AI Stocks to Watch: Undervalued Opportunities Beyond Nvidia

Here Are My Top Artificial Intelligence (AI) Stocks to Buy Right Now (Hint: Not Nvidia) | The Motley Fool

Looking for undervalued opportunities in the AI boom? Check out this trio of big AI winners that haven't popped up on Wall Street's radar screens yet. There are many ways to buy into the artificial intelligence (AI) frenzy. Many investors look to AI hardware designer Nvidia, making the former video gaming accelerator maven one of the most valuable companies in the world. Nvidia is a great company, but the stock may have soared too high, too fast. There are more reasonable AI ideas out there right now. Let me tell you why IBM (IBM 0.26%), Micron Technology (MU -0.12%), and Fiverr International (FVRR 0.88%) strike me as stronger AI investments in the fall of 2024. This trio may not be the most obvious AI investments on the market. But they have deep connections to the surging generative AI market, just from slightly unusual angles: Data collected from YCharts and Finviz on Nov. 21, 2024. Nvidia has been crushing the rest of the stock market since key client OpenAI introduced ChatGPT almost exactly two years ago. That's great for longtime Nvidia owners, but the galloping gains left the stock hanging at uncomfortably high valuation ratios. No matter how you slice it, Nvidia stock is priced for perfection. The chart may still point upward from here, but there's a real risk of painful price corrections if Nvidia doesn't hold on to its early lead in AI accelerators. By contrast, IBM's AI-driven uptrend has only just begun. Fiverr's stock is actually down in the ChatGPT era, as bearish investors see generative AI as a threat to the company's freelancers. Some day soon, I expect Wall Street to start seeing these bargains for what they are. Fiverr and IBM are quietly building massive revenue streams in the AI space. Their stocks should eventually follow suit. Micron seems to stick out like a sore thumb in the valuation table above. How can I call the stock "cheap" when it trades at 900 times free cash flows and 146 times trailing earnings? The trick is to look forward instead of backward. The memory chip market endured a deep downturn when the ChatGPT boom kicked off. Micron's sales growth is back on track and its cash profits recently swung back into positive territory after a deep dip in red ink: Micron's nosebleed-inducing valuation ratios are based on profits just above the breakeven line, but the future trend will change the math. "We are entering fiscal 2025 with the strongest competitive positioning in Micron's history," CEO Sanjay Mehrotra said in October's fourth-quarter earnings call. "We look forward to delivering a substantial revenue record with significantly improved profitability in fiscal 2025." As a result, Micron's forward-looking valuation is an absolute bargain. The company saw bottom-line earnings of $1.30 per share in fiscal year 2024. Your average analyst expects full-year earnings of roughly $8.93 per share in the just-started fiscal 2025, expanding to $12.86 per share in 2026. So if you focus on the forward price-to-earnings ratio, Micron stands out as an incredible value right now.

