The elevated interest in generative artificial intelligence (AI) has driven an impressive rally in several tech stocks. Advances in generative AI are expected to boost productivity and innovation across multiple sectors, including tech, healthcare, and vehicle automation. Given the robust growth opportunities, we used TipRanks’ Stock Comparison Tool to place Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), and Palantir (NYSE:PLTR) to find Wall Street’s top AI pick.
Amazon (NASDAQ:AMZN)
E-commerce and cloud computing giant Amazon has impressed investors with its performance in recent quarters. The company’s strong execution has helped it drive solid growth despite macro headwinds. Cost reduction and streamlining measures have driven improved profitability.
Analysts are optimistic that generative AI-driven demand will benefit the company’s cloud computing unit, Amazon Web Services (AWS). They are also bullish about the potential of the company’s rapidly growing advertising business.
Amazon is scheduled to announce its first-quarter results on April 30. Analysts expect the company’s revenue to rise 12% year-over-year to $142.68 billion. They project a jump in the company’s earnings per share (EPS) to $0.85 from $0.31 in the prior-year quarter.
What is the Stock Price Prediction for Amazon?
On Tuesday, BMO Capital analyst Brian J. Pitz raised the price target for Amazon stock to $215 from $205 and maintained a Buy rating. The analyst also increased the AWS revenue growth estimate to 15% from 14% for 2024. He expects further upside potential from generative AI workloads and IT spend migration.
Pitz thinks that the integration of AI-powered shopping assistant, Rufus, into Amazon’s Retail business is underappreciated. The analyst believes that the benefits from Rufus, coupled with various generation AI capabilities, could help Amazon’s Retail business generate double-digit growth in gross merchandise value (GMV) and unlock meaningful free cash flow.
Overall, Amazon earns a Strong Buy consensus rating based on 42 unanimous Buys. At $212.41, the average AMZN stock price target indicates about 18.3% upside potential. AMZN stock has risen about 68% in the past year.
Nvidia (NASDAQ:NVDA)
Nvidia shares have risen over 64% year-to-date and rallied about 204% in the past year. The semiconductor giant has immensely gained from the generative AI wave, which has created massive demand for the company’s advanced graphics processing units (GPUs).
In the fourth quarter of Fiscal 2024, Nvidia’s revenue surged 265% to $22.1 billion, while adjusted EPS jumped 486% to $5.16. Addressing concerns about maintaining the elevated growth rates, Nvidia CEO Jensen Huang said during the Q4 FY24 earnings call that the backdrop is excellent for continued growth.
The CEO anticipates that the demand for the company’s GPUs will remain high due to generative AI-led tailwinds and the industry-wide shift from central processors to the accelerators that the company sells.
Is Nvidia a Buy, Sell, or Hold?
Recently, Evercore analyst Mark Lipacis initiated coverage of Nvidia stock with a Buy rating and a price target of $1,160. The analyst contends that investors underestimate the significance of the chip, hardware, and software ecosystem that Nvidia has created. He highlighted the upside that NVDA can offer by pointing out that computing eras last 15-20 years and are “typically dominated by a single vertically integrated ecosystem company, whose returns are measured in 100-to-1000 bagger range.”
With 39 Buys and two Holds, NVDA scores a Strong Buy consensus rating. The average NVDA stock price target of $1,004.92 implies an upside potential of about 22%.
Palantir (NYSE:PLTR)
Palantir shares have skyrocketed by a staggering 164.5% in the past year, driven by AI-related optimism. The data analytics firm’s upbeat quarterly results also helped in driving the stock higher. In the fourth quarter of 2023, the company’s revenue grew 20% to $608 million. Additionally, Q4 2023 marked the fifth consecutive quarter of GAAP profitability for the company.
It is worth noting that Palantir’s commercial revenue is growing at a faster pace than its government business. In full-year 2023, the company’s government revenue increased 14% to $1.2 billion while the commercial revenue was up 20% to $1 billion. In particular, the company attributed the strength in its U.S. commercial business to its Artificial Intelligence Platform (AIP) offering.
Earlier this month, investors cheered Palantir’s deal with tech giant Oracle (NYSE:ORCL). The partnership will combine Oracle’s cloud and AI offerings with Palantir’s AI and data analysis platforms.
PLTR is scheduled to announce its Q124 results on May 6. Analysts expect the company’s EPS to increase to $0.08 from $0.05 in the prior-year quarter. The Street expects 17.2% rise in revenue to $615.30 million.
What is the Target Price for Palantir?
Last month, Monness analyst Brian White downgraded Palantir Technologies stock to Sell from Hold with a price target of $20. The analyst noted that PLTR stock continues to rise after its surge in 2023, resulting in “an egregiously rich valuation.”
The analyst acknowledged that PLTR is well-positioned to benefit from the long-term AI boom and leverage on volatile geopolitics. That said, he is concerned about uneven revenue from government-related contracts, unsteady execution, and high valuation.
Wall Street has a Moderate Sell consensus rating on Palantir stock based on two Buys, five Holds, and six Sells. The average PLTR stock price target of $19.67 implies a possible downside of 9.1% from current levels.
Conclusion
While Wall Street is bearish on Palantir due to its lofty valuation, Amazon and Nvidia have earned bullish reviews. Analysts currently see a slightly higher upside potential in Nvidia stock than Amazon shares. Both these companies have the financial strength and capabilities to capitalize on the generative AI wave.
