Nasdaq Correction Creates Buying Opportunity for AI Chip Stocks

Nasdaq hit correction territory: Can buying this safe stock today set you up for life?

The tech-laden Nasdaq Composite index is having a forgettable 2025 so far as it recently entered correction territory following remarkable gains in 2023 and 2024 thanks to catalysts such as artificial intelligence (AI). Investors have apparently been booking profits in high-flying tech stocks amid economic uncertainty arising out of the tariff-induced trade war, a decline in consumer confidence in February, and a tepid February jobs report. These factors have sent the Nasdaq Composite down by more than 13% from its most recent high on Dec. 16, 2024. A stock market correction can open up some great buying opportunities A stock market correction refers to a drop of 10% to 20% in a major index. So, the Nasdaq is firmly in correction territory as of this writing, and some of the top names in this sector have also taken a beating. It remains to be seen how long this correction is going to last and if a bigger drop is on the way. However, investors should note that such corrections can create opportunities to buy top stocks on the cheap. I think it's worth looking right now -- during the current Nasdaq correction -- at Nvidia (NASDAQ: NVDA), which is trading at an attractive valuation, growing at a nice clip, and is the leading player in its industry. Buying Nvidia at its current valuation could turn out to be a smart long-term move considering the massive markets it serves. Nvidia is cheaper now than it was after its 2022 plunge Nvidia stock was hammered big time during the Nasdaq sell-off of 2022, losing 50% of its value that year. However, investors who were savvy enough to buy this semiconductor bellwether that year were rewarded with outstanding gains over the next couple of years. Specifically, Nvidia stock shot a remarkable 820% over 2023 and 2024, fueled by terrific growth in its revenue and earnings. NVDA data by YCharts It crushed the Nasdaq's 84% gains during this period by emerging as the leader in AI data center chips. But what's worth noting here is that Nvidia is now cheaper than it was at the end of 2022. Nvidia is now trading at 24 times forward earnings estimates, well below its forward earnings multiple of 34 at the end of 2022. Nvidia is now growing at a much faster pace than it was two years ago. The chip designer ended fiscal 2023 (which ended in Janary 2023) with flat revenue growth and a 25% drop in adjusted earnings. For comparison, Nvidia's fiscal 2025 revenue was up by 114% and its adjusted earnings jumped 130%. So, Nvidia looks like a much safer stock to buy right now as compared to 2022 thanks to its remarkably strong growth and cheaper valuation. The chip giant's remarkable growth is here to stay Nvidia is serving multiple end markets that should ideally allow it to remain a top growth stock for a long time to come. For instance, the market for AI chips is expected to exceed $500 billion in annual revenue by 2033 thanks to the growing application of this technology in autonomous vehicles, edge computing devices, and other areas. Nvidia reportedly commands 92% of the AI chip market. This is precisely why its data center revenue could keep growing at a commendable pace even if the company were to lose some ground in this market. And there seems to be a solid chance that Nvidia will keep its dominant position in the AI chip market thanks to its pace of technological advancements. The company says it sold $11 billion worth of its latest generation of Blackwell AI processors that went on sale in the previous quarter. That was close to the $12.6 billion revenue that rival AMD generated last year in the data center business. As such, it won't be surprising to see Nvidia cornering a major chunk of the $500 billion revenue opportunity in AI chips in the coming years. And Nvidia's long-term opportunity isn't limited to just AI hardware. The company's professional visualization and automotive businesses also have massive growth opportunities. For example, Nvidia is expecting its automotive revenue to triple in the current fiscal year to around $5 billion following a 55% increase in the previous fiscal year. Nvidia's huge partner ecosystem in the automotive space -- which includes auto majors such as Hyundai and Toyota, along with original equipment manufacturers (OEMs) and ride-sharing companies such as Uber -- puts it in a nice position to capitalize on secular growth trends in the automotive industry. These companies are tapping Nvidia's hardware and software ecosystem to build autonomous vehicles and robotaxis. Additionally, Nvidia's enterprise software revenue doubled last year thanks to growing demand for its AI solutions. There is a huge addressable opportunity in this market as well which could complement the company's growth in other segments. As such, it won't be surprising to see Nvidia coming out strongly from the ongoing correction and delivering healthy gains to investors in the long run. It's unlikely that any one stock will set you up for life, but buying this tech stock right now could turn out to be a smart move for investors looking to add a fast-growing company to their portfolios that they can hold for a long, long time. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Uber Technologies. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. 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The Nasdaq Just Hit Correction Territory: Can Buying This Safe Stock Today Set You Up for Life? | The Motley Fool