Top 3 AI Stocks to Watch in December 2024 | The Motley Fool

These three high-quality AI stocks are poised to surge in the coming months. This year has kept stock market investors on tenterhooks. On the one hand, the benchmark S&P 500 index reached a record high of 6,001.35 on Nov. 11, implying a year-to-date gain of 25.8%. However, for most of 2024, investors and analysts have been bogged down by challenges, including high inflation, high private debt levels, supply chain constraints, and geopolitical tensions. In this environment, some investors may be staying away from speculative investments and buying stakes in fundamentally strong stocks riding robust secular tailwinds. Artificial intelligence (AI) is undoubtedly one solid trend that has become a hot investment theme on Wall Street. Against this backdrop, here's why it is prudent for investors to watch out for these three AI-powered stocks in December 2024. The first stock worth considering now is the $1.48 trillion market-cap, AI-driven social media giant Meta Platforms (META -0.43%). Meta's AI-powered recommendation system is pivotal in increasing user engagement on its family of apps. The company's AI-powered feed and video recommendations have helped increase time spent on Facebook and Instagram by 8% and 6%, respectively, in 2024. Higher user engagement on social media platforms results in a better return on investment for advertisers. Plus, over 1 million advertisers are also using the company's generative AI tools to create advertisements. Meta estimates that the use of image generation has helped boost ad conversions by 7%. Unsurprisingly, Meta reported a 7% increase in the number of ad impressions and an 11% rise in average price per advertisement across its services in the third quarter of 2024. Besides strengthening its core advertising business, Meta's AI initiatives are also helping create new revenue streams. Meta's AI-powered assistant, Meta AI, is seeing solid traction and has already reached 500 million monthly active users. With 3.2 billion or 40% of the global population using at least one of Meta's applications daily, Meta AI can soon become the most widely used AI assistant globally. Meta is also investing heavily in AI infrastructure to position its open-source Llama AI model as the industry standard. Llama downloads reached 350 million by the end of August 2024, almost 10 times higher than that by the end of August 2023. While Llama 3 models continue to see strong momentum, Meta is focusing on training Llama 4 models on clusters comprising more than 100,000 of Nvidia's H100 GPUs. Meta's financials also reflect the company's strong business momentum. Revenue and net income are growing at a double-digit rate. The company's balance sheet is also very healthy, with $70.9 billion in cash and marketable securities compared to just $28.8 billion in debt. Adding up all the above factors, Meta seems to be an exceptional AI pick for December 2024. Technology behemoth Microsoft (MSFT -0.43%) is the second stock to watch in December 2024. Although the company surpassed consensus revenue and earnings estimates in its first-quarter fiscal 2025 results (ended Sept. 30), the stock has taken a beating on a weaker-than-expected year-over-year revenue growth outlook for the Azure cloud computing business. Despite these concerns, there is much to like about Microsoft. Microsoft's $13 billion partnership with OpenAI has been pivotal in strengthening the company's core offerings and opening new revenue streams. Microsoft's AI business is projected to cross a $10 billion annual revenue run rate in the second quarter. This milestone will make AI the fastest-growing business in the company's history. Azure and other cloud services also grew revenue by 33% year over year in the first quarter, while AI services accounted for roughly 12 percentage points of this growth. The company also focuses on generating high-quality AI revenue streams from selling the entire AI package (hardware, software, models, frameworks) to enterprise customers instead of just GPUs to speculative AI start-ups. The company is building an end-to-end app platform with Azure AI to help enterprises build their own Copilots and agents. Hence, with the demand for Azure AI services higher than the available capacity, Microsoft expects its planned data center capacity expansions to accelerate Azure's AI-powered growth in the second half of fiscal 2025. Another major growth catalyst for Microsoft is the cloud-based Microsoft 365 productivity suite, which is also seeing solid growth in average revenue per user (ARPU) partly due to the robust adoption of AI-powered Copilot services. Since nearly 70% of Fortune 500 companies are now using Microsoft 365 Copilot, this AI service has further increased the stickiness of Microsoft's offerings among large enterprises. Hence, considering Microsoft's success in leveraging its AI investments with strong execution in core businesses and healthy financials, this diversified company is well positioned to prove a smart buy in the coming months. The third AI-powered stock to watch in December 2024 is memory player Micron Technology (MU 4.46%). The company's high-performance memory offerings are used extensively by data centers to power complex AI and high-performance computing applications. Besides adding new servers, data centers are also replacing multiple older-generation servers with next-generation traditional and AI servers to boost power efficiency, space management, and performance. Plus, DRAM and NAND content in the newer servers is also increasing. This has helped boost demand for Micron's memory offerings. Micron is also working to capitalize on this opportunity by transitioning from older nodes to the more advanced one-beta DRAM node technology and G8/G9 NAND process technology -- moves to help boost the production capacity of its high-margin memory offerings. HBM (high-bandwidth memory, a type of DRAM) has also emerged as a major growth catalyst for the company. The HBM market is expected to grow from $4 billion in 2023 to $25 billion in 2025, and Micron is targeting a 20% to 25% share of this market by 2025. Micron's HBM chips are already sold out until 2025, with pricing concluded for 2024 and 2025. This resulted in high revenue visibility and predictability for Micron's HBM business. Considering these tailwinds, Micron stock seems poised to surge higher in 2025.

The Artificial Intelligence (AI) Boom Isn't Over. 3 AI Stocks to Buy Right Now. | The Motley Fool

AI could become a multitrillion-dollar industry. There are still high-quality stocks with compelling risk-reward upside potential. Here are three of them. The stock market has ridden the excitement for artificial intelligence (AI) to new heights. It's not all hype; according to McKinsey, AI could add as much as $13 trillion to the global economy by 2030. Sure, some stocks have risen faster than others, so perhaps some stocks have gotten too expensive. Justin Pope (Taiwan Semiconductor): If you're looking for a surefire winner in the AI field, Taiwan Semiconductor is as good a bet as any. It's the world's largest semiconductor foundry, which manufactures chips for design companies like Nvidia, AMD, and others. Taiwan Semiconductor is the world's leading foundry, holding an estimated 62% of the global market as of Q2 2024. That positions Taiwan Semiconductor to capture explosive growth in demand for AI chips moving forward. AMD CEO Lisa Su predicted during her company's Q3 earnings call that AI chip demand will grow by 60% annually to $500 billion in 2028, more than the entire semiconductor industry's size in 2023. It seems safe to say that end markets worldwide, AI and otherwise, will need increasingly more chips. At this writing, Taiwan Semiconductor stock trades at a forward P/E ratio of just under 28. At the same time, analysts estimate the company's earnings will grow by an average of 31% annually over the next three to five years. That's a PEG ratio of 0.9, indicating the stock is a bargain for its expected future growth. So, why is the stock so cheap? Taiwan is near China, which claims it is part of its territory and has threatened to invade the country. This is a legitimate risk that investors should consider before buying the stock. That said, it's impossible to know what will happen. A forceful invasion might spark retaliation from the U.S. and other countries because of Taiwan's importance to the world's chip supply chain. The U.S. and Taiwan Semiconductor have taken steps to derisk from China, including cutting back shipments of advanced AI chips to China and investing roughly $65 billion to build new foundries in Arizona. Ultimately, Taiwan Semiconductor is too good a company to ignore the stock at this valuation, even with the geopolitical noise around it. Jake Lerch (Tesla): My choice is Tesla. Granted, most investors know Tesla as an electric vehicle company, but there's more under the hood for those willing to look. In its most recent quarter (the three months ended Sept. 30), Tesla reported total revenue of $25.2 billion. Some $20 billion, or 80% of the total, came from automotive revenue. The remaining $5.2 billion was split almost equally between Energy Generation & Storage ($2.4 billion) and Services ($2.8 billion). Those segments also grew significantly faster than Tesla's automotive division: Data source: Tesla Q3 2024 quarterly update. YOY = year over year. Moreover, as Tesla's AI investments begin to bear fruit, AI will likely drive growth for the company. Consider this: One could view Tesla's vehicles as more than simply products; they could also be platforms. Teslas are equipped with multiple sensors designed to capture video and data, then relay it to Tesla's Dojo or Cortex supercomputers. Those systems can then analyze the data to constantly improve what could become the company's crown jewel: its Full Self-Driving (FSD) system. If Tesla can develop truly autonomous FSD, the company's market cap could expand by an entire order of magnitude -- which is astounding considering that Tesla is (as of this writing) valued at more than $1 trillion. That's to say nothing of Tesla's other bets that rely on AI advancements: its Optimus humanoid robot, robotaxis, and perhaps unimagined (or at least unrevealed) uses for its massive supercomputer clusters. In other words, yes, Tesla is an AI company. What's more, when all is said and done, Tesla's AI assets are so impressive that they may power the company to unforeseen heights over the next decades. AI-oriented investors should take notice. Will Healy (Qualcomm): Of the major AI chip stocks, few appear better positioned for buyers than Qualcomm. It had become an afterthought for investors as the 5G upgrade cycle ran its course. However, that changed thanks to AI, as smartphones equipped with the Snapdragon 8 Gen 3 or the Elite Mobile Platform chipsets delivered on-device AI to smartphone users. Moreover, Qualcomm has thought ahead to the day when smartphone use would fall. Hence, the company expanded into Internet of Things/industrial, automotive, and PC chips. In fact, its automotive segment was the fastest-growing segment in fiscal 2024 (ended Sept. 29), increasing revenue by 55%. Still, it only makes up just over 7% of the company's revenue. For now, handsets were 64% of the company's revenue, and that segment's revenue grew 10% yearly amid an AI upgrade cycle. Admittedly, Qualcomm's handset business faces notable challenges, and it is in a legal dispute with Arm Holdings, which Qualcomm depends on for some chip designs. The dispute dates back to 2019, though Qualcomm has continued to thrive despite that legal battle. Also, Apple has tried for years to best Qualcomm's designs only to extend the supply agreement. For now, Qualcomm benefits from an upcycle. In fiscal 2024, the company's $39 billion in revenue increased by 9%. However, in Q4, revenue rose by 18%, signaling an upward move in the cycle is benefiting the company. Also, costs and expenses rose by only 3%, allowing Qualcomm's $10 billion in net income for fiscal 2024 to surge 40% higher compared with year-ago levels. Amid this growth, Qualcomm trades at a P/E ratio of about 18, far below other chip industry competitors. While the dispute with Arm carries some risk, Qualcomm's diversification into other areas will make it difficult for such challenges to stand in the way of its long-term success.

