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Our top writers at InvestorPlace.com – our free news and analysis website – take a look at five AI dominators they believe could become trillion-dollar companies over the next decade. These firms are examples of just how quickly the AI revolution will upend existing businesses as we know them… and why you need to be paying attention.
The AI Dominators: Arm Holdings (ARM)
Arm (NASDAQ:ARM) is a U.K.-based chip designer that produces a rival standard to the traditional x86 architecture. It’s a simpler, more power-efficient chip design that’s now found in almost 99% of battery-powered computing hardware, including smartphones, tablets, and Internet of Things (IoT) devices.
Arm’s architecture is also modular; large clients like Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) can turn chip features on and off as needed. As Faisal Humayun notes for InvestorPlace.com, this attribute has recently given ARM an enormous edge in custom AI chips, which require increasing amounts of customization:
An important point to note is that Arm has moved away from general-purpose CPUs to products catering to specific industries. The company offers AI-enabled CPUs for mobile, consumer electronics, IoT, automobile and cloud & networking. Therefore, the addressable market is significant, and royalty revenue will continue to swell. With the stock relatively undiscovered, it’s a good time for exposure.
Humayun believes shares could triple over the next two years as Arm architecture expands from smartphones into servers and PCs.
In addition, Arm’s royalty rates are also on the rise. Its most recent V9 standard has more than twice the blended royalty rate of past versions. That means revenues will grow even faster over the long run as older chip models are eventually phased out, making Arm a potential trillion-dollar company hiding in plain sight.
2. Qualcomm (QCOM)
The shift to Arm architecture is also helping Qualcomm win market share in AI.
Qualcomm is the world’s largest maker of smartphone processors – a mature market that saw shipments shrink 4% last year. Qualcomm itself saw revenues decline as much as 23% as end customers drew down existing inventories.
However, the chipmaker’s experience with Arm’s customizable architecture has suddenly vaulted it back to growth. As Marc Guberti summarizes in an InvestorPlace.com article:
Qualcomm is enabling leading on-device AI capabilities. Those tailwinds can change the tide. It was only a few quarters ago when Qualcomm reported double-digit YoY revenue declines, so the recent earnings report shows a positive development.
The effect is particularly strong in automotive. In March, Qualcomm’s management announced that revenues from its automotive segment had risen 35%, compared to a 1% rise in smartphone chip sales. Cars are becoming more computationally reliant, and Qualcomm’s Snapdragon Ride chips are giving Nvidia’s offerings a run for their money.
Qualcomm is also seeing some early successes in PC chips, thanks to its 2022 acquisition of Nuvia, a chip-designing firm that specialized in the compute-intensive chips that Qualcomm lacked. The company’s Snapdragon X Elite has already won several notable contracts, and will prominently feature in the next generation of AI PCs.
It might take another several years for Qualcomm to beat the incumbents in servers or automotive applications. But once change begins in earnest, history tells us that Qualcomm can dominate markets in the blink of an eye.
3. Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is an aggregator of networking and wireless chip companies. Years of smart acquisitions have turned the San Jose, California-based firm into an industry powerhouse, and it now sells everything from acoustic resonators to virtualization software. Broadcom’s latest acquisition was a mammoth $69 billion purchase of VMware in 2023.
Financial returns have been excellent, thanks to the company’s wise use of capital and growing demand for high-speed networking solutions. Operating margins of 45% are some of the highest in the tech industry.
Rich Duprey now notes at InvestorPlace.com that Broadcom’s dominance in networking puts it at the forefront of the AI Revolution. Artificial intelligence runs well in parallel, which has increased demand for hyperscalers – enormous data centers that can service thousands of customers at once. Broadcom’s high-speed networking gear, Duprey writes, is exactly what these centers need:
Although Broadcom is best known for the semiconductors it makes for mobile handsets, the chipmaker pivoted to data center infrastructure and its custom accelerators are in high demand. Broadcom reported first-quarter AI revenue surged 300% to $2.3 billion. It now expects AI will account for 35% of 2024 total revenue, or $10 billion. That’s up from its previous forecast of $8 billion. As data centers are a major growth market for the foreseeable future, there is still plenty of time to buy into AVGO stock.
Louis Navellier and the InvestorPlace.com research staff also note that Broadcom could benefit from future developments in areas like quantum computing, sensing, measurement and engineering. Though these efforts aren’t expected to pan out until at least 2025, Broadcom’s history as a consolidator means the firm could see even greater upside over the next decade.
4. Adobe (ADBE)
Adobe (NASDAQ:ADBE) is the undisputed leader in content creation software. Its products span photo editing (Photoshop), video-making (Premiere Pro), document files (Acrobat PDF), and more. Many credit the firm with revolutionizing the world of digital art.
Today, the groundbreaking firm is at it again. In 2023, Adobe began experimenting in Photoshop, allowing generative AI to automatically fill in areas based on user commands. And the company has since released increasingly powerful versions of this software. Users can now fine-tune and improve AI-based content in ways not possible on rival platforms like Midjourney or OpenAI’s Dall-E.
Joey Frenette, at InvestorPlace.com, also notes that Adobe is branching out into other AI-related areas:
More recently, the firm made a big splash in the realm of AI video generation and editing. From text-to-video to AI-assisted video editing in Premier Pro, it’s clear Adobe wants a big piece of the AI creative market.
All of this suggests any existential threat from generative AI is overblown. Microsoft Word won’t disappear overnight because ChatGPT is writing homework assignments… and neither will Photoshop or Premiere Pro simply because Dall-E can pump out images. AI-generated content needs editing, fine-tuning, and customization, and Adobe provides the software needed to turn these AI drafts into professional-quality products.
5. ServiceNow (NOW)
Our final AI dominator today was going to be my top choice of IT specialist. But it’s hard to choose between AI-forward software companies. Oracle (NYSE:ORCL) is an AI leader in finance… Salesforce (NYSE:CRM) in customer relations management… Workday (NASDAQ:WDAY) in human capital management… the list goes on. No matter where you look, AI-focused firms are dominating their respective industries.
So, I’m suggesting ServiceNow (NYSE:NOW), the company that sits on top of all these processes. The company’s NOW Platform interfaces with disparate vendors, allowing enterprises to select the best solutions without increasing the amount of maintenance work. And as Mohammed Saqib explains in an InvestorPlace.com article:
The company continues to make significant strides in helping enterprises automate and optimize its operations. It boasts an impressive client roster that includes 85% of the Fortune 500 companies. Also, ServiceNow’s platform is a critical tool for businesses looking to enhance efficiency and implement digital transformation strategies.
The result, so far, has been excellent. Sales at ServiceNow rose 23% in 2023, while operating profits increased roughly 30%. Analysts expect similar growth rates through 2027 as demand continues to grow.
ServiceNow itself is also a leader in generative AI. In 2023, the company became one of the first software firms to release enterprise-focused AI solutions, according to analysts at Morningstar. And it’s already earning extra revenues from these offerings from higher list prices. Though NOW shares trade at a significant premium, the company seems set to grow into these valuations… and then some… over the next decade.
On the date of publication, Thomas Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.