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3 Top AI Stocks on the Verge of a Bull Run

Nvidia, Meta Platforms, and The Trade Desk are all intriguing AI investments.

As firms released more powerful CPUs and data-processing algorithms, the artificial intelligence (AI) market has risen dramatically in recent years. Nonetheless, according to Fortune Business Insights, this young sector might develop at a compound annual growth rate (CAGR) of 20.1 percent between 2022 and 2029 as underlying technologies improve.

Many AI stocks reached all-time highs last year before losing steam this year as interest rates climbed. However, the downturn has generated appealing purchasing opportunities for those willing to tolerate short-term volatility. So let's take a look at three AI stocks that could be on the verge of a bull run later this year: Nvidia (NVDA 1.22 percent), Meta Platforms (FB 1.39 percent), and The Trade Desk (TTD -0.27 percent ).

According to Research and Markets, Nvidia will likely continue to be the market leader in the data center accelerator industry, which is expected to grow at a compound annual growth rate (CAGR) of 36.7 percent between 2021 and 2026.

1. Nvidia [NVDA]

Nvidia is the leading manufacturer of discrete GPUs for PCs and data centers in the world. Throughout the pandemic, its GPU sales skyrocketed as stay-at-home trends spurred increased purchases of PCs for remote work and high-end gaming. People utilized more apps and cloud-based services as a result of the lockdown measures, which prompted data centers to deploy additional high-end GPUs to process the incoming data using machine learning and AI tools.

In fiscal 2022, Nvidia's revenue and adjusted EPS increased by 61% and 78%, respectively (which ended this January). However, when the pandemic-related tailwinds diminish, analysts anticipate revenue and adjusted EPS to climb only 29 percent and 27 percent, respectively, this year.

As a result, Nvidia's stock has dropped more than 40% this year as a result of the broader tech sell-off. However, the crash dropped its forward price-to-earnings ratio to 30, which appears to be reasonable in comparison to its growth prospects.

According to Research and Markets, Nvidia will likely continue to be the market leader in the data center accelerator industry, which is expected to grow at a compound annual growth rate (CAGR) of 36.7 percent between 2021 and 2026. It should also maintain a significant lead over Advanced Micro Devices (AMD 1.68 percent) in the PC gaming industry, which Mordor Intelligence predicts will rise at an 8.9 percent CAGR from 2022 to 2027.

Nvidia's stock may stay volatile this year, but I believe it will remain a top AI chip play for many years to come.

2. Meta Platforms [META]

Every month, Meta Platforms serves 3.64 billion people via its "family" of four apps: Facebook, Messenger, Instagram, and WhatsApp. This enormous audience supplies the corporation with a gold mine of data, which AI systems then mine to help marketers design customized ad campaigns.

In 2021, Meta's revenue and earnings per share increased by 37% and 36%, respectively. Analysts predict that revenue will expand by only 8% this year, while earnings per share will fall by 13%.

This slowdown might be ascribed to Apple's (AAPL 4.01 percent) iOS privacy upgrade, which allowed users to opt out of data-tracking features; intense competition in the short video market from ByteDance's TikTok; and billions of dollars in losses at its VR/AR-focused Reality Labs division.

Because of these issues, Meta's stock price has fallen more than 40% this year, lowering its forward price-to-earnings ratio to 16. That low valuation means that Meta will struggle to develop new ways to generate targeted adverts and will continue to lose users to TikTok. But I feel those concerns are exaggerated.

Instead, I expect Meta will develop new methods to create targeted advertisements using first-party data, while also expanding its moat against TikTok with Instagram Reels and Facebook Watch. These actions will take time and likely reduce short-term profits, but they should eventually pay off and stabilize growth.

When that happens, investors will see Meta as a viable AI-powered advertising investment once more.

3. The Trade Desk [TTD]

The Trade Desk is the world's largest demand-side platform (DSP) for digital ads, assisting ad agencies, advertisers, and trade desks in bidding on programmatic ad inventory and managing their own ad campaigns.

Instead of human sales staff, machine learning and AI algorithms automate programmatic ad sales on a self-service platform. These AI-powered advertisements are then sold in real-time auctions that take place when a visitor accesses a mobile app, website, or connected TV (CTV) platform.

Revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at The Trade Desk increased 43 percent and 77 percent, respectively, in 2021, as ad sales increased in a post-lockdown market. The majority of that growth was driven by its CTV division, which is benefiting from the demise of linear TV platforms in the face of the rise of streaming alternatives.

Analysts anticipate that The Trade Desk's sales and adjusted EBITDA will increase by 33% and 23%, respectively, this year as the company's post-lockdown recovery continues. Although the prognosis is positive, the company's stock is down more than 40% for the year.

The Trade Desk stock is still not cheap, trading at 46 times this year's adjusted EBITDA, but I believe it is one of the finest long-term investments in programmatic advertising and the rising CTV industry.

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