2 Artificial Intelligence (AI) Stocks to Buy on the Dip | The Motley Fool

The stock market is soaring to all-time highs these days, especially in the tech sector. The S&P 500 (^GSPC -1.32%) market index gained 49% over the last two years while the tech-heavy Nasdaq Composite (^IXIC -2.24%) index soared 68% higher. Both market trackers traded about 1% below their record prices on Thursday, Nov. 14. But every tech stock didn't get the memo about this sustained surge. Despite playing active and lucrative parts in the artificial intelligence (AI) boom, Advanced Micro Devices (AMD -2.84%) and Micron Technology (MU -2.86%) are trading more than 30% below their peak prices. I think both Micron and AMD are excellent AI investments thanks to their recent discounts. Let's take a closer look at these underappreciated AI winners. These AI hardware specialists work in the shadow of more popular rivals, led by Nvidia. They stand with both feet inside the AI opportunity, though. Here's what you need to know about Micron's and AMD's AI products. AMD designs high-performance computer processors. Its product portfolio includes the Ryzen line for desktops and notebooks, the Epyc range of server-grade chips, and the Instinct collection of AI computing accelerators. The Instinct chips go head-to-head with Nvidia's AI accelerator solutions, and you often find AI supercomputers managing the AI accelerator computations with Epyc processors. System builders can pair AMD or Nvidia accelerators with AMD and Intel server processors, and almost every combination is found among the world's largest supercomputers in 2024. Nvidia and AMD AI accelerators are bundled with a ton of high-speed memory. One Nvidia H200 card comes with 141 gigabytes (GB) of accelerator memory. AMD's rival Instinct 205X has 128 GB of fast memory. And there's more: These massive memory stores don't include the memory tied to the Intel or AMD processors running the show. Nor do they account for the memory-based solid-state devices (SSD) that provide long-term storage for these computing beasts. And that's just the back end of the AI business. Smartphones and other consumer-facing devices with AI features also require more memory than older devices without AI. As a leading maker of high-speed memory chips, Micron benefits directly from this surging memory demand. The AI market is more than a future opportunity for these companies. AMD's third-quarter sales jumped 18% year over year, driven by a 122% surge in the data center segment. That's the division accounting for AMD's Epyc and Instinct chips, which are used in AI servers. In Micron's recent fourth-quarter report, revenue rose 93% year over year. Again, the fuel for this fire was "robust AI demand" and soaring data center sales, the report said. Both stocks look expensive if you focus on their reported results. AMD trades at 124 times trailing earnings and 145 times free cash flow. These metrics stand at 147 and 909, respectively, for Micron. So I get it if traditional value investors are staying away from these stocks. But the chip experts are coming back from an extended downturn in the semiconductor sector, held back by a stubborn shortage of manufacturing capacity and the recent inflation crisis. Switching to a forward-looking perspective, AMD shares are changing hands at 27 times next-year earnings estimates, and Micron's forward price-to-earnings ratio stops at 7.7. So I think it's a big mistake to write off Micron and AMD as overpriced growth stories. It just took some time to overcome recent back-end challenges and deliver robust bottom-line profits again. These AI stocks look tempting right now, and I highly recommend picking up a few shares while they're cheap.

