Growth catalysts for these tech stocks are unfolding.
Huge investments by companies in artificial intelligence (AI) will bring consumers new products and experiences that have the potential to change the world. Investors who put their money into the companies best positioned to benefit from this technology could reap great rewards.
Here are two AI stocks that are expected to grow rapidly in the second half of this year and beyond.
1. Apple
What better company to change the world with AI than Apple (AAPL 0.22%)? Apple is a brand founded on Steve Jobs’ vision to design devices that would do just that. The company’s shares have soared to new highs in the last month since it unveiled new AI features for its devices this fall. Wall Street is high on Apple’s growth prospects, and for good reason.
Morgan Stanley is among the firms touting Apple’s growth potential in the AI era, seeing Apple Intelligence as “a clear catalyst for a multi-year product upgrade cycle.”
Of the 3.1 billion smartphones in use worldwide, there will be many more AI smartphones over the next decade. IDC predicts that smartphones with generative AI capabilities will grow 78% annually through 2028, compared to 2.3% growth for the overall smartphone market. The introduction of AI smartphones is an opportunity for Apple to attract more smartphone buyers to its lucrative product lineup, which begins with the launch of iOS 18 and new iPhones later this year.
No smartphone maker is better positioned to profit from new technology. Apple’s net profit reached $100 billion last year, and could rise further if sales of more expensive devices with more advanced processors that can run Apple Intelligence grow. “We remain very optimistic about the opportunity in generative AI,” Chief Executive Tim Cook said in the company’s last earnings call.
Analysts expect Apple’s profits to grow 15% in fiscal 2024 (ending September) and 10% next year. If Apple Intelligence drives demand levels in line with analysts’ expectations, these forecasts could be conservative, sending Apple’s shares higher as the year ends.
2. Advanced Micro Devices
After soaring 128% in 2023, shares of Advanced Micro Devices (AMD -1.21%) are roughly flat so far in 2024. But the leading chip supplier has several catalysts on the horizon that could propel the stock to new highs.
AMD’s new MI300 AI chips are doing very well in the data center market. The company’s data center revenue grew 80% year over year in the first quarter. However, the rest of its business has shown mixed results, which is why the stock has underperformed this year. However, improved growth in some of the company’s other markets could be the catalyst for accelerating revenue growth into 2025.
Citigroup sees the stock rising over the next year. The firm sees AMD benefiting from increased demand for chips for PCs, as well as continued growth in the AI chip market. In that regard, AMD is working with Microsoft to optimize its Ryzen processors for new AI experiences for PCs.
“We believe AI, with its ability to deliver unprecedented productivity and usability gains, will be the biggest inflection point for the PC since the internet,” CEO Lisa Su said during the company’s first-quarter earnings call.
Analysts currently expect revenue to grow 31% this year and 59% by 2025. As the end of the year approaches and investors focus on growth forecasts for next year, AMD shares could surge.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Ballard has invested in Advanced Micro Devices. Motley Fool has invested in and recommends Advanced Micro Devices, Apple, and Microsoft. Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
