscal 2027, Arm Holdings is poised for significant growth in the years to come. While the stock may be expensive at around 100 times next year’s earnings, its dominant position in the industry could make it a multibagger investment for patient investors.
Another AI stock worth considering is SentinelOne, a cybersecurity company that offers AI-powered solutions for threat detection and response. While many cybersecurity solutions still rely on human analysts to combat threats, SentinelOne’s Singularity XDR platform uses AI-powered tools to automate and streamline these processes. This has made the company faster, more efficient, and more accurate in its threat response capabilities.
Since its IPO three years ago, SentinelOne’s growth has slowed, but analysts predict a 27% revenue expansion from fiscal 2024 to fiscal 2027. With its enterprise value currently at $7.3 billion, SentinelOne could be an attractive acquisition target for larger IT or cybersecurity companies looking to capitalize on the growing AI and cybersecurity markets. If the company can sustain its revenue growth of 20% to 30% annually, it has the potential to become a major player in the cybersecurity industry and create substantial wealth for investors.
Finally, there is IonQ, a quantum computing company that is aiming to revolutionize the way AI operations are performed with its patented “trapped ion” technology. Quantum computers have the potential to significantly speed up AI operations by using qubits instead of traditional binary zeros and ones. IonQ’s small and energy-efficient QPUs could pave the way for larger and more reliable quantum computing systems in the future.
Despite only earning $22 million in 2023, IonQ is expected to see an 87% revenue growth to $145 million by 2026 as it scales up its operations and acquires more customers. While the stock is not profitable and currently trades at 28 times next year’s sales, the potential for growth in the quantum computing sector could lead to substantial gains for investors in the long run.
In conclusion, while Nvidia may have paved the way for AI investments in the past, there are plenty of other smaller companies in the AI space that have the potential to deliver significant returns for patient investors. Companies like Arm Holdings, SentinelOne, and IonQ are at the forefront of innovation in the AI industry and could make investors rich in the years to come. As always, it’s essential to do thorough research and consider the risks before investing in any stock, but for those looking to capitalize on the growing AI market, these three stocks could be worth considering.