1 Unstoppable Artificial Intelligence (AI) Stock to Buy Before 2024 Ends | The Motley Fool

Artificial intelligence (AI) has turned out to be a terrific catalyst for Oracle (ORCL 0.98%) in 2024, with shares of the cloud infrastructure and database software provider jumping 74% so far this year, as of this writing. This impressive rise in Oracle stock isn't surprising, as the company's business has received a big boost because of the growing demand for its cloud infrastructure that's being rented by companies to train and deploy AI models. The good part is that the robust demand for cloud AI services has allowed Oracle to build an impressive revenue pipeline, which is expected to drive a nice acceleration in the company's growth. More importantly, the market for cloud-based AI services that Oracle's cloud infrastructure is serving is currently in its early phases of growth. That's precisely the reason why this AI stock may be able to sustain its impressive growth momentum in 2025, and beyond. Here's a look at the reasons why buying Oracle stock looks like a no-brainer. During Oracle's fiscal 2025 first-quarter results (ended Aug. 31) in September this year, it reported an 8% year-over-year increase in revenue to $13.3 billion. More importantly, the company said it expects fiscal 2025 growth to land in double digits on the back of solid growth in cloud infrastructure revenue. Oracle's full-year guidance suggests that its revenue growth is set to accelerate over the 6% improvement it witnessed in its top line in fiscal 2024 to $53 billion. So the company's revenue should ideally hit $58.3 billion this year. The good part is that analysts are expecting Oracle's revenue growth to accelerate over the next couple of fiscal years as well. It won't be surprising to see the company indeed deliver what Wall Street is looking for. That's because the company started the first quarter of fiscal 2025 with a 53% increase in its remaining performance obligations (RPO) to $99 billion. For comparison, Oracle's RPO increased 44% in the fourth quarter of fiscal 2024. The acceleration in this metric bodes well for Oracle, as the RPO refers to the future value of a company's unfulfilled contracts. That figure could have been higher, but Oracle said the demand for cloud infrastructure services is outpacing supply. Not surprisingly, the company is looking to bring more capacity online, using Nvidia's graphics processing units (GPUs) to build huge data centers to help its customers train large AI models. Oracle's data centers currently serve 85 regions globally, and it has another 77 that are either under construction or are in the planning phase. This aggressive expansion should allow Oracle to meet the fast-growing demand for its cloud infrastructure. It is worth noting that its cloud-related RPO increased by more than 80% in the previous quarter and represents three-fourths of its overall RPO. There is more room for growth in this space, given booming demand for cloud-based AI services. Oracle says that it witnessed a 162% year-over-year increase in cloud-native AI customers in the previous quarter. The total contract value of its AI-specific deals in fiscal Q1 came in at $3 billion. Goldman Sachs projects that the cloud infrastructure-as-a-service (IaaS) market that Oracle serves could be worth a whopping $580 billion in 2030, accounting for 29% of the overall cloud spending of $2 trillion by the end of the decade. The investment bank adds that generative AI-based cloud spending could range between $200 billion to $300 billion of the overall market. Oracle is well on its way to making the most of this multibillion-dollar opportunity, with its cloud IaaS revenue jumping by 46% year over year in fiscal Q1 to $2.2 billion. Meanwhile, the fact that it landed $3 billion worth of AI-related cloud contracts during the same quarter suggests that this business is set for stronger growth in the future. So, it wasn't surprising to see Oracle management expecting faster growth in cloud infrastructure revenue this fiscal year, compared to the previous period. More importantly, the long-term opportunity in this market is the reason why Oracle raised its long-term growth forecast, which could lead to more stock upside in the long run. Oracle expects to achieve $66 billion in revenue in fiscal 2026, which would be a 13% increase over its fiscal 2025 projection. Additionally, it is anticipating at least 10% growth in its earnings-per-share growth next year. However, in fiscal 2029, Oracle sees its top line hitting at least $104 billion. That would translate into a three-year compound annual growth rate of more than 16% between fiscal 2026 and fiscal 2029. Considering that Oracle is now trading at 29 times forward earnings, as compared to the tech-heavy Nasdaq-100 index's forward earnings multiple of 31.3, it isn't too late for investors to buy it. The sharp jump in Oracle's revenue growth, along with the faster increase in its bottom line, points toward improved earnings power in the long run, which should allow this cloud stock to maintain its healthy stock market momentum going forward for a long period.

