Where Nvidia Ranks Among Fastest-Growing AI Companies
Nvidia Corp. has been the darling of the media when it comes to discussions surrounding artificial intelligence (AI) over the last two years. The company has undoubtedly carved out a significant niche for itself, primarily due to its dominance in the production of graphics processing units (GPUs) essential for data centers that power AI technology development. However, while Nvidia generates a great deal of buzz, the reality is that it doesn’t sit at the top of the rankings when looking at the fastest-growing AI companies. In fact, individual investors may find their enthusiasm for AI stocks waning.
Understanding the Landscape of AI Companies
Before diving into the list of companies leading the AI revenue growth, it’s crucial to define what constitutes an AI company. The definition is not restricted to a particular industry; it encompasses a spectrum—from hardware innovators like Nvidia to software developers and even traditional manufacturers adopting automation technologies. This broad view is critical for investors seeking opportunities in what has become a diverse landscape of AI-related ventures.
AI Stock Screen: Setting the Criteria
A productive approach to investing in this thriving sector is to filter out companies with sustainable growth potential. This can be achieved through a stock screen, beginning with holdings from eight AI-themed exchange-traded funds (ETFs). Each of these funds utilizes different stock-selection methodologies, allowing for a wide-ranging assessment of potential investment opportunities.
Interestingly, while Nvidia is often perceived as the giant in this space, it ranks not first, but fourth in expected revenue growth among AI companies over the next two years, according to analysts. This suggests a potential shift in investor sentiment away from hardware suppliers to those with innovative products capable of monetizing generative AI technologies.
Current AI ETFs and Nvidia’s Position
Here’s a quick look at the eight prominent ETFs focusing on AI and their corresponding details:
| ETF | Assets ($mil) | Weighting | Stocks held | Nvidia portfolio ranking | Nvidia portfolio % |
|---|---|---|---|---|---|
| Global X Robotics & Artificial Intelligence ETF | $2,615 | Market cap | 45 | 1 | 13.1% |
| Global X Artificial Intelligence & Technology ETF | $2,249 | Market cap with maximum of 3% | 84 | 12 | 3.1% |
| iShares Future AI & Tech ETF | $622 | Equal weighting | 46 | 3 | 6.0% |
| First Trust Nasdaq Artificial Intelligence & Robotics ETF | $449 | Modified weighting based on involvement in AI or robotics | 106 | 38 | 0.7% |
| Invesco AI & Next Gen Software ETF | $401 | Modified weighting based on exposure to AI-related industries | 99 | 3 | 8.5% |
| Roundhill Generative AI & Technology ETF | $207 | Weighted by exposure score to generative AI and related industries | 46 | 1 | 8.0% |
| WisdomTree Artificial Intelligence and Innovation Fund | $197 | Equal weighting | 75 | 1 | 3.4% |
| Robo Global Artificial Intelligence ETF | $139 | Weighting by score based on AI contribution to sales | 55 | 1 | 2.7% |
Source: FactSet
The Top 20 Companies Expected to Grow by Revenue
When assessing the growth potential of AI companies, a filter reveals the following 20 companies projected to exhibit the highest compound annual growth rate (CAGR) between 2024 and 2026:
| Company | Ticker | Country | Expected two-year revenue CAGR through 2026 |
|---|---|---|---|
| Credo Technology Group Holding Ltd. | IGPT | Cayman Islands | 47.3% |
| Astera Labs Inc. | TOBT, CHAT | U.S. | 42.9% |
| Quanta Computer Inc. | CHAT | Taiwan | 41.0% |
| Nvidia Corp. | — | U.S. | 33.3% |
| Nio Inc. ADR | ROBT | China | 31.8% |
Source: FactSet
Conclusion: A Cautious Perspective
While Nvidia remains a cornerstone of the AI narrative, especially with its recent astounding revenue numbers, investors must remain vigilant and recognize the broader landscape of AI potential. With a plethora of innovative companies emerging, the time is ripe for diversifying into segments that promise transformative growth through unique applications of AI technology. As the market continues to evolve, maintaining a balanced portfolio that includes a variety of players will become increasingly important. Above all, due diligence is paramount—investors should ensure they are well-informed before venturing into any investment.
