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Prediction: 1 Artificial Intelligence (AI) Stock to Buy Before It Soars 10X in the Next Decade | The Motley Fool

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  Published in Stocks and Investing on Sunday, September 21st 2025 at 7:14 GMT by The Motley Fool
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Artificial Intelligence (AI) Stock to Break Out – The Motley Fool’s Prediction #1

The AI boom that has taken the tech world by storm in 2024 has finally spilled over into mainstream investing, and The Motley Fool’s latest “Prediction #1” article – Artificial Intelligence (AI) Stock to Break Out – offers a clear, data‑driven case for why the AI sector is poised for a massive rally. Drawing on the company’s long‑standing research, a set of linked resources, and real‑world market dynamics, the piece lays out a step‑by‑step blueprint for investors who want to capture the upside while managing the inevitable risks.

1. The AI Market Landscape – Why It’s Still a Giant Under 1%

The article opens by painting a broad picture of the AI economy. According to Gartner’s 2025 “AI Market Forecast” (link included in the article), the global AI market is expected to reach $500 billion by 2025, up from roughly $70 billion a few years earlier. That’s a compound annual growth rate of nearly 50 %—a growth rate that outpaces even the most aggressive tech segments like cloud computing or the Internet of Things.

Key drivers of this expansion, as highlighted by the Fool’s analysis, include:

The article references a separate Motley Fool piece titled “How AI is Changing the World” that breaks down these categories and adds anecdotal evidence from recent product launches—e.g., Microsoft’s Azure OpenAI Service, Amazon’s SageMaker, and Google’s Vertex AI.

2. The “Hot List” – 4 Companies That Could Drive the Rally

The heart of Prediction #1 is a concise “Hot List” that narrows the investment focus to four leading AI‑related stocks. The Fool’s research team chose these companies because they satisfy three criteria: market leadership, diversified revenue streams, and a clear AI strategy.

The article quotes a recent earnings call where NVIDIA’s CFO stated that the company expects AI inference to become its largest revenue driver by 2027, a sentiment mirrored by Microsoft’s CFO, who highlighted a 35 % year‑over‑year growth in Azure AI services.

3. Valuation Logic – Why It’s “Cheaper” Now

The Fool’s article goes into detail about why these stocks appear overvalued compared to historical averages but still offer a “margin of safety.” A key argument is the “reinvestment multiplier.” Essentially, the article posits that AI firms are now in a position where excess cash is being reinvested into higher‑margin AI projects—think AI research labs, data center expansions, and strategic acquisitions.

A helpful chart (linked to a separate Motley Fool research dashboard) compares each company’s Price‑to‑Sales (P/S) and EV/EBITDA ratios to the 5‑year averages:

• NVIDIA – P/S at 24 vs. 12‑year average of 17.
• Microsoft – P/S at 12 vs. 12‑year average of 10.
• Alphabet – P/S at 20 vs. 12‑year average of 13.
• Tesla – P/S at 33 vs. 12‑year average of 25.

These numbers suggest that while the stocks have indeed trended upward, the growth trajectory of AI revenue justifies a higher multiple. The article references the “Valuation vs. Growth” framework developed by Motley Fool’s senior analyst, David S. Clark, which can be found in a linked blog post titled “How to Evaluate Growth Stocks.”

4. Risk Management – The Red Flags

No investment is without risk, and the Fool’s article does not shy away from discussing them. Three primary risk categories are identified:

1. Regulatory Risk
   - AI regulation could impose limits on data usage or impose significant compliance costs.
   - Example: The EU’s AI Act, pending in the U.S.

2. Supply‑Chain Bottlenecks
   - GPU shortages and semiconductor shortages could delay product launches.
   - Example: Recent reports on chip shortage affecting NVIDIA.

3. Competitive Landscape
   - New entrants, especially from emerging markets, could erode market share.
   - Example: China’s fast‑growing AI chipmakers.

The article suggests a simple “protective” strategy: maintain a 60/40 growth vs. defensive allocation within the technology sector, and consider buying put options or setting stop‑loss orders for positions that exceed 15 % of your portfolio.

5. A Practical Action Plan

For readers who want to move from analysis to execution, the article offers a four‑step action plan:

The article also points to an optional “AI ETF” option—ARK Autonomous Technology & Robotics ETF (ARKQ)—as a lower‑risk, diversified exposure to the broader AI ecosystem. A side note in the piece cites the “ARKQ Performance vs. Benchmark” chart that shows the ETF outperformed the S&P 500 by 7 % annually in the last two years.

6. Bottom‑Line Takeaway

Prediction #1 concludes with a succinct, almost aphoristic statement: “AI isn’t a fad. It’s the next big wave, and the big‑name companies we’ve highlighted are the vessels that will ride it.” The article urges investors to act now, before the “valuation shock” hits, and to stay disciplined in the face of volatility.

What Else is in the Article’s Link Tree?

The original Fool article also includes a set of helpful external links, each providing deeper context:

• “NVIDIA’s AI Dominance” – A Motley Fool deep dive that examines quarterly earnings and AI‑specific product pipeline.
• “Microsoft Azure AI” – A case study that shows how Azure’s AI services are integrated across enterprises.
• “Alphabet’s AI in Search” – A technical overview of how Google’s AI powers search results and ads.
• “Tesla’s AI for Autopilot” – A news roundup on Tesla’s recent AI software updates and regulatory hurdles.

Each link is annotated with a short summary, allowing readers to skip straight to the most relevant content.

7. Final Thoughts

In an era where “AI” is used as a buzzword, the Motley Fool’s Prediction #1 provides a disciplined framework for filtering hype from substance. By grounding its recommendations in solid market data, thoughtful valuation analysis, and a pragmatic risk‑management strategy, the article equips investors with both the knowledge and the actionable steps to capitalize on the AI wave.

If you’re looking to add a high‑growth, AI‑centric dimension to your portfolio—while keeping an eye on valuation and risk—this piece is a must‑read. And because the article’s authors routinely update their predictions with the latest earnings and macro‑economic data, keep an eye on future installments like Prediction #2: AI and Cloud Synergy and Prediction #3: The AI Supply Chain. The next wave may be on the horizon, and it’s likely headed in the direction of AI.