If You Think AI Is the Next Big Thing, Buy These 3 Stocks (And Nvidia Isn't On the List)

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The artificial intelligence revolution is clearly upon us. Whether we’re talking about individuals using AI to post pictures on the internet or concoct a beautiful dinner, or corporations looking to implement AI solutions to do more with less, there seems to be a trillion different use cases for a technology that can think and process faster than humans. 

Of course, time will tell just how revolutionary this new technological breakthrough will ultimately be. The internet revolution of the 1990’s certainly brought about plenty of disruption for key industries. But many of the top industries analysts at the time thought would be dead in the matter of a few years (we still have bookstores, even though Amazon has tried its hardest) are still around. Landlines still get used by a few folks out there, and I recently learned that it’s still possible to get dial up internet. 

The things you learn. But instead of going backwards, let’s look forward and see what could be ahead for three of the most-traded AI stocks in the market over the past month. 

Figma (FIG)

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No doubt, Figma (NASDAQ:FIG) is the top AI growth stock many investors are honing in on right now. Some of this has to do with the fact that Figma is such a new entrant to the AI race. Having gone public on July 31 (I know, seems like forever ago), there’s still not a lot for investors to go off of, other than the company’s initial IPO filing documents. 

That said, those documents do shed a rather nice light on what appears to be a hyper-growth stock, and the latest one that investors really want to grab a piece of. 

Some estimates have suggested this IPO was roughly 30x oversubscribed, meaning demand was insane out of the gate from early investors to get a small piece of this company. Much of that has to do with the company’s extremely strong fundamentals and growth, with more than $1 billion in annual recurring revenue. It typically takes companies years to achieve such a milestone, and the fact that Figma hit the market with these kinds of numbers led to the sort of investor demand we saw out of the gate.

Perhaps more importantly, Figma’s incredibly high 91% gross margin and underlying profitability (nearly $45 million in profit on $749 million in sales) is equally impressive. If this whole AI thing is as big as people say it will be, this is a key stock to own.

Palantir (PLTR)

We can’t forget about high-flying Palantir (NASDAQ:PLTR) now can we. 

I’ve been skeptical of Palantir in the past, and most of this skepticism really centers around the company’s valuation. The market has news for me: Palantir’s valuation has only done one thing over the past year – explode higher.

With a one-year return of more than 500%, bulls have laughed all the way to the bank. And at least for right now, it does appear to be the case that this momentum could continue. 

Barring some sort of major meltdown in Palantir’s key relationship with the U.S. government (and corporations, which have become an increasingly bigger piece of the revenue and earnings pie for the company), it’s true that Palantir’s growth trajectory is remarkable. With revenue growth of 39% this past quarter (driven by U.S. commercial revenue which surged more than 70%), there’s a lot to like about how the company’s mix is shifting more toward the private industry.

And while this stock now trades at a price-sales multiple that’s in the triple digits, there’s really no telling where this stock will go from here. Thus far, bulls that have been calling for higher highs have been right, so I’ll temper my skepticism at least for now. 

Applied Digital (APLD)

Applied Digital (NASDAQ:APLD) is a company I don’t cover much, but really should. 

Most investor attention around the AI revolution surrounds the semiconductors that power this technology, or the companies that are putting groundbreaking AI models together (or gaining real efficiencies from using the technology). However, the data center space is one that is also an integral piece of the puzzle when it comes to creating a future in which artificial intelligence technology is truly mainstream.

Now, there is competition in this space, and Applied Digital is by far the only player in an oligopoly of a market. But it’s my view that over the medium to longer-term, operations will likely consolidate in this space, given the value that scale has to data center operators’ underlying margins. 

Size matters, and on that front, Applied Digital is a relatively small player in this space. But with a valuation of nearly $4 billion, and a valuation I’d suggest could invite some larger suitors to take a shot at acquiring this company, Applied Digital will remain on my buy list for now. 

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