The explosive progress of the factitious intelligence (AI) market drove many tech shares to report highs over the previous few years. Two of these most evident performs on that secular pattern had been Nvidia (NASDAQ: NVDA), the world’s largest provider of AI accelerator chips, and Microsoft (NASDAQ: MSFT), which owns a large stake in OpenAI.
Nvidia and Microsoft are nonetheless the sector’s bellwethers, however buyers should not overlook the opposite hidden gems. Let’s take a look at three of these promising performs: AMD (AMD 1.75%), SentinelOne (S -3.27%), and Innodata (INOD -5.55%).
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1. AMD
AMD, the world’s second-largest producer of x86 CPUs and discrete GPUs, does not get as a lot consideration as Nvidia as an AI chipmaker. However over the previous few years, AMD ramped up its manufacturing of Intuition GPUs for information facilities.
Its latest MI300 Intuition chips, which had been constructed on Taiwan Semiconductor Manufacturing‘s 5nm and 6nm nodes, provide comparable efficiency to Nvidia’s H100 GPUs for a (*3*). That lower cost tag makes it a compelling different for information heart clients which can be scuffling with Nvidia’s excessive costs and provide constraints.
AMD’s information heart chip gross sales (which embody its Epyc CPUs and Intuition GPUs) solely rose 7% in 2023, however surged 80% 12 months over 12 months within the first quarter of 2024 and soared 115% within the second quarter. Its information heart chip gross sales accounted for 48% of its income within the second quarter — up from simply 24% a 12 months earlier.
That speedy growth, which mirrors the breakneck progress of Nvidia’s information heart enterprise, offset its slower gross sales of PC gaming GPUs, gaming console APUs, and embedded chips. It additionally complemented its strong gross sales of Ryzen CPUs for PCs.
From 2023 to 2026, analysts count on AMD’s income to develop at a compound annual progress price (CAGR) of 20% as its earnings per share (EPS) rises at a CAGR of 105%. Its inventory is not low-cost at 42 occasions its ahead adjusted earnings, nevertheless it might soar a lot increased as its information heart enterprise expands and turns into a a lot bigger proportion of its enterprise.
2. SentinelOne
SentinelOne is a cybersecurity firm that goals to switch all human analysts with AI-powered algorithms on its Singularity prolonged detection and response (XDR) platform. It gives its companies by means of a mixture of on-site home equipment and cloud-based companies.
SentinelOne’s income greater than doubled in fiscal 2022 and monetary 2023 (which resulted in January 2023), however solely grew 47% in fiscal 2024. It expects that slowdown, which it attributes to the robust macro headwinds, to proceed with 29% to 31% progress in fiscal 2025. That deceleration — together with its lack of typically accepted accounting rules (GAAP) and non-GAAP (adjusted) earnings — drove away the bulls as rates of interest rose. Its inventory now trades 34% beneath its IPO value and 70% beneath its all-time excessive.
However after that decline, SentinelOne’s inventory seems to be traditionally low-cost at lower than 9 occasions this 12 months’s gross sales. Analysts count on its income to develop at a CAGR of 27% from fiscal 2024 to fiscal 2027 because it expands its AI-powered area of interest of the cybersecurity sector. Additionally they count on it to slender its internet losses as economies of scale kick in.
CrowdStrike (NASDAQ: CRWD), the cloud-native cybersecurity chief that competes towards SentinelOne within the XDR market, notably recently found itself blamed for a world IT outage on Home windows machines with a flawed software program replace. That huge blunder might drive extra firms to SentinelOne and different AI-powered cybersecurity platforms.
3. Innodata
Innodata went public again in 1993, and it was thought of a slow-growth IT companies and enterprise software program supplier over the subsequent 25 years. However from 2019 to 2023, Innodata’s income rose at a CAGR of 12%, and analysts count on it to proceed rising at a CAGR of 33% from 2023 to 2026. It expects “at the very least” 40% natural income progress in 2024.
This dusty old company — which gives enterprise course of, expertise, and consulting companies together with its digital data administration software program — turned an thrilling progress inventory once more because it rolled out new generative AI companies. By the start of 2024, it had signed grasp service agreements with 5 of the “Magnificent Seven” firms. It expects to considerably develop its income from three of these tech giants this 12 months.
Innodata racked up GAAP losses over the previous three years, however its adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) turned constructive in 2023 — and analysts count on that determine to develop at a three-year CAGR of 64% by means of 2026. Innodata’s inventory has already rallied 1,450% over the previous 5 years because it turned a progress play once more, nevertheless it nonetheless does not look too costly at 5 occasions this 12 months’s gross sales. Due to this fact, this oft-overlooked tech inventory might nonetheless have loads of room to run because the generative AI market expands.
Leo Sun has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Gadgets, CrowdStrike, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.