The rapid growth of artificial intelligence (AI) has already had a massive impact on the stock market. Many AI companies have seen their valuations skyrocket. And according to recent research, this is just the beginning.

A report released by UN Trade and Development (UNCTAD) earlier this year projects that the global AI market will grow from $189 billion in 2023 to $4.8 trillion by 2033. Given that growth, there's a strong possibility that quality AI stocks will outperform the market over the next five to 10 years.

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Here are two that could be poised for explosive growth.

1. Applied Digital

Applied Digital (NASDAQ: APLD) builds and buys data centers where companies can rent space and install their own servers. When it started out, Applied Digital catered to blockchain companies, but it later switched its focus to the high-performance computing (HPC) and AI industries.

It's a straightforward business model, although Applied Digital did take a stab at offering AI cloud services through a subsidiary it launched in 2023, Sai Computing. Earlier this year, it announced plans to close that chapter by selling its cloud segment and transforming itself into a real estate investment trust (REIT).

Getting back to what it does best could be a positive move for Applied Digital. Its data center hosting business is now in the black, with a profit of $8.8 million in its fiscal 2025 third quarter, which ended on Feb. 28. The cloud services business isn't. It booked a loss of $10.3 million in the quarter, despite being the faster-growing segment.

On the data center front, Applied Digital announced two lease agreements with AI hyperscaler Coreweave on June 2. The agreements will last approximately 15 years and are expected to generate about $7 billion in revenue. Applied Digital stock has been soaring since then -- it's up 51% since the start of June.

The top tech companies are spending heavily on data centers and AI infrastructure. Applied Digital is well-positioned to capitalize on that spending, especially as it transitions to a REIT model and focuses on its data center business.

2. Lemonade

At first glance, Lemonade (NYSE: LMND) might not seem like an AI stock. It's an insurance company offering renters, homeowners, car, pet, and term life policies. But Lemonade has made AI a key part of its business since it launched in 2015.

It uses AI at every stage of its processes. New customers can quickly get quotes on policies through the company's AI chatbot, Maya. It uses AI during the underwriting process to calculate people's premiums and to assign a lifetime value (LTV) to each customer based on their likelihood of filing a claim, switching insurance providers, or bundling multiple insurance products.

The claims process also has built-in AI, allowing Lemonade to fully automate about 55% of its claims, according to Chief Claims Officer Sean Burgess. In addition, Burgess says that Lemonade handles over 40% of customer service tickets with AI.

Lemonade isn't profitable yet, but it beat expectations in its most recent quarter. Revenue rose 27% year over year to $151.2 million in the first quarter. Its in-force premium (IFP), which is the total premium value across all active policies, also increased by 27% to $1.0 billion.

That made it the sixth consecutive quarter where Lemonade's IFP has grown, and management has set an ambitious goal of growing its IFP to $10 billion in the coming years. In another good sign, its gross loss ratio -- the share of its premiums that get paid out as out claims -- is declining. It went from 88% in the third quarter of 2023 to 73% in the first quarter of 2025.

While investing in young businesses that are losing money can be risky, it also gives you an opportunity to get in on the ground floor. I think that's where we're at with Lemonade. This company's high-tech business model has been great for attracting customers, particularly younger customers -- 70% of its customer base is under 35. Based on Lemonade's financial growth and embrace of AI technology, it could be poised to take off.

Should you invest $1,000 in Applied Digital right now?

Before you buy stock in Applied Digital, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Applied Digital wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $676,023!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,692!*

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Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.

There will prove to be many winners as artificial intelligence (AI) infrastructure continues to grow and AI end-uses expand. Nvidia (NASDAQ: NVDA) has been the Wall Street darling surrounding everything AI for the past two years.

CoreWeave (NASDAQ: CRWV) has been getting the love most recently, though. Shares of the AI hyperscaler providing cloud services have soared about 185% in just the past month as of this writing. Nvidia stock has increased 24% in that time. CoreWeave just went public in late March, and the shares have jumped about 270% since that initial public offering (IPO). Investors may wonder if Nvidia's shine is fading, and it's time to buy CoreWeave instead. I'd argue that is flawed thinking, however.

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The growth isn't over for Nvidia

Investors may be taking a breather after the early exponential gains in Nvidia stock. Growth in the business itself has also slowed, though that was inevitable. Sales of its advanced chips in the data center segment had been growing like a weed. Revenue in that segment has been increasing in each consecutive quarter for the last two years. In the most recent fiscal quarter, that growth rate slowed to 10%, though, as seen below.

Despite that trend, it's clear AI demand hasn't yet peaked. Remember, these are still sequential quarterly increases in data center sales. For perspective, that fiscal first-quarter revenue was a 73% jump compared to the prior year period. Management also guided investors to expect further revenue growth in the current quarter. So, while an unsustainable growth rate slows, the company is still solidly in growth mode.

