Goldman Sachs Insights
Taking a retrospective look back to 2010, the golden era of the U.S. stock market, we see the tech sector as the tireless engine propelling equity market gains, responsible for a noteworthy 40% surge over the past 14 years.
During this transformative period, tech stocks have served as veritable treasure troves, turning humble investments into veritable treasures. Consider the remarkable ascent of Advanced Micro Devices, where $1,000 sown in 2010 would now yield a bountiful harvest exceeding $23,000. Companies like Microsoft, Amazon, and Netflix have dazzled the markets with their exponential growth. Among them, Nvidia stands out, riding high on diverse catalysts, including the latest entrant – artificial intelligence (AI).
The AI Revolution
Driven by cutting-edge technologies, the AI landscape is still in its nascent stages. A prophecy by Bloomberg stirs excitement, foreseeing AI as a revenue powerhouse, surging to a monumental $1.3 trillion in 2032 from the current estimate of $137 billion. In the pursuit of cultivating a million-dollar portfolio, AI-centric enterprises emerge as prime contenders, beckoning investors to embark on a long-haul journey.
1. Palantir Technologies: The AI Pathfinder
While behemoths like Nvidia revel in the limelight with their AI model-training prowess, the crux lies in deploying these models for tangible real-world applications. Enter Palantir Technologies (NYSE: PLTR), orchestrating this transformation through its trailblazing Artificial Intelligence Platform (AIP).
AIP serves as a cornerstone for crafting generative AI applications, seamlessly integrating large language models (LLMs) into operational workflows while offering a repository of pre-built AI applications. Palantir’s ingenious “boot camp” strategy has resonated well with clients, leading to lucrative contracts and holistic adoption of AI in business operations.
Witnessing a 55% surge in commercial customer base and contract value, Palantir pulled in a staggering $946 million in total contract value in the last quarter, indicating a robust 47% uplift from the corresponding period. The AI-powered propulsion has steered its adjusted operating margin to a commendable 37%, heralding an era of burgeoning profits.
2. Oracle: The Cloud Virtuoso
Parlaying Palantir’s software platforms, meticulously run on cloud infrastructure by Oracle (NYSE: ORCL), heralds a strategic alliance. Oracle’s cloud realm, a haven for nurturing AI models, resonates with an escalating demand that surpasses infrastructure capabilities.
Riding on a stellar 56% uptick in consumption, Oracle’s infrastructure cloud services surged to an annualized revenue run rate of $8.6 billion, a remarkable feat underpinning the AI-induced cloud upsurge. As the remaining performance obligations (RPO) skyrocketed by 53% to $99 billion, Oracle’s thriving ecosystem promises a bullish trajectory in the ensuing fiscal years.
Forecasts by Goldman Sachs augur a shimmering future for Oracle, envisioning infrastructure-as-a-service to amass a colossal $580 billion in revenue by 2030, bolstered by the AI juggernaut. With estimates proffering accelerated growth following a commendable 6% revenue surge in the last fiscal year, Oracle stands poised to capitalize on this unprecedented opportunity.