3 Stocks Set to Ride the Artificial Intelligence (AI) Wave to New Heights

Three Motley Fool contributors highlighted Amazon, Qualcomm, and Nvidia as key AI stocks, citing their respective strengths in cloud computing, chipset technology, and AI chip development. Amazon's AWS is expected to benefit from AI-driven cloud growth, while Qualcomm's low-cost AI applications could boost demand for its products. Nvidia reported strong revenue growth of 69% year-over-year, reaching $44.1 billion, driven by high demand for its AI chips, though gross margin fell due to export restrictions to China.

Analysis

Artificial intelligence (AI) remains a prominent investment theme, with analysts highlighting Amazon (AMZN), Qualcomm (QCOM), and Nvidia (NVDA) as key beneficiaries. Amazon's cloud division, AWS, which holds a 30% global market share and contributed over 58% of the company's operating income in the past year, is poised to benefit significantly from AI-driven demand; Goldman Sachs forecasts global cloud computing revenue to reach $2 trillion by 2030, growing at a 22% annualized pace. AWS demonstrated 17% year-over-year revenue growth in Q1, and Amazon is projected for 17% annual long-term earnings growth, trading at a P/E ratio of 33. Qualcomm, despite challenges such as its relationship with Apple and U.S.-China tensions, is seen as a potential beneficiary of low-cost AI driving upgrade cycles for its chipsets, which constituted 64% of its revenue in H1 fiscal 2025. The company reported a 17% year-over-year revenue increase to $22.6 billion and an 18% rise in net income to $6 billion for the first two quarters of fiscal 2025, with its automotive and IoT segments growing 60% and 31% respectively over the last year; Qualcomm currently trades at a P/E of 15. Nvidia continues its strong performance in the AI sector, reporting quarterly revenue of $44.1 billion (up 69% year-over-year) and net income of $18.8 billion (up 26% year-over-year) for the three months ending April 30, 2025, along with $14.1 billion in share repurchases. A notable decrease in gross margin from 78% to 61% was attributed to a write-off from U.S. export restrictions to China, with management expecting a rebound to the 70-75% range.

Key Decisions for Investors

• Investors could consider Amazon a strategic AI investment, leveraging AWS's market leadership, strong growth prospects in the expanding cloud AI sector, and a current P/E ratio of 33 which is deemed reasonable for its growth profile.
• Qualcomm presents a value-oriented opportunity in AI with a P/E of 15, significant growth in its automotive and IoT segments, and potential upside from AI-driven chipset demand, though investors should weigh the existing geopolitical and client-specific risks.
• Nvidia remains a prime candidate for AI exposure given its dominant market position and exceptional revenue growth, but investors should be cognizant of its high valuation and a recent, albeit temporary, dip in gross margin; the share's significant prior gains and its exclusion from a specific 'top 10' list may warrant careful position sizing and consideration of diversification.