Missed Nvidia Stock? 2 Stocks With High-Flying Potential

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If OpenAI’s ChatGPT is the biggest growth factor for artificial intelligence stocks this decade, then Nvidia (NASDAQ:NVDA) stock is the best place to invest to capture the upside. Nine months after the release of ChatGPT, Nvidia’s stock has increased by 230% to attract a US $ 1.1 trillion market capitalization. It’s natural to feel like you missed Nvidia’s growth opportunity. However, there are several other emerging AI-growth stocks with significant upside potential.

It’s still a complicated endeavor to predict which AI platform developer will rule the world of generative AI like Meta Platform created by social media apps Facebook and Instagram. However, the biggest beneficiaries of the AI race will be the companies involved in building the ecosystems and “equipment” needed for the mass work of generative AI systems – such as Nvidia, and its supplier network. They will book more business regardless of who wins on the software front. See Teradyne (NASDAQ:TER), for example.

Teradyne stock: A cheap AI “pick-and-shovels” stock that hasn’t taken off yet

Teradyne is a supplier of automated test solutions to the semiconductor industry – a key service in the AI chip production chain. The company has the lead in AI-chip production testing technology, a position that will see it grow revenue and profit as the production of AI chips gains momentum in the next two to three years.

The company listed Apple, Samsung Electronics, Qualcomm, Intel, and Analog Devices as its biggest customer. Orders for its AI-chip testing platforms may surge as these giant semiconductor industry behemoths begin mass production of AI-chips.

Most importantly, Teradyne has one foot in the consumer AI chips market. Back in 2021, Teradyne’s UltraFLEX test platform enabled AI-chip production startup Syntiant to ship millions of microwatt power, deep learning Neural Decision Processes (simply, tiny AI chips) to customers. Syntiant is a 2017 startup that makes AI chips for battery-powered devices such as mobile phones, smart speakers, laptops, and other personal gadgets.

Teradyne stock trades at a reasonable forward price-to-earnings (P/E) multiple of 24.5 after a 31.6% jump so far through 2023. The best returns are yet to come.

AI could give IBM stock a new lease on life

After years of lackluster performanceInternational Business Engines (NYSE:IBM) is a US$126.6 billion software and technology consulting business that will receive a performance boost from AI. IBM beat analyst revenue estimates for the second quarter of 2023 as it generated double-digit growth (11% year-over-year growth) in its Data and AI consulting business segment despite a seemingly weak economy.

IBM is targeting to build a US$1 billion AI consulting business. Its latest AI software, Watson X, could be a revolutionary product to change the historically slow growth of the business. The company is putting AI into its software products, and IBM Watson can be a coding assistant, a customer service assistant, a tennis commentator. This is one of many functions that the AI platform will serve IBM’s business customers, including being a geospatial data analyst for NASA.

In addition, IBM’s Artificial Intelligence Unit (AIU), a “first-of-its-kind” AI-chip with 23-billion transistors printed in 2022, has many opportunities ahead. If the hardware becomes a big hit with business customers, IBM will become an AI-chip manufacturer, a business line that could attract premium valuations.

Meanwhile, IBM stock has delivered 1.5% of total shareholder returns year to date. Investors receive a quarterly dividend yielding 4.8% annually to supplement passive income. Shares trade at a cheap forward price-to-earnings (P/E) multiple of 14, and could attract higher multiples as AI takes center stage in IBM’s business transformation, and improves its fortunes as it works on its US$57 billion debt burden.