You can spread your investment across these five stocks…
This may be one of the best times to invest in tech stocks, as we face a game-changing moment. The development of artificial intelligence (AI) is only just beginning, and this technology has the potential to revolutionize our daily lives and the operation of many businesses. The results could save time and money and even lead to major transformations such as the discovery of life-saving drugs. Analysts predict that the AI market, currently valued at around $200 billion, could reach more than $1 trillion by the end of the decade.
It is therefore the ideal time to invest $50,000 in a basket of stocks present in the field of AI. (This should be part of a diversified strategy, so I would advise investing the entire amount in AI stocks only if you have already built a strong portfolio including other sectors and stocks. Otherwise, consider ‘invest a smaller portion, depending on your investment style, in the following stocks and the rest with quality players in other sectors.)
Most of the following AI powers are already winning today – one of them is a fetch game – and they could all have a lot more to gain in the future. You could do it too if you invest in it from the start.
Image source: Getty Images.
1.Nvidia
Nvidia (NVDA -3.22%) It may be the first stock many investors think of when someone mentions AI. Indeed, the company dominates the AI chip market, holding an 80% share, which has helped Nvidia grow its profits by triple digits in recent quarters.
The stock price has followed, climbing nearly 200% over the past year, but this player still has room to grow over time thanks to its commitment to innovation. Nvidia’s graphics processing units (GPUs) perform critical AI tasks like model training and inference, and they are the fastest on the market. The company is not standing still, however, and aims to update its GPUs on an annual basis, so that Nvidia can stay ahead of its competitors in the long term.
The next catalyst for Nvidia is big: the launch of its Blackwell architecture and its most powerful chip ever later this year. So now is the perfect time to get started with this market giant.
2. Amazon
Amazon (AMZN 1.60%) benefits from AI in two ways. The powerhouse of e-commerce uses AI to generally streamline and improve its operations, such as determining the fastest delivery routes for packages. This can reduce costs over time and increase revenue, and it can also keep customers coming back because they will appreciate the optimized services.
Amazon is also a leader in cloud computing, operating the Amazon Web Services (AWS) business, and in this area its AI investments are already paying off. AWS offers its customers a variety of tools, from chips to a fully managed service offering large language models to customize for any AI project. And it recently helped AWS reach $100 billion in annual revenue.
It’s important to remember that Amazon also has a long history of profit growth and generates billions of dollars in sales and net income. So, Amazon is making a strong buy for its long-term strength and potential in AI.
3. Super microcomputer
Super microcomputer (SMCI -1.35%) has been around for about 30 years, with revenues gradually increasing, but the business has really taken off thanks to the AI boom. The company manufactures servers, workstations and large-scale solutions needed for AI data centers. This has allowed Super Micro’s profits to soar in recent years, and the stock price has followed.
Here’s why it should continue. Super Micro’s strategy of working hand-in-hand with the world’s largest chipmakers allows it to immediately integrate their chips into its products upon launch. Additionally, the company’s product lines include many common parts, making it possible to quickly assemble a custom product.
This speed should keep Super Micro growing – and the company’s liquid cooling technology is also becoming a key growth driver. Heat generation in AI data centers is a huge problem, but Super Micro’s technology solves it perfectly.
All of this makes Super Micro a winner in AI today, and this success is expected to continue into the future.
4.Intel
Intel (INTC 1.53%) has fallen behind in the AI race in recent years, but the title could make a great pickup play right now. Especially since the company has reached an important turning point. Intel recently launched a new portfolio of AI products that could help it carve out a decent share in this market – and demand is so high that several chipmakers have the opportunity to excel.
The company has launched the Gaudi 3 accelerator, which it says could outperform Nvidia’s current GPU in inference and power efficiency – and at lower cost.
Intel could also gain ground as it advances to become the world’s second-largest foundry by 2030. The company has opened its manufacturing network to others, meaning it will produce chips for those customers. This won’t translate into earnings growth overnight, but in the long run the results could be significant. And it’s a good time to bet on Intel’s future.
5. Broadcom
Broadcom (AVGO -4.38%) has been in the news lately as it announced a 10-for-1 stock split, scheduled for July. But that’s no reason to buy this semiconductor and networking giant. The reason to buy the stock has to do with the demand Broadcom is seeing from AI customers as well as the growth resulting from its recent acquisition of VMware. Broadcom reported a 43% increase in revenue last quarter, to more than $12 billion, and both of those items contributed to the gains.
The company makes thousands of products that you’ll find anywhere from your smartphone to a data center. This has allowed Broadcom to increase its profits over time, but today’s high demand for AI could spark a new era of growth.
During the quarter, AI revenue soared 280% to $3.1 billion, and Broadcom expects AI revenue to exceed $11 billion for the year. As Broadcom says, networking AI accelerators is difficult, but Broadcom has the technology to make it happen. So there is reason to be optimistic about growth as the AI market expands. And that’s why Broadcom is a buy before and after the next stock split.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino holds positions at Amazon. The Motley Fool holds positions and recommends Amazon and Nvidia. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.