Nvidia’s forefront position in advanced graphics processing units (GPUs) has made it one of the most important players in the artificial intelligence (AI) revolution. It’s also powered incredible sales and earnings growth that has translated into explosive stock gains for the hardware leader. The company’s stock price has risen roughly 207% over the last year and trades in the neighborhood of a record high.

Investors may have missed out on the opportunity to build a position in Nvidia stock before it went on its explosive run over the last 12 months, but there are still promising players in the AI space that trade at discounts that leave room for huge long-term returns. If you’re looking for AI investment opportunities that are still valued far below their peaks, here’s why Snowflake (NYSE: SNOW) stock is a smart buy.

Snowflake is making sense of the world’s data
Powerful hardware and well-crafted algorithms are essential for high-performance AI applications, but artificial intelligence systems are also only as good as the data they are trained on. As Snowflake’s management explains, “There’s no AI strategy without data strategy.”

When S&P Global Intelligence surveyed a selection of large businesses last year, it found that 98% of respondents were already using or planning to use services from multiple cloud infrastructure providers. But in many cases, it’s not easy to combine and analyze data generated across Amazon’s, Microsoft’s, and Alphabet’s respective cloud services. Snowflake’s Data Cloud platform has become a go-to solution for solving this issue and unlocking the potential of big data analytics.

The platform helps businesses and organizations get the most out of their data by providing a digital space for information from otherwise walled-off sources to be combined and analyzed. Even with the AI tailwind still in the early stages of energizing Snowflake’s business, the data technologies specialist has demonstrated impressive momentum.

At the end of the third quarter, the company had 436 customers with annual contract values of more than $1 million — an increase of 52% from the 287 clients it had in the category in the previous year’s quarter. Meanwhile, product revenue increased 34% year over year to reach $698.5 million, and non-GAAP (generally accepted accounting principles) adjusted free cash flow skyrocketed 70% to hit $111 million.

2024 will be a breakthrough year for Snowflake’s AI strategy
Last November, the company launched Snowflake Cortex — a toolset designed to help customers quickly build AI applications and analyze data. The software specialist is also in the early stages of rolling out Snowpark Container Services, which makes it easier for developers to access large language models and data libraries and flexibly utilize hardware within optimized parameters.

These two services are core pillars of the company’s AI enablement strategy and are in the early stages of being made available to customers. Snowflake is also rolling out Document AI — a service to turn unstructured data into partially structured data that can be used by AI systems.

According to an estimate from AI expert Bernard Marr, 120 zettabytes of data were generated in 2023. For reference, a zettabyte is equivalent to a billion terabytes. The forecast suggests that 147 zettabytes of new data will be generated this year, and 180 zettabytes of data will be generated in 2025.

With massive surges in the amount of data generated taking place, the vast majority of this data is unstructured. As a result, it can’t be easily plugged into AI algorithms with much expectation that it will produce good results.

According to Snowflake’s estimates, roughly 80% of the data currently being generated in the world is unstructured. Not every bit of that data will be useful, but Document AI is helping to put unstructured information into formats that are capable of being sorted and categorized. In turn, this makes them more applicable to analytics models and opens the door for superior performance in AI and large language-model algorithms.

Still down 50%, this AI growth stock has huge potential
Snowflake estimates that it will have recorded product revenue of $2.65 billion in its 2024 fiscal year, which concludes at the end of January. Jump ahead five years, and the company anticipates posting annual product revenue of approximately $10 billion. Management also anticipates substantial improvements in margins over that stretch.

With the data software specialist’s share price still down by roughly half from the high that it hit in 2021, investors have a chance to build a position in an already fast-growing company before AI tailwinds begin to accelerate. So if you missed out on Nvidia’s run and are looking for other investment opportunities that could skyrocket, Snowflake is a worthwhile portfolio addition right now.