Nvidia is more ubiquitous than you might think

That's because it's not just Nvidia's advanced GPU and CPU chips driving sales and expanding AI infrastructure. Its AI ecosystem includes interconnect technologies, the CUDA (compute unified device architecture) software platform, and artificial intelligence processors that are part of many different types of architectures.

CEO Jensen Huang recently touted Nintendo's new Switch 2 gaming console, for example. The unit includes Nvidia's AI processors that Huang claims "sharpen, animate, and enhance gameplay in real time."

Nvidia has a broad array of customers. As AI factories and data centers are built, it will continue to be a major supplier and one that investors should benefit from owning. Nvidia also invests in the AI sector. It makes sense to look at where the AI leader itself sees future gains.

Nvidia thinks CoreWeave is a good investment

One of the AI companies in which Nvidia holds a stake is CoreWeave. Nvidia should know CoreWeave well, too, as an important customer. CoreWeave leases data center space to companies needing the scalable, on-demand compute power it has control of from the 250,000 Nvidia chips it has purchased.

It's a desirable option for enterprises that require significant computational power to process large amounts of data efficiently. There appears to be plenty of demand. But there is plenty of risk for investors, too. It just announced a new lease agreement to further increase capacity.

Applied Digital, a builder and operator of purpose-built data centers, has agreed to deliver CoreWeave 250 megawatts (MW) of power load on a 15-year term lease at its recently built North Dakota data center campus. CoreWeave has the option to expand the load by an additional 150 MW in the future.

Demand is quickly driving growth for CoreWeave. That's led investors to jump in and drive the stock higher in recent months. Valuation is just one major risk with CoreWeave. Customer concentration is another. Last year, Microsoft accounted for nearly two-thirds of revenue. CoreWeave also disclosed that 77% of 2024 revenue came from just its top two customers.

CoreWeave is also spending massive amounts of capital to grow AI cloud capacity. It had about $5.4 billion of liquidity available as of March 31 and raised another $2 billion from a late May debt offering. That's approximately its level of capital expenditure in just the first quarter alone, though.

CoreWeave has the risk, Nvidia has the profits

That spending may pay off. But there are risks there as well. Customers could develop their own AI infrastructure or could redesign systems that don't require its services. CoreWeave stock also trades at a high valuation after the stock has soared. It recently had a price-to-sales (P/S) ratio of about 30.

That could be cut in half this year with its strong sales growth, but it isn't earning any money yet. At the same time, Nvidia sports a price-to-earnings (P/E) ratio of about 30 based on this year's expected profits.

Remember, too, that as CoreWeave grows, so do Nvidia's profits. Applied Digital CEO Wes Cummins said that its leased North Dakota data center campus will be full of Nvidia Blackwell class servers. I think the risk profile, financial picture, and massive potential for Nvidia make it the better AI stock to buy now.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Howard Smith has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends Nintendo and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

In today's video, I discuss recent updates affecting Applied Digital (NASDAQ: APLD) and CoreWeave (NASDAQ: CRWV). To learn more, check out the short video, consider subscribing, and click the special offer link below.

*Stock prices used were the market prices of June 2, 2025. The video was published on June 2, 2025.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Should you invest $1,000 in Applied Digital right now?

Before you buy stock in Applied Digital, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Applied Digital wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,385!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $842,015!*

Now, it’s worth noting Stock Advisor’s total average return is 987% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Jose Najarro has positions in CoreWeave. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

Applied Digital (NASDAQ: APLD) was a double-digit winner on Thursday, as its stock price popped by over 10%.

That was due in no small part to the initiation of coverage of the cutting-edge data center builder's stock by an analyst, who, it turns out, is extremely bullish on its prospects. Applied's share price trajectory was all the more impressive, considering that the S&P 500 index basically closed flat across the trading session.

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An enthusiastic buy recommendation from a pundit

The initiating party was Citizens JMP's Greg Miller, who launched his tracking of Applied stock by tagging it with a market outperform (read: buy) recommendation at a price target of $12 per share.

That would be significant upside even after Thursday's rally in the shares, as that's a meaty 60%-plus above the stock's most recent closing level.

According to reports, Miller believes that Applied's pivot from its onetime specialty of Bitcoin mining infrastructure to its current focus on data centers is a clever move. He feels it should start to reap the benefits of this soon and anticipates the signing of a hyperscaler client in the very near future (while noting that this anticipated event has been delayed several times).

Nothing artificial about this potential

I'd agree that Applied's transformation from Bitcoin mining supply to data center infrastructure is a smart shift. I feel that, given the near-insatiable hunger for facilities that can support the relatively much higher resource demands of artificial intelligence (AI) functionalities, this market holds significantly more promise.

Should you invest $1,000 in Applied Digital right now?

Before you buy stock in Applied Digital, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Applied Digital wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $644,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $807,814!*

Now, it’s worth noting Stock Advisor’s total average return is 962% — a market-crushing outperformance compared to 169% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.