Interest in artificial intelligence (AI) has exploded following the launch of ChatGPT late 2022. Nvidia has been one of the biggest winners in terms of revenue growth and stock price appreciation. But even though Wall Street still expects the stock to rise over the next year, analysts are forecasting more upside in 2017. Amazon (AMZN 0.30%) And Vistra (VST 3.02%).

• Nvidia has a median price target of $150 per share. This implies a 6% upside from the current stock price of $141.
• Amazon has a median price target of $220 per share. This implies a 17% upside from the current stock price of $188.
• Vistra has a median price target of $143.50 per share. This implies a 16% upside from the current stock price of $124.

I think Nvidia is a must-have stock for investors hoping to capitalize on the AI ​​boom. But owning a basket of AI stocks is the most prudent strategy, so Amazon and Vistra are certainly worth considering.

1. Amazon

Amazon’s investment thesis centers on its strong competitive presence in three markets. Specifically, the company operates the largest online marketplace in North America and Western Europe by sales. Amazon is also the third largest digital advertising company. And Amazon Web Services (AWS) is the largest public cloud.

Amazon uses artificial intelligence across its retail business to automate coding and supply chain management and provide product recommendations to shoppers. Morgan Stanley analysts estimate that the resulting cost savings could increase the company’s operating margin by several percentage points. But the company is uniquely positioned to monetize AI thanks to its leadership in cloud infrastructure and platform services (CIPS).

AWS accounted for 32% of CIPS spending in the second quarter, while Microsoft Azure ranked second with 23% market share and AlphabetGoogle’s Google Cloud Platform ranked third with 12% market share, according to Synergy Research Group. AWS strengthens its leadership with Amazonian basea cloud service that allows businesses to refine pre-trained models and create 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 estimates that up to 15% of that total could be spent on cloud services. Generative AI. 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 this in mind, Wall Street expects Amazon’s profits to increase 25% over the next 12 months. This consensus estimate makes the current valuation of 45 times earnings reasonable. In fact, of the 67 analysts who follow Amazon, 63 currently rate the stock as a Buy. Investors should feel comfortable purchasing a small position in this AI stock today.

2. View

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

Vistra is a utility company that integrates the generation of electricity from gas, coal, nuclear and renewable facilities with the retail sale of electricity to residential, commercial and industrial customers in 16 states and the District of Columbia. With an installed capacity of 41 gigawatts (GW), Vistra ranks as the largest electricity producer in the United States. The company is also the nation’s largest retail residential electricity provider.

Importantly, Vistra recently entered into long-term power purchase agreements with two large-scale cloud computing companies at the heart of the AI ​​boom. The first involves the construction of a 200-megawatt solar facility backed by Amazon, and the second involves the construction of a 405-megawatt solar facility backed by Microsoft. Investors hope nuclear deals are next for Vistra, just like the recent agreement between Microsoft and Constellation Energy.

Notably, management expects the artificial intelligence boom to increase data center energy demand by 35 GW between 2023 and 2030, but that is by no means Vistra’s only growth driver. For example, population growth in West Texas could increase electricity demand by 20 GW by the end of the decade, and the company sees a potential opportunity in relocating industrial activity.

Wall Street expects Vistra’s earnings to rise about 250% over the next 12 months. The figure reflects increased data center energy demand and an intense capital return program that saw Vistra repurchase a quarter of its outstanding shares over three years. In this context, the current valuation of 91 times earnings is reasonable. In fact, of the 15 analysts who follow Vistra, 14 rate the stock as a Buy. And even the lowest price target of $127 per share implies a 2% upside.