Unlocking the Potential of Artificial Intelligence
The excitement surrounding artificial intelligence (AI) has driven stock prices of top companies to new heights in 2024. However, not all AI innovators have seen their stock prices soar. Disappointing quarterly results or underwhelming outlooks can send shares plummeting, creating a buying opportunity for patient investors with a long-term perspective.
Two AI Stocks Poised for a Turnaround
Shares of Advanced Micro Devices (NASDAQ: AMD) and Adobe (NASDAQ: ADBE) have taken a hit, declining 43% and 31% from their 2024 highs, respectively. Despite this, both companies have made significant strides in AI development, positioning them for a potential turnaround in 2025.
AMD’s AI Ambitions
AMD has been playing catch-up with Nvidia in the AI space, but its efforts are paying off. The company has secured deals with big tech companies like Oracle, Microsoft, and Meta Platforms, demonstrating its ability to provide cost-effective AI data center chips. AMD’s AI accelerators have proven more efficient than Nvidia’s in inference performance, making them an attractive option for companies like Meta. The company’s third-quarter data center revenue surged 122% year-over-year, outpacing Nvidia’s growth. With its accelerated AI chip development and growing relationships with big tech companies, AMD is poised for strong revenue growth and earnings expansion in 2025.
Adobe’s AI-Powered Future
Adobe has made significant advancements in AI-powered features, expanding their use across its suite of design and marketing software. The company’s GenStudio platform combines creative and marketing software to help companies develop marketing campaigns, harnessing its Firefly generative AI models and machine learning. Adobe’s focus on commercial-safe generative AI gives it an edge in the market, and its free Adobe Express software is attracting more users than ever. Despite disappointing financial results in 2024, Adobe is well-positioned to win business from creatives and marketers looking to leverage AI, leading to steady revenue growth and margin expansion.
A Buying Opportunity
With shares of AMD and Adobe trading at a relative bargain, long-term investors may find a considerable margin of safety in these AI stocks. As the companies continue to develop and expand their AI capabilities, patient investors may be rewarded with strong earnings growth and a potential turnaround in 2025.
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