2 AI Stocks That Can Crush the S&P 500 by 2030

The S&P 500 has had exceptional returns over the past year and is currently up about 23%. However, the index returned an average annual return of around 10% going back decades, so if you want to find stocks to beat the market, you need to look for companies that can sustain high double-digit growth over time for several years.

The artificial intelligence (AI) market is a promising area to look for growth stocks. Statista predicts that spending on AI technology will grow from $184 billion this year to $826 billion by 2030.

Here are two AI stocks that have crushed the S&P 500 over the past year and may outperform the index by the end of the decade.

1. Palantir Technologies

Actions of Palantir Technologies (PLTR 1.95%) hit new highs as the AI ​​software vendor reported accelerated growth this year. The company depended primarily on government transactions. However, it is starting to see a growing number of corporations investing in its software, which could catapult the stock to market-crushing returns over the next six years.

In the second quarter, Palantir reported a robust 27% year-over-year increase in total revenue. The company closed 10 deals worth more than $10 million. These results are impressive given the headwinds many software companies are experiencing this year due to tightening business spending.

Companies seem to be prioritizing investment in AI. After using Palantir, these companies see positive returns, such as faster task completion and better product pricing optimization, which can help a business increase profit margins.

An important advantage for Palantir is the use of its software engineers as part of the sales process. Engineers work with customers to configure the software and show them ways to get more out of it. This gives Palantir a huge advantage in growing sales from customers.

Palantir’s high-margin software business should create outstanding returns for shareholders in the coming years. Wall Street analysts expect Palantir’s annual earnings to grow 85% over the next five years, implying substantial growth in the company’s margins. There will be ups and downs, but investors should expect Palantir stock to at least double from current stock prices through 2030 and outperform market averages.

2. Nvidia

Nvidia (NVDA -0.03%) it is estimated to control at least 70% of the AI ​​chip market. It has long dominated the market for graphics processing units (GPUs), which have the processing bandwidth to handle the demands of AI training. Nvidia’s leadership in GPUs has translated into phenomenal returns for shareholders in recent years as the company continues to invest in building more data centers.

Nvidia’s data center revenue more than doubled year-over-year last quarter to $26 billion, and opportunities to expand beyond the US should allow the company to maintain its momentum next year. As it prepares to launch the next generation of the Blackwell AI computing platform, management also continues to highlight the burgeoning opportunity to provide AI infrastructure to countries around the world.

Foreign nations want to use their own language and culture with generative AI tools, and are turning to Nvidia to help them build the infrastructure to do so. For example, Japan’s National Institute of Advanced Industrial Science and Technology uses thousands of Nvidia H200 GPUs for its AI Bridging Cloud Infrastructure 3.0 supercomputer.

As Nvidia continues to ride the enterprise wave, sovereign AI infrastructure could be the next wave that creates significant growth opportunities for the GPU leader. Management believes its sovereign AI business will top $10 billion this year.

Nvidia’s share price is up 160% over the past year, but that’s been driven entirely by its data center growth. The stock still trades at an attractive forward price-to-earnings ratio of 29, using consensus estimates for next year’s earnings. With analysts projecting 52% annual earnings growth over the next five years, Nvidia stock could significantly outperform the average stock.