Some artificial intelligence (AI) companies have risen to the occasion in 2024, riding the wave of AI innovation and transforming it into impressive financial performance, while others have just been lucky. As the year wraps up, three large-cap AI stocks stand out: Nvidia (NASDAQ:NVDA), Palantir Technologies (NASDAQ:PLTR), and MicroStrategy (NASDAQ:MSTR).
U.S. technology giants continue to dominate the global AI race, and early investors have reaped massive gains on the big winners in this hot space. However, the top-performing AI stock on the list has rallied on non-AI-related momentum. Let’s dive into how the best AI stocks leveraged AI to capture attention (and investors’ dollars) this year.
Nvidia stock: The undisputed AI champion
Semiconductor designer Nvidia continues to experience unbelievably strong revenue, earnings, and cash flow growth rates in 2024, and NVDA stock has soared 173% year-to-date to make the Jensen Huang-led tech giant the largest company in North America with a US$3.5 trillion market capitalization.
Nvidia has booked the most dollar revenue and earnings and generated the most cash flow from pure AI-related products and business lines so far in 2024. Its dominance in AI hardware and software development tools has created what appears like a monopoly in the global AI space.
This year, Nvidia smashed records across the board:
- Revenue growth: 135% year-over-year for the nine months to October 27, 2024, to US$91.2 billion.
- Net income: 190%, with operating margins expanding from 70.9% to 75.8%.
- Free cash flow growth: 187.3% to US$45.2 billion.
With its groundbreaking AI accelerators and highly sought “free” AI software development platform, the company has tripled its revenue, earnings, and cash flow run rates in 2024.
In the near term, Nvidia expects to hit US$37.5 billion in revenue this quarter, a 70% year-over-year increase by January 2025. Revenue growth momentum remains strong.
Investors who bought in early have seen spectacular returns, but even at current valuations, Nvidia stock remains the gold standard in AI. Nvidia stock’s forward price-to-earnings (P/E) multiple of 32.8, and a forward price-earnings-to-growth (PEG) ratio of 0.8 make the AI stock seem undervalued relative to its strong future earnings growth potential.
Palantir Technologies stock: The quiet highflier
Up 284% year-to-date, Palantir Technologies may not have Nvidia’s market clout, but its stock performance this year has been nothing short of stellar. Known for its advanced data analytics and “military-grade” AI platforms, Palantir has seen revenue growth rates accelerate every quarter, from 12.7% in mid-2023 to 30% by September 2024.
Key highlights:
- Operating margins doubled year-over-year to 15.6% this year.
- Debt-free balance sheet: A rarity in today’s market.
- Inclusion in the S&P 500 this year boosted demand as passive funds rushed to buy.
While Palantir’s fundamentals shine, the stock’s forward price-to-earnings ratio of 138 might give value-conscious investors pause. Still, its momentum and robust financial health make it a compelling long-term play.
MicroStrategy: An AI stock riding Bitcoin’s wave
It’s up 515% so far this year, but MicroStrategy stock’s AI story is more of a subplot than the main narrative. While the company has enhanced its software offerings with AI capabilities, its true catalyst in 2024 has been Bitcoin. As the largest corporate holder of Bitcoin, MicroStrategy has profited handsomely from the cryptocurrency’s meteoric rise to over US$100,000 per coin.
The numbers:
- MicroStrategy held 279,420 BTC by November 11, 2024. The stash was acquired at an average cost of US$42,692 per Bitcoin.
- Its core software business, however, hasn’t seen much growth, with revenue declining sequentially from US$499 million in 2022 to $467.2 million over the past 12 months.
Investors looking to bet on AI innovation might find MicroStrategy lacking. But if Bitcoin is your game, this stock could be another indirect play.
What does 2025 hold?
The AI landscape evolves rapidly, and 2025 will undoubtedly bring new contenders to the forefront. For now, Nvidia leads the pack, Palantir impresses with its steady execution, and MicroStrategy stands as a reminder that not all AI stocks are created equal.
Whether you’re chasing growth, value, or speculative thrills, AI offers a little something for every type of investor. As exciting as these AI stock success stories are, due diligence remains key. The future may be AI-powered, but investing success still depends on your ability to separate hype from substance.
