These are the 3 fastest growing artificial intelligence (AI) stocks

There are many ways to define “fastest growing” stocks. You can focus on market performance, sales growth or profit and look at proven results or future expectations. Traditionalists may prefer to look at reported results and historical market data. Growth-oriented investors may lean toward forward-looking projections based on rapid top-line growth or long-term profit targets.

Today, I’m looking at the fastest-growing artificial intelligence (AI) stocks of the past three years in terms of expected revenue growth. In this way, I will show companies with a lot of expected business growth in the coming years, regardless of what they did in the early days of the generative AI boom.

So here are the top three names of that analysis, based on their expected compound annual growth rate (CAGR) of their top sales over the next three years.

1. Nvidia: 50.4% estimated CAGR

It’s no secret that semiconductor designer Nvidia (NVDA 4.05%) has grown like wildfire in recent years. Revenue growth over the past 3 years stands at a staggering 63.8% CAGR at this point. OpenAI introduced its revolutionary ChatGPT system in November 2022. As the leading provider of AI accelerator hardware for the platform, Nvidia has enjoyed skyrocketing sales ever since.

And analysts see no end to this trend. Your average analyst firm expects Nvidia to grow sales by about 50.4% annually over the next three years.

I agree that Nvidia should produce strong sales growth in this AI boom. However, it becomes increasingly difficult to maintain these skyrocketing growth rates as the base figure for each year-over-year comparison increases. Furthermore, I’m not convinced that the analyst community pays enough respect to Nvidia’s current and potential rivals. If nothing else, having a lot of high-powered AI accelerator chips at their disposal could limit Nvidia’s gross profit margins over time.

So Nvidia seems overpriced to me, since Wall Street’s growth targets seem a bit too bullish. I cashed out some of my paper earnings on this stock a few months ago. However, the analysts may be right. I would kick myself if Nvidia continued to dominate the AI ​​hardware space and my portfolio had nothing to do with that opportunity. You should check your risk tolerance before walking away from Nvidia’s rising stock — or doubling down on it.

2. Super Micro Computers: 36% estimated CAGR

Nvidia is the largest vendor of AI acceleration chips and Super Micro Computers (SMCI -5.01%) sells a lot of custom server systems using those chips. As a result, Supermicro’s sales growth is slightly behind Nvidia’s. In an alternate universe where it was the only AI server builder, Supermicro might have shown equal or even greater growth than Nvidia.

In this world, Supermicro started this growth from a much lower revenue level than Nvidia, as it is currently growing its long-term growth rate faster. Supermicro stands out in the system building market through a combination of unique cooling solutions and relatively low system prices.

That said, Supermicro’s target market is even more fragmented than Nvidia’s. Hewlett Packard Enterprise (HPE 0.53%) and della (DELL 2.38%) sells far more servers than Supermicro, even in the AI ​​server niche. On the other hand, this situation gives Supermicro more room to take market share from its rivals, outperforming its peers in the process. On the downside, HP and Dell won’t just sit back and let Supermicro win.

So that’s another challenging growth objective. At the same time, Supermicro comes with high valuation ratios for this subsector. As such, it is far from my favorite buying idea among AI stocks.

3. Cloudflare: 27.7% estimated CAGR

Finally, specialist in security and network performance Cloudflare (NET 1.58%) is on the back of Supermicro’s revenue growth due to the significant slowdown over the past two years.

Cloudflare is not a pure AI investment, but the company has strong ties to the emerging AI space. You can already buy AI-oriented edge computing services directly from Cloudflare, using its global network of servers and AI accelerators to deliver results close to the end user. Its cybersecurity and network acceleration features are also quite valuable for AI service providers. For example, ChatGPT services always go through Cloudflare’s content delivery and data security tools.

So Cloudflare is a serious AI investment with robust revenue growth. The company is also improving its AI computing infrastructure over time. Cloudflare, meanwhile, recently revamped its sales department, driving both revenue per sales agent and operating margin growth.

The stock is far from cheap, but Cloudflare is perhaps the most compelling long-term growth story on this list. This company is pulling multiple levers to keep the growth fire burning, and the best chapters in Cloudflare’s story may yet be written.