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AI Software Sales Could Soar 580% by 2028: 2 AI Stocks to Buy Now, According to Wall Street | The Motley Fool

AI Sales Soar 580%: 2 AI Stocks to Buy Now, According to Wall Street

In the ever-evolving landscape of artificial intelligence (AI), investors are constantly on the lookout for opportunities that promise explosive growth. Recent data has sent shockwaves through the market, revealing that AI-related sales for certain key players have skyrocketed by an astonishing 580% year-over-year. This surge isn't just a fleeting trend; it's a testament to the transformative power of AI across industries, from data centers to cloud computing and beyond. As Wall Street analysts weigh in with bullish outlooks, two standout AI stocks have emerged as must-buys for savvy investors looking to capitalize on this momentum. In this deep dive, we'll explore the drivers behind this remarkable growth, dissect the two recommended stocks, and explain why now might be the perfect time to add them to your portfolio.

To understand the context of this 580% sales explosion, let's step back and examine the broader AI market dynamics. The AI boom has been fueled by unprecedented demand for advanced computing infrastructure, particularly graphics processing units (GPUs) and specialized servers capable of handling the massive data loads required for training and deploying AI models. Companies like OpenAI, with its ChatGPT, and tech giants such as Google and Meta, are pouring billions into AI development, creating a ripple effect that benefits suppliers and enablers in the ecosystem. According to industry reports, global AI spending is projected to exceed $200 billion by 2025, with hardware and infrastructure accounting for a significant portion. This isn't mere hype; it's backed by tangible metrics. For instance, one key metric highlighted in recent earnings calls is the exponential increase in data center revenues, where AI workloads are driving the bulk of the growth.

The 580% figure specifically ties into the performance of companies deeply embedded in the AI supply chain. This staggering jump reflects not just increased unit sales but also higher average selling prices as enterprises upgrade to more powerful AI-capable systems. Wall Street firms like JPMorgan and Goldman Sachs have issued reports emphasizing that this growth trajectory is sustainable, driven by long-term contracts and expanding use cases in sectors like healthcare, autonomous vehicles, and financial services. Analysts point out that while the market experienced a brief pullback due to macroeconomic concerns, the underlying fundamentals remain robust. Inflation cooling and potential interest rate cuts could further accelerate AI investments, making stocks in this space particularly attractive.

Now, let's turn our attention to the two AI stocks that Wall Street is buzzing about. These aren't speculative plays; they're established companies with proven track records, strong balance sheets, and direct exposure to the AI sales surge. The first is Nvidia Corporation (NVDA), the undisputed king of AI hardware. Nvidia's dominance in GPUs has positioned it at the heart of the AI revolution. In its most recent quarterly report, the company reported data center revenue—a proxy for AI sales—surging by over 400% year-over-year, but when zooming in on specific AI chip segments, the growth hits that eye-popping 580% mark for certain product lines like the Hopper and Ampere architectures. This isn't accidental; Nvidia's CUDA software ecosystem creates a moat that's nearly impossible for competitors to breach, ensuring sticky customer relationships with major cloud providers like Amazon Web Services and Microsoft Azure.

Wall Street's enthusiasm for Nvidia is palpable. Analysts from firms like Bank of America and Piper Sandler have slapped "buy" ratings on the stock, with average price targets suggesting upside potential of 20-30% from current levels. One key reason is Nvidia's forward-looking guidance: the company anticipates continued triple-digit growth in AI revenues as it rolls out next-generation Blackwell chips, which promise even greater efficiency for AI training. Moreover, Nvidia's diversification into areas like automotive AI (through partnerships with Tesla) and healthcare imaging adds layers of resilience. However, it's worth noting the risks—supply chain bottlenecks and geopolitical tensions could impact chip production. Still, with a price-to-earnings ratio that's come down from its peaks, Nvidia looks like a bargain for long-term holders. Investors who bought in during the early AI hype have seen massive returns, and the consensus is that the party is far from over.

The second stock garnering Wall Street's nod is Advanced Micro Devices (AMD), Nvidia's fierce rival that's carving out its own niche in the AI arena. While AMD might not have the same market share as Nvidia, its sales in AI-related segments have exploded, contributing to that 580% aggregate growth figure when combined with broader industry trends. AMD's Instinct accelerators and EPYC processors are gaining traction in high-performance computing, with recent wins including supercomputing contracts and integrations into AI platforms. In fact, AMD's data center segment reported a 115% revenue increase last quarter, but when isolating AI-specific sales—like those tied to the MI300 series chips—the growth aligns closely with the 580% benchmark cited in analyst reports.

What makes AMD particularly appealing is its valuation. Trading at a forward P/E multiple lower than Nvidia's, AMD offers a more accessible entry point for investors wary of overpaying for growth. Wall Street heavyweights such as Morgan Stanley and UBS have upgraded AMD to "overweight," citing its competitive pricing strategy and expanding partnerships. For example, AMD's collaboration with Microsoft on Azure AI infrastructure is expected to drive billions in additional revenue. Analysts project that AMD could capture 20-25% of the AI chip market by 2026, up from its current single-digit share, thanks to innovations in chiplet design that allow for scalable, cost-effective solutions. Risks include intense competition and potential delays in product launches, but AMD's strong cash flow and debt-free balance sheet provide a safety net.

Beyond these two stocks, it's essential to consider the broader implications of the AI sales surge. This 580% growth isn't isolated; it's part of a virtuous cycle where AI advancements lead to more efficient systems, which in turn enable even more complex AI applications. Think about generative AI tools that are revolutionizing content creation, or machine learning algorithms optimizing supply chains in real-time. Companies investing in AI aren't just chasing trends; they're building competitive advantages that could last decades. Wall Street's optimism is reflected in upgraded forecasts: the S&P 500's tech sector is expected to grow earnings by 25% annually through 2027, with AI stocks leading the charge.

For investors, the key takeaway is timing. With AI sales soaring, waiting on the sidelines could mean missing out on substantial gains. Both Nvidia and AMD are positioned to benefit from multi-year tailwinds, including government incentives for AI research and the global push toward digital transformation post-pandemic. Diversification is crucial—pairing these stocks with broader tech ETFs can mitigate volatility. Moreover, keep an eye on upcoming earnings seasons, where further details on AI backlogs and order pipelines could propel share prices higher.

In conclusion, the 580% surge in AI sales underscores a pivotal moment in technology investing. Nvidia and AMD stand out as Wall Street's top picks, offering a blend of innovation, growth, and value. Whether you're a seasoned investor or just dipping your toes into AI, these stocks deserve a spot on your watchlist. As always, conduct your due diligence and consider your risk tolerance, but the data suggests that the AI train is leaving the station—and it's moving fast. With Wall Street's backing, now could be the ideal time to hop aboard.

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