The tech-laden Nasdaq Composite index is having a forgettable 2025 so far as it recently entered correction territory following remarkable gains in 2023 and 2024 thanks to catalysts such as artificial intelligence (AI). Investors have apparently been booking profits in high-flying tech stocks amid economic uncertainty arising out of the tariff-induced trade war, a decline in consumer confidence in February, and a tepid February jobs report. These factors have sent the Nasdaq Composite down by more than 13% from its most recent high on Dec. 16, 2024. A stock market correction refers to a drop of 10% to 20% in a major index. So, the Nasdaq is firmly in correction territory as of this writing, and some of the top names in this sector have also taken a beating. It remains to be seen how long this correction is going to last and if a bigger drop is on the way. However, investors should note that such corrections can create opportunities to buy top stocks on the cheap. I think it's worth looking right now -- during the current Nasdaq correction -- at Nvidia (NVDA 0.85%), which is trading at an attractive valuation, growing at a nice clip, and is the leading player in its industry. Buying Nvidia at its current valuation could turn out to be a smart long-term move considering the massive markets it serves. Nvidia stock was hammered big time during the Nasdaq sell-off of 2022, losing 50% of its value that year. However, investors who were savvy enough to buy this semiconductor bellwether that year were rewarded with outstanding gains over the next couple of years. Specifically, Nvidia stock shot a remarkable 820% over 2023 and 2024, fueled by terrific growth in its revenue and earnings. It crushed the Nasdaq's 84% gains during this period by emerging as the leader in AI data center chips. But what's worth noting here is that Nvidia is now cheaper than it was at the end of 2022. Nvidia is now trading at 24 times forward earnings estimates, well below its forward earnings multiple of 34 at the end of 2022. Nvidia is now growing at a much faster pace than it was two years ago. The chip designer ended fiscal 2023 (which ended in Janary 2023) with flat revenue growth and a 25% drop in adjusted earnings. For comparison, Nvidia's fiscal 2025 revenue was up by 114% and its adjusted earnings jumped 130%. So, Nvidia looks like a much safer stock to buy right now as compared to 2022 thanks to its remarkably strong growth and cheaper valuation. Nvidia is serving multiple end markets that should ideally allow it to remain a top growth stock for a long time to come. For instance, the market for AI chips is expected to exceed $500 billion in annual revenue by 2033 thanks to the growing application of this technology in autonomous vehicles, edge computing devices, and other areas. Nvidia reportedly commands 92% of the AI chip market. This is precisely why its data center revenue could keep growing at a commendable pace even if the company were to lose some ground in this market. And there seems to be a solid chance that Nvidia will keep its dominant position in the AI chip market thanks to its pace of technological advancements. The company says it sold $11 billion worth of its latest generation of Blackwell AI processors that went on sale in the previous quarter. That was close to the $12.6 billion revenue that rival AMD generated last year in the data center business. As such, it won't be surprising to see Nvidia cornering a major chunk of the $500 billion revenue opportunity in AI chips in the coming years. And Nvidia's long-term opportunity isn't limited to just AI hardware. The company's professional visualization and automotive businesses also have massive growth opportunities. For example, Nvidia is expecting its automotive revenue to triple in the current fiscal year to around $5 billion following a 55% increase in the previous fiscal year. Nvidia's huge partner ecosystem in the automotive space -- which includes auto majors such as Hyundai and Toyota, along with original equipment manufacturers (OEMs) and ride-sharing companies such as Uber -- puts it in a nice position to capitalize on secular growth trends in the automotive industry. These companies are tapping Nvidia's hardware and software ecosystem to build autonomous vehicles and robotaxis. Additionally, Nvidia's enterprise software revenue doubled last year thanks to growing demand for its AI solutions. There is a huge addressable opportunity in this market as well which could complement the company's growth in other segments. As such, it won't be surprising to see Nvidia coming out strongly from the ongoing correction and delivering healthy gains to investors in the long run. It's unlikely that any one stock will set you up for life, but buying this tech stock right now could turn out to be a smart move for investors looking to add a fast-growing company to their portfolios that they can hold for a long, long time.

