After skyrocketing more than 7x since the end of the third quarter of 2022, Nvidia is now close to correction territory. The high-flying stock may fall even more.
Investors could be champing at the bit to buy Nvidia on a pullback. That could prove to be a smart move over the long term. However, there are other artificial intelligence (AI) stocks to consider. I predict the following three AI stocks will outgain Nvidia over the next five years.
1. Alphabet
Google parent Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) has been a big winner from the AI boom, with its shares jumping more than 40% during the last 12 months. Although this performance doesn't hold a candle to Nvidia's, Alphabet could pick up steam while Nvidia loses some momentum.
Valuation is a top consideration. Nvidia trades at nearly 35x sales, while Alphabet's price-to-sales multiple is below 6.5. Sure, I fully expect Nvidia will generate stronger sales growth than Alphabet over the next few years. However, Nvidia stock is priced for perfection -- and most companies don't deliver perfection for very long.
Alphabet has almost become an AI underdog in the minds of some investors after public embarrassment with its generative AI models. Don't underestimate the company's AI expertise, though. Apple could implement Google Gemini in its iPhones, according to Bloomberg. If this happens, I believe it will provide a major catalyst for Alphabet stock.
I also think Waymo will become a major growth driver for Alphabet over the next five years. Cathie Wood's Ark Invest projects the robotaxi market will top $10 trillion in sales by the early 2030s. I'm not that optimistic, but I still expect this market to take off, with Waymo as one of the biggest beneficiaries.
2. Meta Platforms
Meta Platforms(NASDAQ: META) has been one of the best-performing megacap stocks not named Nvidia. Shares of the social media giant have soared close to 140% over the last 12 months, and I think Meta has more room to run.
Like several other big tech companies, Meta is trying to reduce its dependence on Nvidia's GPUs by using its own AI chips. Also like several of its peers, Meta is more attractively valued than Nvidia.
While Nvidia faces increasing competition, Meta might benefit from less competition. A bill is making its way through the U.S. Congress that would require Bytedance to divest TikTok or face the consequences of an effective ban in the U.S.
I don't think Meta requires a TikTok ban to outperform Nvidia over the next five years, though. Meta CEO Mark Zuckerberg proclaimed last year that business messaging will be the company's "next major pillar." More recently, he said that smart glasses with embedded AI assistants could be Meta's "killer app." I suspect Zuckerberg is right on both counts.
3. UiPath
Great AI stocks aren't limited to megacap monsters. UiPath(NYSE: PATH) hasn't delivered the level of sizzling returns Nvidia has over the last 12 months and it hasn't kept up with Alphabet and Meta, either. However, with a market cap of only $12.4 billion, UiPath could grow much larger over the next five years.
I recently wrote that UiPath was my pick for the best AI stock to buy right now. Its relatively small size was a key factor in my selection process. More importantly, I view UiPath as an AI company on the rise and in its early stages of growth.
UiPath is the leader in robotic process automation (RPA), and this market is expanding by leaps and bounds. Unsurprisingly, UiPath continues to deliver exceptional sales growth, with revenue soaring 31% year over year in Q4 to a record high. It also achieved profitability for the first time -- a major milestone that could set the stage for accelerated stock gains.
The rapid advances in AI are allowing the company to automate business processes that it couldn't do in the past, and UiPath is seizing this opportunity. It launched Clipboard AI last year, with TIME magazine naming it one of the best inventions of 2023. UiPath also introduced its AutoPilot AI-powered assistant in Q4.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Speights has positions in Alphabet, Apple, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Nvidia, and UiPath. The Motley Fool has a disclosure policy.
