Nvidia, Tesla, Palantir among Dan Ives 10 AI stocks to own through the end of 2025

Key Concepts

• AI Revolution: The ongoing transformation driven by advancements in artificial intelligence.
• AI Bubble: A speculative market phenomenon where the valuation of AI-related companies is excessively inflated.
• Nvidia Chips: High-performance semiconductors crucial for AI computations.
• Demand-Supply Imbalance: A situation where demand for a product significantly exceeds its supply.
• Enterprise Use Cases: Practical applications of AI in business operations.
• Robotics and Autonomous Systems: AI-powered machines and vehicles capable of independent operation.
• Commercial Bookings: Revenue generated from sales to non-governmental clients.
• Foundational AI Companies: Companies providing essential infrastructure or services for the AI ecosystem.

Discussion on the AI Revolution and Market Bubble

Dan Ies, Managing Director and Global Head of Tech Research at Wed Bush, argues that the current market is not in an AI bubble. He supports this view by highlighting the immense demand for Nvidia chips, with a 12:1 demand-supply ratio, and a 30% acceleration in demand over the last three months. Ies emphasizes that only 3% of US companies and less than 1% globally have adopted AI, indicating the early stage of this revolution. He contrasts the current situation with the late 1990s tech bubble, where companies had minimal business models and were valued at 30 times revenues. Today, he points to trillion-dollar companies with substantial free cash flow and a true "fourth industrial revolution" driven by enterprise use cases in robotics and autonomous systems. Ies likens the current AI party to being at 10:30 PM with the potential to last until 4:00 AM, suggesting significant room for growth.

Top 10 Tech Stocks for the AI Revolution

Ies presents a list of 10 tech stocks he believes are poised to benefit from the AI revolution.

Nvidia: The Godfather of AI

Nvidia is described as the "Rocky Balboa of the AI trade" and the "godfather of AI." Ies anticipates that Nvidia's earnings numbers are underestimated by 15-20% for the next year, partly due to potential re-entry into the China market and overall demand. He notes that current demand has primarily been from the US, with significant interest from sovereign nations in Asia. Despite concerns about competitors like Google's TPUs, Ies maintains a bullish outlook, projecting Nvidia to reach $250 within a year. He reiterates the critical demand-supply imbalance, stating that even major players like Meta struggle to secure sufficient Nvidia chips.

Palantir: The Messy of AI

Palantir is characterized as the "messy of AI," with no direct competitors in terms of use cases. While initially focused on government contracts, its commercial bookings are expected to grow significantly, potentially 5x from current levels. Ies believes Palantir could become a trillion-dollar company within the next two to three years, acknowledging its current high valuation but emphasizing its future growth potential.

Tesla: Physical AI and Robotics

Tesla is viewed as a "physical AI" company, with its robo-taxis and autonomous driving capabilities being key drivers for next year. Ies sees this as the "biggest chapter of growth ever in its history," focusing on robotics and autonomy. He sets a base case of $600 and a bull case of $800 for Tesla, considering it one of the two best companies in the world for physical AI, alongside Nvidia. He argues that calling Tesla merely a car company is offensive, as it is fundamentally a technology company whose potential investors continue to underestimate.

Other Notable Mentions and Exclusions

While not on the top 10 list, Ies mentions Salesforce, Amazon, and IBM as companies he is positive on and included in his "Ives AI30 ETF." He acknowledges their potential but states that the top 10 are "the elite" and are "defining the AI revolution" in their respective categories.

• Salesforce: Ies believes Salesforce, under new leadership, will be successful despite current challenges.
• IBM: He notes that IBM is taking a page from Satya Nadella's playbook at Microsoft, indicating a positive direction.
• Intel: Ies sees Intel as now being part of the AI revolution, supported by government backing and Nvidia. While acknowledging an uphill battle in innovation, he believes Intel is in a much better position than a year ago.

Concerns about OpenAI's Entrenchment

Regarding OpenAI's entrenched position in the AI ecosystem, Ies does not view it negatively. He compares it to foundational companies like Oracle and Microsoft, stating that these entities are crucial to the AI revolution. He dismisses concerns about "circular deals" and believes these companies are foundational to the ongoing AI game, which he still considers to be in its early stages ("top of the third one out").

Conclusion

Dan Ies firmly believes that the AI revolution is in its nascent stages, with significant growth potential ahead. He dismisses the notion of an AI bubble, citing strong demand, limited adoption, and the transformative nature of AI across various industries. His top 10 stock picks, including Nvidia, Palantir, and Tesla, represent companies he sees as leading this revolution through chip innovation, enterprise solutions, and advancements in physical AI and robotics. While acknowledging the importance of other tech giants, his focus remains on those he considers the "elite" defining the current AI landscape.