Three AI Stocks That Could Outperform Nvidia

The semiconductor giant Nvidia (NVDA) has achieved remarkable returns of over 700% during the "Age of AI," transforming every $1,000 invested into around $80,000. As impressive as this growth has been, many investors may find it worthwhile to consider smaller companies that have more room to grow in the rapidly expanding AI market.

In light of these considerations, here are three AI stocks that have potential to rise significantly as the AI revolution continues.

AI Stock No. 1: Pfizer (PFE)

Artificial intelligence offers significant advantages for pharmaceutical companies, which typically invest billions on research and development of new drugs. AI can reduce both the time and cost of this process by quickly running thousands of simulations on chemical and biological reactions, which would take human teams much longer.

Recognizing the potential impact of AI, Pfizer Inc. (PFE) has been making substantial investments in this field since 2014, nearly ten years before AI became mainstream. For example, in 2022, Pfizer invested $20 million in CytoReason, a company that uses AI to create new disease models, and plans to increase its investments to $100 million annually through 2027.

Pfizer's CEO, Mikael Dolsten, understands the transformative power of AI in healthcare. In 2022, he remarked, "The rapid expansion of new technologies, like artificial intelligence, holds tremendous potential to help transform what is possible in human health." Currently, Pfizer's stock trades around $29 and offers a substantial dividend yield of 5.75%, compared to the 1.29% average among S&P 500 companies.

AI Stock No. 2: Tesla Motors Inc. (TSLA)

Tesla has experienced a decline in investor favor, especially following Elon Musk's underwhelming presentation on robot taxis. However, the introduction of its Optimus robots—humanoid devices designed to assist with household tasks and work in settings like fast-food restaurants—could be a game changer for the company.

Elon Musk has claimed that Optimus could potentially raise Tesla's market value to a staggering $30 trillion, representing a remarkable 50x increase for the stock. While this growth might take several years to materialize, and commercial availability of the robots might be limited until 2024 or even 2025, betting against Musk has often proven to be a losing proposition since Tesla’s initial public offering in 2010. Tesla may still provide significant returns for investors in the future.

AI Stock No. 3: The Kroger Co (KR)

At first glance, The Kroger Co., a grocery store chain with a long history of 135 years, may not seem like an innovator. However, it was the first supermarket in the U.S. to implement electronic scanning in 1972.

Today, Kroger is leveraging AI technology to enhance efficiency and improve customer experience. By analyzing data from 62 million households, Kroger uses advanced data science to generate personalized coupons, streamline operations, and optimize shipping schedules to minimize waste. This helps create a more convenient and rewarding shopping experience for millions of regular customers.

Kroger serves 23 million digitally engaged households annually and offers 500 billion "Start My Cart" recommendations each year. With these data operations becoming increasingly sophisticated, stocks have already seen a 27% increase year-to-date. Kroger has also raised its dividend to 2.1%, which is above the S&P 500 average of 1.29%. Importantly, the stock remains relatively cheap compared to its fundamentals, with a price-to-earnings (PE) ratio of just 14, making it appealing to value investors compared to the already inflated prices of other tech stocks.

In summary, while Nvidia has enjoyed remarkable growth in the AI sector, investors may find better opportunities in smaller companies poised to capitalize on this transformative technology.

AI, Stocks, Investing