2 AI stocks to buy in September

The artificial intelligence (AI) market could reach $826 billion by 2030, according to Statista. Investors who stick with the top vendors in data center hardware and enterprise software should see excellent returns as AI investments increase in these critical areas.

Here are two outstanding AI stocks to buy right now.

1. Nvidia

Nvidia (NVDA 0.78%) has long dominated the graphics processing unit (GPU) market and continues to show market share leadership in AI. At the beginning of this year, adze CEO Elon Musk said, “Right now, there’s nothing better than Nvidia hardware for AI.” Its GPUs are the gold standard for playing video games and training autonomous cars.

Nvidia’s gaming business has been pressured by weak consumer spending, but revenue from its data centers is exploding. The company just issued another successful report with total revenue up 122% year over year. Revenue is expected to grow about 80% year over year in the next quarter.

Nvidia said nearly half of its data center revenue comes from large cloud service providers, including Amazon, Microsoftand Alphabetto Google. These companies generated $182 billion in free cash flow over the past year, so they can afford to make long-term commitments to build out their data center infrastructure, which is good for Nvidia.

And data centers need many components beyond GPUs to function properly, such as network equipment, servers and software. Nvidia is building a competitive edge by providing everything a data center needs to build what are essentially “AI factories,” as management likes to call them.

Networks revenue grew 114% year-over-year last quarter. While this business only generated 12% of Nvidia’s total revenue, it could become a bigger contributor to the business over the next few years. Management said its Spectrum-X ethernet platform is seeing widespread adoption by enterprise customers and is on track to become a multibillion-dollar product line in the next year.

The company doesn’t just sell a chip. Sells interconnect cables, software and other services that require understanding customer needs. This leads to closer ties with AI researchers and data centers, and should allow Nvidia to grow revenue over the long term and deliver exceptional returns for shareholders.

2. ServiceNow

Service Now (NOW 0.49%) is an enterprise software provider that takes all of a company’s data from different departments and creates a single portal to create applications and workflows. The company has consistently seen year-over-year revenue growth of 20% or more in recent years.

Even in a difficult business environment that is putting pressure on enterprise software spending this year, ServiceNow continues to post strong growth that shows the opportunity it has going forward.

In the second quarter, the company signed 88 deals worth more than $1 million in customer account value, a 26 percent increase over the year-ago quarter. It reports strong growth for its generative AI platform Now Assist, the fastest-growing new product in its history.

Companies are signing up because of the tremendous value the platform provides by streamlining business processes and increasing worker productivity. For example, the city of Los Angeles used the ServiceNow platform during the pandemic to build a scheduling app for COVID tests in days, which highlights how its platform can help significantly reduce software development time.

Overall, ServiceNow has 1,988 paying customers of more than $1 million in customer account value, but it’s notable that the largest deals — more than $20 million in account value — are up 40% from year to year.

It’s a great sign that the company is seeing rapid adoption of generative AI services. Companies in banking, healthcare, semiconductors and more industries are interested. This bodes well for ServiceNow’s competitive position as more companies integrate AI into their operations.

The generative artificial intelligence market is expected to be worth $34 billion in 2024 and grow to $356 billion by 2030, according to Statista. ServiceNow is well positioned to take advantage of this opportunity.

The stock is up 1,200% over the past 10 years, but it’s not too late to buy shares. ServiceNow estimates its long-term addressable market at $275 billion, compared to its bottom line revenue of just under $10 billion. It should be able to grow double-digit revenue for many years and deliver market share returns.