Getty Images; Ilustration by Bankrate
Many of the companies benefiting from the boom in artificial intelligence (AI) spending saw their stocks soar in 2024, with several experiencing gains of more than 100 percent. The AI trend has been a boon to investors, but those who missed out on gains are left wondering if it’s too late to get in on the action.
(If you have specific questions about individual investments or your overall portfolio, consulting with a financial advisor may be a wise decision.)
These three stocks rode the AI boom and more than doubled in 2024. Here’s what analysts have to say about them and if there’s still room to run.
3 AI stocks that reached new heights in 2024
1. Palantir Technologies (PLTR)
- Market cap: $185.9 billion
- 2024 total return: 340.5 percent
Palantir got its start building software for the U.S. intelligence community working on counterterrorism operations. Since then, it has expanded to serve commercial customers and helps turn massive amounts of data into usable assets. Recently, the company has benefited from the growth of its new AI platform that combines its existing software with large language models to create value for clients.
During its 2024 third quarter, Palantir’s revenue jumped 30 percent to $725.5 million, with U.S. commercial revenue growing 54 percent. The growth was “driven by unrelenting AI demand that won’t slow down,” according to CEO Alexander C. Karp.
Still, the company’s shares are richly valued following huge gains in 2024, giving some analysts pause despite likely continued growth.
“We expect [Palantir] to continue to be a beneficiary of AI demand as IT budgets favor AI initiatives in 2025,” CFRA analyst Janice Quek wrote in a recent note to clients. “However, we are also mindful of [Palantir’s] rich valuation multiple that could be a downside risk factor for investors, especially if the company fails to meet lofty expectations in the upcoming quarters.”
CFRA has a “hold” rating on the stock with a 12-month price target of $81, compared to a recent price of $77.
Need an advisor?
Need expert guidance when it comes to managing your investments or planning for retirement?
Bankrate’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.
2. Nvidia (NVDA)
- Market cap: $3.56 trillion
- 2024 total return: 171.2 percent
Perhaps no company has benefited more from the boom in AI spending than Nvidia. The company’s graphics processing units, or GPUs, are in high demand as companies such as Microsoft, Alphabet and Meta Platforms build out their AI capabilities. Nvidia’s stock has increased more than 20-fold in the past five years, driven by tremendous growth in its underlying business.
Nvidia is expected to generate revenues topping $129 billion in its 2025 fiscal year, which concludes at the end of January, more than doubling from $60.9 billion in 2024. The stock’s outperformance has pushed Nvidia near the top of the list of the world’s most valuable companies, causing some analysts to view the shares as fairly valued.
“We remain bullish on Nvidia’s dominance in artificial intelligence but believe that the market is already pricing in this opportunity,” Morningstar analyst Brian Colello wrote in a recent note to clients. He estimates the company’s fair value at $130 per share, compared to a recent stock price of about $145.
3. Broadcom (AVGO)
- Market cap: $1.14 trillion
- 2024 total return: 109.6 percent
Broadcom designs, develops and supplies semiconductors and infrastructure software solutions and has benefited greatly from the recent boom in AI spending. The company saw revenues grow 44 percent to $51.6 billion during its fiscal 2024, boosted by 220 percent growth in AI revenue.
Broadcom recently increased its quarterly dividend payment by 11 percent and is targeting a fiscal 2025 payout of $2.36 per share, its 14th straight year of higher dividends.
Bank of America Global Research Analyst Vivek Arya has a “buy” rating on the shares with a price target of $250, compared to recent levels of $238. He sees a “surging AI opportunity” for the company that could be three to four times larger in 2027 than it is today. However, he acknowledges the company is “exposed to shifts in investor appetite for AI stocks.”
Bottom line
The AI boom was impressive in 2024, and it’s likely far from over. Speaking with a financial advisor and doing your research on what the experts are saying about individual stocks and sectors can help you make the right decisions for your portfolio.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Read the full article here