1 Magnificent AI Stock Smart Investors Are Adding to Their Portfolios (Hint: It's Not Palantir) | The Motley Fool

Investor excitement for artificial intelligence (AI) has reached a fever pitch. Most stocks associated with AI are soaring, with Nvidia recently becoming the largest company in the world by market capitalization. Another example is Palantir, which is up a whopping 283% year to date due to the rapid adoption of its AI tools across the United States government and big business. While it might be exciting to chase these fast-running AI stocks, smart investors know it is a dangerous game. That is why hedge fund managers such as Bill Ackman and Charlie Munger protege Li Lu own large stakes in Alphabet (GOOG 1.57%) (GOOGL 1.61%) to play the AI boom. The big tech stock is crushing it with new AI innovations, leading to strong revenue and earnings growth. And yet, the stock is underperforming the S&P 500 in 2024. Should you add Alphabet stock to your portfolio? Today, many investors know about OpenAI and its ChatGPT products. But did you know that its underlying technology was invented by Alphabet? That's right, Alphabet -- parent company of Google and YouTube -- invented the transformer model back in 2017. Transformers are a type of neural network that can learn by ingesting data, which is why they are perfect for training AI. In 2024, Alphabet has applied transformer AI innovation to dozens of products. This includes circle-to-search, AI photo editing, the Gemini conversational chatbot, and Google Search AI summaries. Unlike AI start-ups, Google already has existing users it can automatically upgrade to these new AI innovations, improving its customer value proposition and further separating itself from the technology pack. For context on Alphabet's massive scale, last quarter its seventh product (Google Maps) hit 2 billion active users. All seven of Alphabet's products with 2 billion users now have its Gemini AI models embedded as a feature. From Google Docs to Gmail to Google Search itself, Alphabet is bringing cutting-edge AI tools to billions of people around the world. Alphabet's products are getting a major upgrade with all these new AI features. Fast growth in AI can present a double-edged sword, though. Due to the computing intensity of AI language models, training and querying these AI features can require tons of spending on computer chips, energy, and data centers. Apply it to hundreds of millions or billions of users and the computing bill can add up fast. Start-ups in the AI space are dealing with this problem. All of them have good usage growth but are burning a boatload of cash. Not Alphabet. Alphabet has many ways to implement these AI tools to generate more revenue. First, it is applying generative AI techniques to its new advertising tool, Performance Max, which quickly lets brands of all sizes spin up advertisements across Alphabet's properties like Google Search or YouTube. Second, it can monetize new AI responses directly on Google Search, with the company already experimenting with sponsored listings for its new AI summary feature. Third, it can outsource these AI tools through the Google Cloud division, which is one of the leading cloud computing companies in the world. This is leading to fast revenue growth for Alphabet even at its immense scale. Last quarter, Google Cloud revenue grew 35% year over year to $11.4 billion. Google Search grew 12% year over year to $49 billion. YouTube advertising grew 12% year over year to $8.9 billion. In total, Alphabet's revenue grew 15% last quarter to an astounding $88 billion. And, despite the massive computing costs needed to maintain all these AI tools, operating margin expanded to 32%. Even though Alphabet is crushing it in AI, the stock is only up 23% this year. Other AI-themed stocks like Nvidia and Palantir are up 100% and trade at nosebleed earnings ratios. Alphabet's stock looks reasonably cheap at today's price. It has a price-to-earnings ratio (P/E) of 23, which is well below the S&P 500 index average of 30 right now. For a company with a long track record of double-digit revenue and earnings growth, investors may be underrating Alphabet stock at the moment. Don't forget its heavy share repurchase program, which brings down its total outstanding shares and further boosts earnings per share (EPS) every year. EPS growth is the lifeblood of stock price appreciation over the long haul. If you believe Alphabet can further expand its lead in AI over the next decade, you'll do well if you buy from here and hold for the long term.

Better Artificial Intelligence (AI) Stock: Nvidia vs. Micron Technology | The Motley Fool

