The artificial intelligence (AI) software market is expected to grow 21% this year, while the overall AI market is expected to grow at a compound annual growth rate of 40% through 2028. Investors would struggle to find another market with it. projected force.
Some of the key players in this market include Nvidia (NVDA -2.10% ) and IBM (IBM 0.10% ), both of which are developing advancements in this space for a more efficient, automated lifestyle with the potential to improve and save lives. Both can also provide your long-term investment portfolio with the fundamental assets on which to build a fortune.
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1. Nvidia’s AI footprint continues to expand
The company’s world-class graphics processing units and system-on-chips are the backbone of a massive 80% share of the AI market, supporting a wide range of technological developments, including game consoles, automobiles, medical imaging technology, and the evolving metaverse, to name a few. The company’s A list of customers includes Amazon Web services and Alphabet .
Many of us have used Waze or Google Maps while driving – this data is supported by Google Cloud Platform, which in turn is supported by Nvidia GPUs. Imagine what the next 10+ years could bring, as AI will play a prominent role in navigation as autonomous vehicles become more abundant. And that’s just one area of AI for Nvidia.
In the coming decade, businesses and society are going down the road of augmented reality, virtual reality, automation, predictability, and optimization to produce accurate results in real time. Nvidia’s leadership in artificial intelligence puts it on the path to a total addressable market of $1 trillion. In its fourth quarter report, Nvidia showed its growth with record annual revenue of 61% YoY to $27 billion, supported by a 53% increase in fourth quarter revenue YoY annual.
The exceptional demand that CEO Jensen Huang sees for Nvidia is driven by gaming, data center and visualization platforms. Its strong business momentum is expected to continue, leading to a 45% jump in expected first-quarter revenue year-on-year, already an astonishing 84% jump year-on-year.
A broader market decline led to its share price wiping out 20% in the month following its fourth quarter results. It’s since come back strong, but it’s still only 5.5% above where it was when the company announced record quarterly and annual revenue, as well as a positive outlook. At $280 per share and an analyst average price target of $352 – a high of $410 – Nvidia is one of my favorite stocks based on projected market growth, leadership and products. superiors working towards a massive addressable market.
2. IBM is moving from mainframes of the past to an AI mainstream of the present
If you’ve ever taken a test with Scantron sheets — you know, the ones where you fill in the bubble with a No. 2 pencil — these are scored by IBM machines using a process that dates back to 1937, and they are still used today. But the IBM of old is quickly becoming the IBM of the new, with an AI-driven future. It offers investors the opportunity to transact certain winnings which come with an additional reward.
The inventor of the floppy disk, hard drives and UPC barcode has adapted and evolved to adapt to our changing work environment and growing reliance on automation, optimization and Data protection. In 2020, IDC recognized IBM for having a 13.7% market share in AI lifecycle software, after leading the world’s AI software platforms for five consecutive years. The highly regarded research company Gartner now presents it as a leader in the development of cloud AI, data science and machine learning platforms.
IBM offers a suite of scalable solutions under its Watson umbrella of AI products, including content search and analytics, data and risk management, and governance and compliance. These solutions help its customers become leaner by reducing operating costs. These savings can then be reinvested for future growth, which could include additional spending on IBM solutions.
In an aggressive move, IBM is channeling its growth efforts into an open hybrid cloud platform with AI capabilities in pursuit of what the company estimates to be a $1 trillion hybrid cloud opportunity. To further focus on this space, the company transformed its managed infrastructure services into a public company named Kyndryl. The increased focus on the global hybrid cloud market is expected to benefit IBM with an expected compound annual growth rate of 17.6% for the market, compared to the expected 10% growth in managed infrastructure.
The company is already seeing its efforts bear fruit. Fourth-quarter earnings and revenue beat analysts’ expectations, resulting in the company’s fastest quarterly revenue growth since 2011. This led to a 72% year-over-year increase in net profit. another for the quarter. Expectations for 2022 include mid-single-digit revenue growth, driven by cloud services and AI solutions, although the company warns that profits could start to show signs of slowing once labor costs ease. higher labor will begin to appear after a few more quarters.
But for long-term investors, a short-term challenge of earnings uncertainty can be overcome with an annual dividend of $6.56 per share, which represents a dividend yield of 5%. Additionally, these dividends may be received in cash in quarterly payments, which protects investors from a 5% decline in the share price or may generate more gains if dividend reinvestment is selected. Either way, it’s exciting to see how far IBM has come in more than 100 years and how far it could go in the next five years, which could mean big wins for investors.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.
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