The Nasdaq Just Hit Correction Territory. Here Are 5 Stocks You'll Regret Not Buying Right Now. | The Motley Fool

With the Nasdaq Composite in correction territory, investors should consider investing some cash in the stock market. Corrections are defined as a decline of 10% from an all-time high, but they occur fairly often (just over every year since 1980). Sometimes, these corrections turn into bear markets, but other times, they reverse and go higher, and I believe the latter is more likely. As a result, I'm looking at stocks I can buy now to take advantage of the sell-off, and I've come up with five fantastic options that you'll regret not scooping up for dirt cheap prices now. Some investors think a reversal of artificial intelligence (AI) hype is causing this correction, similar to how the dot-com bubble burst back in 2000 (basically 25 years ago to the day), but I think that's a bad assumption. While AI and the internet are having a similar effect on how our lives are changing, AI companies are much different than the internet companies that crashed. For one, they make huge profits and have a reasonable business model. There are billions of investment dollars flowing into AI-related hardware because many companies see where the world is heading. As a result, companies like Nvidia (NVDA -0.14%) and Broadcom (AVGO -1.48%) are huge beneficiaries. Since 2023, Nvidia's revenue has soared on the back of AI demand. This year, its revenue is expected to reach $204 billion, clearly indicating that AI investments aren't waning. Nvidia's graphics processing units (GPUs) are the backbone of AI, as they train AI models and then handle inference when deployed. With many of the big tech companies announcing record capital expenditures in 2025, Nvidia will be a primary beneficiary of this spending. Another beneficiary is Broadcom, which makes connectivity switches for data centers and custom AI accelerators (which Broadcom refers to as XPUs). Broadcom's management sees a massive and growing demand for XPUs, as they can often outperform GPUs when the workload is set up properly. Broadcom currently has three companies using its custom-designed XPUs. The company believes this hardware will have a market opportunity of between $60 billion and $90 billion in revenue by 2027. However, Broadcom also has four other customers just launching their XPUs, and they are not included in this figure. With Broadcom's trailing-12-month revenue sitting at $55 billion, it has a massive growth runway. I'm confident these two will continue to do just fine over the next few years, as big tech companies can't afford to slow their AI spending. Otherwise, they risk falling behind competitors who are willing to continue their AI spending. As a result, I'm using this dip to load up on shares of these two. Next, I'm evaluating at the AI hyperscalers, which are tech giants building AI infrastructure. The companies I'm looking at in this space are Amazon (AMZN -2.51%), Alphabet (GOOG -2.53%) (GOOGL -2.60%), and Meta Platforms (META -4.67%), which are all customers of Nvidia and Broadcom and have all announced massive AI infrastructure spending. These aren't some fly-by-night companies that are spending money they don't have; instead, they have a solid base business to fund their AI investments. For Amazon, it's the company's commerce and cloud computing segments. Although Amazon's commerce sales could come under pressure if a trade war drives prices higher, its cloud computing division, Amazon Web Services (AWS), should do just fine. Cloud computing is a major growth segment for Amazon and is a huge beneficiary of workload migration to the cloud and AI spending. With 58% of Amazon's operating profits coming from cloud computing over the past 12 months, it has contributed far more to Amazon's profits than the commerce business. Alphabet and Meta Platforms each have advertising-focused businesses that fund their AI investments. These two generate a ton of cash from their various properties (Alphabet has Google and YouTube, while Meta has Facebook, Instagram, WhatsApp, Threads, and Messenger) and are using it to build out AI infrastructure. Alphabet and Meta have popular generative AI models but are still working to capture market share in this space. While their AI investments will continue (which is great over the long term), their short-term ad revenue may struggle. However, this spending always recovers, and by buying each stock now and taking the long-term view, you'll have a great entry price. While each of these stocks has been expensive at some point, the recent sell-off has made each stock rather affordable. From a forward price-to-earnings (P/E) perspective, many of these stocks look very attractive and are the cheapest they have been for some time. I think investors should use the latest market sell-off to their advantage and load up on these companies that will be long-term winners.

My Best Artificial Intelligence (AI) Chip Stock to Buy Amid the Nasdaq Correction (Hint: It's Not Nvidia) | The Motley Fool

