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Generative
artificial intelligence (AI) has been a major theme that drove a significant rise in several tech stocks this year. Many tech companies are investing millions of dollars in building generative AI models and applications to capture massive growth opportunities in the years ahead. Using
TipRanks’ Stock Comparison Tool, we placed Microsoft (
NASDAQ:MSFT
), Palantir (
NYSE:PLTR
), and Nvidia (
NASDAQ:NVDA
) against each other to find out the AI stock that could deliver the best returns as per Wall Street analysts.
Microsoft Stock (NASDAQ:MSFT)
Microsoft shares had a strong run this year, as investors expect generative AI to be a key catalyst for the company’s future growth. The company is expected to benefit from its aggressive investments in generative AI and collaboration with Open AI. Microsoft is focused on infusing AI across its tech stack to boost its revenue.
Aside from AI-related tailwinds, several analysts are also optimistic about the company’s future growth due to its well-diversified business model, which includes its suite of productivity tools, Azure cloud business, and cybersecurity offerings. Moreover, the
recently completed acquisition of Activision Blizzard is expected to bolster the company’s gaming business.
What is the Target Price for MSFT?
On Tuesday,
Argus analyst Joseph Bonner increased his price target for Microsoft stock to $430 from $390 and reiterated a Buy rating. Bonner highlighted that MSFT continues to pursue long-term growth through its AI and cloud investments and may hold the premier position in business technology.
Microsoft is not immune to macro headwinds and declines in the PC original equipment manufacturer (OEM) and digital advertising markets. That said, Bonner is bullish on Microsoft due to its diversified and strong set of assets. He thinks that MSFT could even be a safe haven in uncertain times.
With 35 Buys and one Hold, Microsoft scores a Strong Buy consensus rating. The average price target of $415.77 indicates 11.6% upside potential.
Shares have risen have risen more than 55% year-to-date.
Palantir Stock (NYSE:PLTR)
Palantir stock has rallied 185% year-to-date, as investors are pleased with the data analytics company’s efforts to improve its profitability. Palantir has delivered GAAP profits for four consecutive quarters. Most recently, the company reported
upbeat third-quarter results and increased its full-year revenue and adjusted operating income guidance, indicating continued momentum in the business.
While Palantir’s government business could be under pressure over the near term due to budgetary constraints, the company is confident about its commercial business, supported by the growing demand for its Artificial Intelligence Platform (AIP), launched earlier this year.
Is Palantir a Buy, Hold, or Sell?
On November 21,
RBC Capital analyst Rishi Jaluria reiterated a Sell rating on Palantir stock with a price target of $5, after the
National Health Service (NGS) awarded Palantir and four other IT firms a GBP 330 million contract over seven years. Jaluria thinks that the announcement was “underwhelming,” as the contract awarded to Palantir was smaller than anticipated and split between four other firms.
Overall, Wall Street has a Hold consensus rating on Palantir based on four Buys, five Holds, and five Sells. The average price target of $15.18 indicates a possible downside of 17%.
Nvidia Stock (NASDAQ:NVDA)
Nvidia stock has enjoyed a stellar rally this year, with the generative AI boom triggering a spike in the demand for the company’s graphics processing units (GPUs). The semiconductor giant’s fiscal third-quarter results crushed Wall Street’s expectations.
Revenue surged 206% to $18.1 billion and
adjusted EPS jumped 593% to $4.02.
Speaking about the company’s robust prospects,
CEO Jensen Huang stated, “NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle.” Nvidia expects continued strength in its business and projects its fiscal fourth quarter revenue to come in at $20 billion (plus or minus 2%), which implies about 231% growth.
What is the Target Price for NVDA Stock?
On Monday,
Piper Sandler analyst Harsh Kumar reiterated a Buy rating on Nvidia stock with a price target of $620. Kumar called NVDA his “top large-cap pick,” replacing his earlier choice, Advanced Micro Devices (
NASDAQ:AMD
). The analyst cited several reasons for the change in his top pick, including a substantially more compelling valuation than AMD and NVDA’s complete stack of compute offerings that provide solid efficiencies and major competitive advantages at the system level.
Kumar also sees the possibility of software licenses becoming a substantial part of Nvidia's overall revenue and increasing the company’s totally addressable market (TAM). He believes that NVDA has good visibility into FY25, thanks to a strong backlog and demand tailwinds.
Wall Street’s
Strong Buy consensus rating on Nvidia stock is backed by 31 Buys and three Holds. The average price target of $661 implies 42% upside.
Conclusion
Wall Street is highly bullish on Nvidia and Microsoft stocks but sidelined on Palantir. Analysts see higher upside in Nvidia stock than Microsoft and Palantir. The semiconductor giant’s advanced GPUs are enjoying robust demand as they are the building blocks for developing generative AI models and applications. Nvidia’s strong execution, continued innovation, and solid fundamentals are expected to drive continued growth in the years ahead.
Disclosure
Microsoft (MSFT) closed the latest trading day at $372.52, indicating a +0.92% change from the previous session's end. The stock outpaced the S&P 500's daily loss of 0.06%. On the other hand, the Dow registered a loss of 0.22%
Tech stocks were mixed in late Tuesday afternoon trading, with the Technology Select Sector SPDR Fund (XLK) rising 0.5% and the Philadelphia Semiconductor index falling 0.5%.
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The artificial intelligence (AI) craze gave share prices of many companies a nice boost this year, which is not surprising since this technology has started moving the needle for many businesses already.
While artificial intelligence (AI) applications have been in development for decades, 2023 will likely go down as a breakthrough year for the technology. It's certainly been a breakout year for AI stocks. The excitement surrounding the tech has powered many of this year's biggest