Both chipmakers are on track to deliver outstanding growth thanks to the robust demand for AI chips. The semiconductor industry is expected to generate $611 billion in revenue this year as per World Semiconductor Trade Statistics (WSTS), which would be a jump of 16% from last year's levels, and the good part is that the growth is set to continue in 2025 as well with an estimated increase of 12.5% in revenue next year. Artificial intelligence (AI) has turned out to be one of the key reasons behind the healthy growth of the semiconductor industry. The proliferation of this technology has driven an increase in demand for multiple types of chips ranging from application-specific integrated circuits (ASICs) to processors to memory. Companies such as Nvidia (NVDA -3.26%) and Micron Technology (MU -2.86%) have turned out to be big beneficiaries of the growth in AI-fueled semiconductor demand. Nvidia's dominant position in AI graphics processing units (GPUs) has led to eye-popping growth in its revenue and earnings in recent quarters, with shares of the company up 193% this year. Micron, on the other hand, has also stepped on the gas of late, though its stock price jump of 27% pales in comparison to Nvidia's. In this article, we will take a closer look at the prospects and the valuation of both companies to find out which one of these two is the better AI stock to buy right now. The demand for data center GPUs has simply taken off in the past couple of years as the race to train and deploy AI models has intensified. Nvidia has turned out to be the go-to supplier of data center GPUs, controlling an estimated 98% of this market in 2023. The company sold an estimated 3.76 million data center GPUs last year, an increase of 42% from the preceding year. The good news for Nvidia investors is that the demand for AI GPUs remains robust. Global Market Insights estimates that the data center GPU market could clock an annual growth rate of 28% through 2032. Given Nvidia's dominant position in this market, it is easy to see why the company's GPU shipments are expected to head higher in 2025. For instance, market research firm TrendForce forecasts a 55% increase in shipments of Nvidia's high-end GPUs next year, driven by the arrival of the company's new Blackwell chips. There is a possibility that Nvidia may be able to generate data center revenue of $200 billion next year, which would be nearly double the current fiscal year's revenue run rate of $98 billion (Nvidia reported $49 billion in data center revenue in the first six months of the current fiscal year). If that's indeed the case, Nvidia could easily crush Wall Street's revenue expectations in the next fiscal year. The company is expected to finish its ongoing fiscal year 2025 with just under $126 billion in revenue, which would be more than double the $60.9 billion it delivered in the previous fiscal year. As the chart above tells us, analysts are expecting Nvidia's revenue to increase another 42% in the next fiscal year, followed by a 17% increase in fiscal 2027. However, there is a strong chance that Nvidia may be able to exceed these estimates thanks to the growth it is clocking in nascent but fast-growing niches such as data center networking, sovereign AI, and enterprise AI software. These diverse catalysts suggest that Nvidia is on track to remain a top AI stock going forward since it is looking to expand its reach into markets beyond just data center GPUs. The demand for memory chips that are used by the likes of Nvidia in their AI GPUs has shot up big time, leading to a massive turnaround in the fortunes of Micron Technology. The memory specialist finished fiscal 2024 (which ended on Aug. 29) with a 61% spike in revenue to $25.1 billion and posted a profit of $1.30 per share as compared to a loss of $4.45 per share in the same quarter last year. Micron management pointed out in its recent earnings release that "robust AI demand drove a strong ramp of our data center DRAM products and our industry-leading high bandwidth memory." The good part is that the memory industry is expected to sustain its terrific momentum in 2025 as well. According to TrendForce, the dynamic random access memory (DRAM) market could witness a 51% increase in revenue next year to $136.5 billion, driven by the growing consumption of high-bandwidth memory (HBM) that's deployed in AI chips. Given that DRAM accounted for 70% of Micron's total revenue in the previous fiscal year, the healthy prospects of this market bode well for the chipmaker. Even better, the NAND flash storage market (which produces the rest of Micron's revenue) is expected to increase by 29% in 2025 and generate $87 billion in revenue. These sunny end-market prospects indicate why Micron's guidance for the current quarter is extremely solid. The company is anticipating $8.7 billion in revenue in the first quarter of fiscal 2025, along with non-GAAP (adjusted) earnings of $1.74 per share. The top-line estimate points toward an 84% increase from the same period last year, suggesting that Micron is on track to deliver even stronger growth in the current fiscal year. Consensus estimates compiled by Yahoo! Finance are forecasting Micron's revenue to increase 52% in this fiscal year to $38.2 billion, followed by a 20% increase in fiscal 2026 to $45.7 billion. The bottom-line growth is expected to remain robust as well when compared to last fiscal year's reading of $1.30 per share. So, just like Nvidia, Micron looks like a solid AI stock. But if you had to choose from one of these two names, which one should you be buying? The above discussion tells us that both Micron and Nvidia are on track to deliver impressive levels of growth thanks to AI-driven demand for their chips. However, if you're looking to choose from these two semiconductor companies to capitalize on the AI boom, a closer look at their valuations will make the choice easier. As the chart below tells us, Micron is significantly cheaper than Nvidia. Of course, Nvidia seems deserving of a premium valuation thanks to its impressive share of the AI chip market, but the pace at which Micron is growing cannot be ignored, either. So, investors looking for a mix of value and growth can consider buying shares of Micron Technology right now because of its valuation and robust earnings growth prospects that could help this tech stock sustain its newly found momentum and jump higher.

Billionaires Are Buying This 1 Top Artificial Intelligence (AI) Stock. Should You Follow Suit? | The Motley Fool

The buzz about artificial intelligence (AI) on Wall Street and Main Street continues to grow. The incredible rise of Nvidia, whose revenue has catapulted from $17 billion in 2021 to $96 billion over the past 12 months, helped push the major stock market indexes to record highs. NVDA Revenue (TTM) data by YCharts Meanwhile, OpenAI's release of ChatGPT spurred a race by big tech companies to create increasingly sophisticated generative AI technology. According to estimates by the firm Next Move Strategy Consulting, the full AI market could be worth more than $1.8 trillion by the end of the decade. With hundreds of companies competing for chunks of this market, choosing which to invest in can be challenging. Examining what billionaires' hedge funds are investing in can be illuminating. Investment managers who control over $100 million must file 13F forms with the Securities and Exchange Commission 45 days after each quarter ends, revealing all of their stock sales and purchases they made in that quarter. The latest filings just dropped last week. Here's one stock that was a particularly popular purchase by those highly experienced Wall Street professionals. Alphabet (GOOGL -1.20%) (GOOG -1.25%), Microsoft, Meta Platforms, and Amazon are expected to invest a combined $189 billion in AI infrastructure in 2024. Google DeepMind is Alphabet's team dedicated to AI research and development. Gemini -- its answer to ChatGPT -- has been integrated into Google Search, and was just released as an iPhone app. Alphabet is also reportedly developing a bot called Project Jarvis that will automate tasks like research, shopping, or booking trips through Google Chrome. Plus, according to Technology Magazine, 60% of generative AI start-ups use Google Cloud. Tudor Investment, which manages more than $27 billion, increased its stake in Alphabet by 461% in the third quarter to 543,600 shares worth in the neighborhood of $95 million as of Monday morning. That investment is still less than 1% of the fund's total assets, but it was a significant increase nonetheless. Viking Global Investors also manages over $27 billion and initiated a new position in Alphabet in Q3 to the tune of 1.3 million shares (worth around $227 million). Meanwhile, Bridgewater Associates ($17.6 billion under management) owned more than 4 million shares of Alphabet, and Tiger Global ($23.4 billion managed) owned more than 10 million shares. It's important to note that these were the stock positions they owned as of Sept. 30. Matters may have changed in the meantime. One reason for their decisions to buy Alphabet stock may be the company's recent impressive results. Revenue grew 15% year over year in Q3 to $88 billion, while operating income rose 34% to $28.5 billion. Meanwhile, cash generated from operations was $31 billion for the quarter and $86 billion year to date. This provides it with the critical capacity to continue investing in infrastructure, as well as to make dividend payments and buy back stock. Alphabet stock currently trades at about 23 times earnings, which is slightly lower than its five-year average of 26 and lower than the valuations of big tech players like Microsoft and Meta. The fact that numerous billionaires are taking big stakes in Alphabet adds to its credibility as an investment. And the company's investments in AI, financial results, and valuation make Alphabet a compelling long-term investment opportunity.