The Nasdaq Composite index has entered correction territory as the tech-laden market index is now down more than 13% from the highs it achieved on Dec. 16 last year, and this souring market sentiment can be attributed to recent economic developments that have led investors to become risk averse. From the tariffs being imposed by the Trump administration on countries such as Canada, Mexico, and China to a weaker-than-expected jobs report last month to weakening consumer confidence on account of a potential uptick in inflation, several factors have contributed to the Nasdaq's correction. But this could also prove an opportunity in disguise for investors. A stock market correction refers to a decline of 10% to 20% in major market indexes. Investors, however, should not start panicking as history suggests that periods of corrections are followed by a sharp recovery. This is evident from the following chart. The Nasdaq Composite corrected in early 2020 during the coronavirus pandemic, and that was followed by a period of sustained rise until the end of 2021. Again, a period of brutal sell-offs ensued in 2022, followed by outstanding gains over the next couple of years. Investors who were savvy enough to buy solid companies during these sell-offs are now sitting on pretty gains. For instance, shares of Nvidia have shot up more than 3,000% since 2019 despite periods of volatility. So investors who held their nerves -- and their Nvidia positions -- over the past five years came out well off despite the sell-offs. That's why it is a good time for investors to look for a company that has the potential to rise remarkably in the long run. Nvidia, no doubt, could be one of those names. However, there's another AI stock that's not only cheaper than Nvidia, but also has the potential to grow at a faster pace than the semiconductor bellwether. Let's take a closer look at that name. Advanced Micro Devices (AMD -2.66%) may not have delivered as stellar gains as Nvidia since the beginning of 2019, but it has still clocked respectable gains of 413%. However, the stock has pulled back nearly 24% during the latest Nasdaq correction since Dec. 16. As a result, AMD stock is now trading at a very attractive 21 times forward earnings, which is a discount to Nvidia. Buying AMD at this valuation looks like a no-brainer since it has several catalysts that could supercharge its growth. From AI personal computers (PCs) to data center graphics cards to gaming consoles, there are multiple reasons why buying AMD right now could turn out to be a smart move. The chipmaker recorded a 14% increase in revenue in 2024 along with a 25% increase in non-GAAP earnings to $3.31 per share. This resilient performance was driven by the company's record data center revenue, which nearly doubled last year as it gained traction in the AI graphics card market and won a bigger share of the server processor market. At the same time, AMD's client processor revenue jumped 52% in 2024 thanks to a recovery in the PC market along with the company's improving share in this space. The company is confident it will achieve growth in both these end markets, which account for more than three-fourths of its revenue. For instance, AMD sees its data center graphics card business generating "tens of billions of dollars of annual revenue over the coming years" as compared to $5 billion in 2024. The company has ramped up its product development efforts and is on its way to launching its next generation of AI graphics cards in mid-2025. What's worth noting here is that AMD's AI graphics cards are now finding traction among major cloud computing players such as Microsoft, IBM, and Oracle. Given that the global AI chip market is expected to generate more than $500 billion in revenue by 2033, AMD could witness a significant bump in its data center revenue from last year's levels of $12.6 billion even if it manages to remain the second-largest player in data center graphics cards with a double-digit share. Meanwhile, the market for central processing units (CPUs) deployed in AI servers is expected to clock an annual growth rate of 28% through 2028, generating $26 billion in annual revenue. AMD has been consistently taking away share from Intel in this market. Its revenue share of the server CPU market stood at 35.5% in the fourth quarter of 2024 as per Mercury Research, up by 3.7 percentage points from the year-ago period. Assuming it can control even 40% of the AI server CPU market's revenue in 2028, its annual revenue from this segment could exceed $10 billion (based on the estimated market size of $26 billion). All this indicates that AMD's data center business is well-placed for robust long-term growth thanks to its growing influence in both the CPU and graphics card markets. On the other hand, AMD is also gaining share in PC CPUs. Its revenue share of server CPUs shot up by an impressive 8.4 percentage points year over year in the fourth quarter of 2024 to 23.8%. AMD is pushing the envelope in the client CPU market by rolling out new AI-focused processors. Not surprisingly, the company believes that its client segment revenue could grow at a faster pace than the market thanks to "the breadth of our leadership client CPU portfolio and strong design win momentum." In all, continued market share gains in both the client and data center markets could pave the way for stronger growth at AMD. This explains why analysts are forecasting stronger growth of 42% in the company's earnings this year, followed by a 35% jump next year to $6.33 per share. Nvidia, on the other hand, is expected to register 50% earnings growth in the current fiscal year followed by 28% in the next one. So, the potentially faster growth in AMD's earnings along with its cheaper valuation are the reasons why this AI stock is a solid buy amid the ongoing correction. Assuming AMD's earnings do hit $6.33 per share next year and it trades at even 25 times forward earnings at that time (in line with the tech-laden Nasdaq-100 index's forward earnings multiple), its stock price could jump to $158. That points toward 62% gains from current levels, giving investors yet another reason to buy this stock.

