Long-Term Investors Shouldn't Ignore These AI Growth Powerhouses

Key Points

• Artificial intelligence promises to add trillions in productivity gains to the global economy.

• Palantir and Nvidia are providing valuable software and hardware to transition business operations to a new technological era.

• 10 stocks we like better than Palantir Technologies ›

Artificial intelligence (AI) has created monster returns for investors over the past few years, but it could just be the tip of the iceberg. Morgan Stanley estimates that AI could lead to $40 trillion in operational efficiencies worldwide.

Here are two elite AI stocks that will help you profit off this opportunity.

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Image source: Getty Images.

1. Palantir Technologies

One reason AI investment will continue to grow over the long term is that it is saving companies real money. Palantir Technologies (NASDAQ: PLTR) is empowering companies to expand margins and become more profitable. It's only going to get better as AI improves. Just about every company and industry could be transformed by Palantir, which is why the stock is expensive and can outperform the broader market over the next decade.

The stock trades at a high forward price-to-earnings multiple of 231 based on the consensus 2025 earnings estimate. This valuation reflects accelerating growth over the past year, where Palantir's U.S. commercial business nearly doubled year over year last quarter, indicating it is still early in capturing its addressable market.

Companies will continue to flock to Palantir because it is making them smarter and more efficient. For example, Fannie Mae is using Palantir to detect mortgage fraud in seconds instead of days. A telecom company has saved hundreds of millions in costs over the last few years using Palantir. These success stories will continue to fuel more demand as more businesses see the value Palantir can create.

In short, Palantir is providing superpowers to businesses, and the proof is in the numbers. In the most recent quarter, Palantir's U.S. commercial revenue surged 93% year over year, while U.S. government revenue grew 53%. Palantir closed 42 deals worth at least $10 million, up from the previous quarter's 31 deals of at least $10 million in value.

As AI advances, Palantir's use cases will continue to expand. It's already helping frontline workers in healthcare and factories save time in decision-making. Analysts expect the company's revenue to grow at an annualized rate of 38% through 2029, which could support more gains for long-term investors.

Image source: Nvidia.

2. Nvidia

With the AI gold rush in full swing, Nvidia (NASDAQ: NVDA) has been the classic "pick-and-shovel" play in this market. It is the top supplier of graphics processing units (GPUs) that are needed to train AI models. Nvidia also provides components needed to build AI-optimized data centers. The stock has rocketed about 1,200% over the last five years but continues to have the makings of a long-term winner.

One reason to invest in Nvidia is that it is one of only two companies providing GPUs for data centers. Nvidia dominates this market. Its data center revenue grew 56% year over year last quarter to $41 billion. Leading cloud service providers like Google and Amazon are some of its biggest customers, and these companies are not short of capital to spend on AI infrastructure, which bolsters Nvidia's growth prospects.

Nvidia's innovation is keeping it in the lead as the default choice for AI chips. It's having another solid year of growth as AI companies adopt its next-generation Blackwell GB300 NVL72 platform. This is a powerful rack system made up of multiple components and chips for the most demanding AI computing tasks.

Nvidia is currently producing 1,000 of these racks per week and selling every one of them. Demand is so great that Nvidia is still working on increasing capacity to sell more units, which is expected to accelerate production of the GB300 through the next quarter.

The stock has lost some momentum recently over concerns about chip restrictions for the Chinese market, which has dinged Nvidia's quarterly revenue. But the long-term outlook is still very positive. With the largest U.S. tech companies continuing to spend billions on AI, Nvidia should remain a rewarding investment. Wall Street analysts expect revenue to grow at an annualized rate of 24% over the next five years to reach $383 billion.

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John Ballard has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.