The Best Stocks to Invest $1,000 In Right Now | The Motley Fool

Technology stocks, especially those with a key role in the hot growth area of artificial intelligence (AI), have led gains in today's bull market. The S&P 500 is heading for a 24% increase this year after rising in the double digits last year thanks to the momentum of these players. Investors have piled into these stocks as a way to get in early on a market that's set to soar throughout the decade -- today's $200 billion AI market is forecast to reach $1 trillion by 2030. This growth forecast and high demand for AI products and services mean it isn't too late to invest in companies leading the AI revolution. They've already seen earnings take off, but this could continue well into the future. Let's check out the best stocks to buy with $1,000 right now. (And by the way, with this amount, you could choose to invest in one of these players or all three.) Oracle (ORCL 1.08%) built its reputation as a database software provider, but in recent times, this tech giant has put a focus on cloud infrastructure -- and serving AI customers. This shift has proven itself to be a very wise choice, as customers have flocked to Oracle, and revenue has taken off. In the most recent quarter, the company's cloud infrastructure revenue jumped 45% to $2.2 billion, and demand for cloud infrastructure continues to surpass supply. Oracle's cloud database partnerships with Microsoft Azure, Alphabet's Google Cloud, and Amazon's (AMZN -0.45%) Amazon Web Services (AWS) make it easy for customers to access Oracle on any platform. Oracle expects cloud database revenue to represent a third major growth driver along with cloud infrastructure and strategic software-as-a-service. A look at Oracle's remaining performance obligations (RPO), or contract revenue that hasn't yet been invoiced, is another reason to be optimistic about what's ahead. Cloud RPO surged 80% and accounts for three-quarters of total RPO -- and total RPO in the quarter climbed 52% to $99 billion. On top of this, you also can count on this tech giant returning value to you as a shareholder through stock buybacks and dividends. Oracle repurchased $150 million worth of stock in the quarter and paid out more than $4 billion in dividends over the past year. Amazon is both a user of AI and a seller of top AI products and services. As an e-commerce leader, Amazon has put AI into place across its fulfillment operations, helping with tasks such as efficiency in warehouses and figuring out the fastest delivery routes. All of this results in cost savings for Amazon, and a smooth delivery process encourages customers to keep coming back. As for selling AI, this happens through the cloud services business. AWS, which is Amazon's biggest profit driver, has gone all in on AI, offering a vast selection of products and services to customers. And this has helped AWS reach an annual revenue run rate of $110 billion. AWS sells premium chips, such as those of Nvidia (NVDA -1.29%), as well as its own chips developed for customers on a budget. And it even offers a fully managed system allowing users to access large language models and tailor them to their needs. Amazon has established a track record of growth, increasing revenue and profit into the billions of dollars over the years. And after revamping its cost structure a couple of years ago, the company now is seeing return on invested capital and free cash flow taking off. All of this makes now a great time to get in on Amazon and benefit from growth over the long term. Nvidia shares have soared nearly 200% this year, but that doesn't mean this stock has reached a plateau. The stock trades for about 51x forward earnings estimates, which isn't cheap but remains reasonable considering the company's long-term potential in the high-growth AI market. This tech powerhouse sells the most sought-after graphics processing units (GPUs) on the planet, chips that power some of the most crucial AI tasks like the training and inferencing of large language models. Nvidia holds about 80% of the AI chip market, but the company's strengths don't stop there. Nvidia has built an AI empire, selling products and services that make it the "go to" destination for any customer aiming to launch an AI program. All of this has helped Nvidia report triple-digit earnings growth in recent quarters, with earnings reaching record levels. And the company's gross margin of more than 70% shows its high profitability on sales. Importantly, Nvidia pledges to innovate on an annual basis, something that should help it maintain its lead in this increasingly competitive market. And Nvidia has a couple of big catalysts ahead: its quarterly earnings report on Nov. 20 and the launch of its new Blackwell architecture in the coming weeks. So even after this year's big gain, Nvidia still represents a great investment for the long term.

Billionaires Are Lining Up Behind This High-Flying AI Stock. Is It a Buy? | The Motley Fool

