More upside than Nvidia: There are two better artificial intelligence (AI) stocks to buy right now, according to Wall Street

Interest in artificial intelligence (AI) exploded after the launch of ChatGPT end of 2022. Nvidia was one of the biggest winners in terms of revenue growth and stock price appreciation. But while Wall Street still expects stocks to rise in the coming year, analysts predict more upside potential Amazon (AMZN 0.30%) And Vistra (VST 3.02%).

• Nvidia has an average price target of $150 per share. That implies an upside of 6% from the current share price of $141.
• Amazon has an average price target of $220 per share. That implies an upside of 17% from the current share price of $188.
• Vistra has an average price target of $143.50 per share. That implies an upside of 16% from the current share price of $124.

I think Nvidia is a must-have stock for investors looking to benefit from the AI ​​boom. But owning a basket of AI stocks is the wisest strategy, so Amazon and Vistra certainly deserve consideration.

1. Amazon

The investment thesis for Amazon focuses on its strong competitive position in three markets. In concrete terms, the company operates the largest online marketplace in terms of turnover in North America and Western Europe. Amazon is also the third largest digital advertising company. And Amazon Web Services (AWS) is the largest public cloud.

Amazon uses artificial intelligence across retail to automate coding and supply chain management and obtain product recommendations for shoppers. Morgan Stanley Analysts believe that the resulting cost savings could increase the company’s operating margin by several percentage points. But the company is particularly well positioned to monetize AI because of its leadership in cloud infrastructure and platform services (CIPS).

AWS accounted for 32% of CIPS spend in the second quarter Microsoft Azure is in second place with a market share of 23% AlphabetAccording to Synergy Research Group, Google’s Google Cloud Platform ranks third with a market share of 12%. AWS leans on its leadership with Amazon soila cloud service that allows companies to refine pre-trained models and build custom generative AI applications.

Goldman Sachs Analyst Kash Rangan estimates that public cloud spending will grow 22% annually to $2 trillion by 2030, and he believes up to 15% of that total could be spent on generative AI services. AWS is well positioned to benefit from Bedrock simply because it is already the largest public cloud in terms of revenue, customers and partners.

With that in mind, Wall Street expects Amazon’s revenues to rise 25% over the next twelve months. That consensus estimate makes the current valuation of 45 times earnings seem reasonable. Of the 67 analysts covering Amazon, 63 currently rate the stock as a Buy. Investors should feel comfortable buying a small position in this AI stock today.

2. View

The investment thesis for Vistra is simple. Companies are spending heavily on AI infrastructure, but AI systems require enormous computing power, which in itself also requires a huge amount of energy. Many experts see nuclear energy as the solution because it is virtually carbon-free and more reliable than renewable sources such as wind and solar energy. Vistra has the second largest nuclear energy fleet in the US

Vistra is a utility company that integrates power generation from gas, coal, nuclear and renewable facilities with retail electricity sales to residential, commercial and industrial customers in 16 states and the District of Columbia. With an installed capacity of 41 gigawatts (GW), Vistra is the largest energy producer in the US. The company is also the largest private electricity supplier in the country.

Importantly, Vistra recently signed long-term power purchase agreements with two hyperscale cloud companies at the center of the AI ​​boom. The first involves building a 200-megawatt solar facility, backed by Amazon, and the second involves building a 405-megawatt solar facility, backed by Microsoft. Investors hope that nuclear deals will be next for Vistra, just like the recent agreement between Microsoft and Constellation Energy.

In particular, management expects the artificial intelligence boom to increase power demand in data centers by 35 GW between 2023 and 2030, but that is certainly not the only growth driver for Vistra. For example, population growth in West Texas could increase energy demand by 20 GW by the end of this decade, and the company sees a potential opportunity in reducing industrial activity.

Wall Street expects Vistra’s revenues to rise about 250% over the next twelve months. That figure reflects increased demand for power in data centers and an intensive capital return program that has seen Vistra buy back a quarter of its outstanding shares in three years. In that context, the current valuation of 91 times earnings is reasonable. Of the fifteen analysts who follow Vistra, fourteen rate the stock as a buy. And even the lowest price target of $127 per share implies an upside of 2%.