Artificial intelligence has been the dominant trend in the stock market over the last two years. The emergence of generative AI, which began with the launch of ChatGPT, has been the primary driver of the bull market and fed the ongoing rotation to tech stocks. Nvidia has ridden this AI wave to become the most valuable company in the world. The growth in AI and the success of AI stocks have attracted a range of billionaire investors to the sector, and one AI stock in particular emerged as a popular pick among billionaires and hedge fund managers in the third quarter, according to recently released 13-F filings. That's Arm Holdings (ARM 0.48%), which is known for licensing its power-efficient CPU architecture for smartphones and other applications. The company has a unique business model as it earns money on licenses and then makes most of its revenue from royalties once the products with those chips start selling. Several billionaires bought Arm stock in the third quarter: In addition to those buys in the third quarter, Arm also enjoys backing from a number of high-profile investors. Nvidia has been the clear leader in the AI boom and the most obvious way to get exposure to the new technology. Not only has the stock soared but its revenue jumped by triple-digits for five quarters in a row, showing that demand is very much soaring for Nvidia's chips. The next-best stock to own in the sector is debatable, but Arm seems to be emerging as the winner. The company works closely with Nvidia. Arm's architecture is in the Grace Blackwell Superchip, and Arm's advantage in power-efficient CPU technology is seen as crucial for data center chips because AI data centers consume enormous amounts of energy. Meanwhile, the company continues to grow inside its core smartphone segment as chips get more expensive and licenses for its latest CPU architecture, the Armv9, grow. During the third quarter, the stock fell sharply in July, in line with a broader pullback in AI stocks, and recouped some of those losses in August and September, even though it still finished the quarter lower than it started. Arm has pulled back over the last week as well, in line with a broader retreat over tech stocks as some investors fear that valuations are bloated, especially in AI names. Indeed, Arm is expensive. It currently trades at a price-to-sales ratio of 39, and a price-to-earnings ratio around 100. However, the company has formidable competitive advantages. Its power-efficient architecture essentially ensures that it will continue to have 99%+ market share of the smartphone market for the foreseeable future as well as an attractive position in the data center market and other applications where preserving battery power is key, like wearable devices. With the recent pullback in the stock, investors may get a better buying opportunity if they're patient. But over the long term, Arm looks like a winner as the AI revolution plays out. Investors should also remember that it has a strong pipeline of revenue coming in from recent licensing deals.

Got $3,000? 3 Artificial Intelligence (AI) Stocks to Buy and Hold for the Long Term | The Motley Fool

There are many different ways to capitalize on the AI revolution. Artificial intelligence (AI) stocks are hot. Maybe a little bit too hot. With lofty valuations and uncertain market potential, many AI stocks may not be good choices for "buy-and-hold" investing. Others, though, look like better long-term bets. While there's some inherent level of risk in any new technology, if I were investing $3,000 in AI stocks, I'd pick a mix of established players and higher-risk ventures. Here are my three top AI stocks for long-term investment. With a market capitalization of more than $3 trillion, Microsoft (MSFT 0.18%) stock is certainly more expensive today than it was two years ago. That's at least partly due to excitement about its AI offerings. Microsoft's premier AI investment is its financial stake in ChatGPT's developer OpenAI -- which has grown to a whopping $13 billion over several years, almost half the AI start-up's current estimated value! However, Microsoft has also made a number of AI-focused improvements to its own products. These include dozens of AI-driven apps and tools for its Azure cloud platform, and the AI Copilot tool for its Office suite. Plus, with so many revenue streams besides AI -- including software, cloud services, and gaming -- Microsoft isn't dependent on its AI investments for financial success. In spite of the market's AI enthusiasm, Microsoft's current valuation of 34 times earnings is well within its historical range, and its shares have actually lagged the performance of the S&P 500 in 2024. This looks like a good time to pick up shares. Although you might think of it more as a cybersecurity company than an AI play, CrowdStrike (CRWD 1.85%) has made big investments in AI that are poised to pay off for the company. CrowdStrike was founded on the idea of "crowdsourcing" cybersecurity. By looking at threats that were circulating in real time and rapidly deploying responses across its entire network via the cloud, CrowdStrike's model was perfectly suited to adding AI elements to improve threat detection and solution deployment. It has begun to roll out such tools for its primary Falcon system, including Threat Graph, which uses AI and machine learning to analyze data in real time, and AI-powered conversational assistant Charlotte AI, which helps analysts locate vulnerabilities in their system and take action to remove them. CrowdStrike made headlines in July when a faulty update caused widespread outages across the global internet. The stock lost more than 40% of its value and still hasn't fully recovered. However, the company seems to have successfully navigated the fallout with minimal long-term impact, resulting in a buying opportunity for this AI leader in a fast-growing industry. Interest in AI-powered data analytics company Palantir Technologies (PLTR -6.86%) has exploded, with the stock price up over 245% so far this year. Now trading at about 54 times sales, the stock looks very expensive. While I think investors would be smart to wait for a better price point to buy, I like the company's long-term prospects, which are directly tied to its AI offerings. Palantir's flagship platform, Gotham, is used by U.S. government intelligence and defense agencies to detect and monitor potential threats. By using AI to analyze data across multiple agencies -- even those with incompatible systems -- Gotham can spot potential dangers that a single agency might never be able to detect on its own. The company has also been increasing the number of customers for its corporate-focused Foundry data analysis platform, and rolling out new AI products like Apollo for software deployment. As a pure AI play, Palantir is a riskier investment than Microsoft or CrowdStrike. Plus, its current lofty valuation puts its stock at risk of a short-term pullback if it reports any slowdown in growth, or if there's any high-profile misstep. Still, management has done an excellent job of leveraging the company's AI assets into new products and new revenue streams, so I expect it to succeed over the long term. If you wanted to invest $3,000 in Microsoft, CrowdStrike, and Palantir, you'd have many options. A risk-averse investor would probably want to purchase more Microsoft, while someone who doesn't mind volatility might lean more heavily into Palantir. You could create a fairly balanced basket of all three without using fractional shares by buying three shares each of Microsoft and CrowdStrike at their current prices and putting the remainder into the more volatile Palantir (roughly 10-11 shares). However you slice it, these AI companies look like good bets for long-term holding.