The Nasdaq Just Hit Correction Territory: Buy This Unstoppable Stock at a Discount | The Motley Fool

Down over 13% from its all-time high (achieved in December), the Nasdaq Composite is officially in a correction, which is defined as a drawdown of at least 10%. After falling by 4% on Monday, the Nasdaq Composite ticked down again on Tuesday as the broader market sell-off intensified across the major indexes. At the time of this writing, the technology sector is down over 10% year to date. Major tech stocks like Microsoft (MSFT 2.55%) and Apple are down 10% and 12%, respectively. Nvidia has tumbled 19% year to date. Here's why Microsoft is a particularly compelling growth stock to buy now. Buying stocks during a major sell-off is never easy, especially when the sell-off happens fairly quickly. The Nasdaq is down 12% in the last month, which indicates how rapid the sell-off has been. During times of intense volatility, it can be tempting to scoop up shares of companies that have sold off big-time. However, a better way to navigate a sell-off is to buy stocks that you believe in long-term. So much so, that you're OK with them falling even more. Every investor wants a great deal. So, buying shares in an excellent company at a low price is preferred. However, assuming you can buy the dip at the best time possible is foolish. Being roughly right is more than good enough. In fact, history shows that buying shares in great companies at bad times is better than investing in bad or mediocre companies at phenomenal prices. Or as Warren Buffett famously said, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Not every stock that is selling off is a wonderful company. Some stocks saw their valuations stretched thin and probably ran too far ahead of fundamentals. But other stocks, like Microsoft, are wonderful companies. And Microsoft is already at a fair price, making it an especially compelling stock to buy now. Microsoft sports a price-to-earnings (P/E) ratio of 30, which is below its 10-year median P/E of 32.5. So right off the bat, it's clear the market is pricing Microsoft at less than its historical average valuation, even though the business has changed drastically over the last decade. Microsoft is arguably the most balanced tech stock on the market. It is involved in hardware, personal computer products, software through its legacy Microsoft 365 suite, Teams, platforms like LinkedIn and GitHub, and cloud infrastructure through Microsoft Intelligent Cloud and Azure. The company is heavily investing in artificial intelligence (AI) to drive efficiency across existing platforms and build advanced data center and AI services for its cloud clients. Microsoft can afford these investments due to its high free cash flow and strong balance sheet, which has more cash, cash equivalents, and short-term investments than long-term debt. In sum, buying Microsoft stock is a catch-all way to invest in AI, cloud computing, software, and hardware through a company with the financial muscle to invest through the cycle. Microsoft isn't the kind of company that will overextend its spending and get strapped for cash. So it is well suited to endure a prolonged slowdown in some of its end markets. One of the most impressive aspects of Microsoft's business is its combination of revenue growth across all segments and overall margin expansion. Microsoft's most recent earnings report was for the second quarter of fiscal 2025. Here's a look at how that quarter stacks up against the first half (1H) of the last two fiscal years. Data source: Microsoft. AI efforts have improved margins in each business segment. It's especially impressive to see how large Microsoft's cloud business has become. The segment is now nearly as big as productivity and business processes (which includes Microsoft 365, Windows, Teams, commercial software products, LinkedIn, and more). Market sell-offs are the perfect time to review the reason why you own a stock, revisit the investment thesis, and address potential risks. Microsoft is a phenomenal business with a solid growth rate, diversified business model, rock-solid balance sheet, reasonable valuation, a growing dividend, and ample free cash flow left over to repurchase stock. So, regarding moats, Microsoft's is about as wide and deep as it gets. Still, the company isn't immune from risks. The biggest risk at this time is probably the impact of its AI investments. Microsoft's bold plans to spend $80 billion on AI data centers and cloud-based applications in fiscal 2025 is no small feat -- even for Microsoft. Already, we've seen the company pull back on stock repurchases to fund its AI efforts. Buying Microsoft now is a bet that these investments are worth the steep price. A pullback in spending from Microsoft's clients could make it harder to sell AI services. However, it's difficult to see a scenario where there would be a permanent pullback on demand for AI tools for consumer software products and cloud solutions. Microsoft is a fairly safe stock to buy now, even if the Nasdaq correction evolves into a full-fledged bear market. Microsoft's earnings growth could slow down for a few years, and the stock would still be a decent value. Microsoft isn't priced for perfection despite the company's excellent results. It's not much, but it's worth mentioning that the company does sport a 0.9% dividend yield with 15 consecutive years of boosting its payout. So, Microsoft has a bit of passive income opportunity. The longer the stock price languishes, the higher Microsoft's yield will become -- especially considering the company will likely continue increasing its dividend every year going forward. Other megacap growth stocks like Apple, Meta Platforms, and Alphabet yield just 0.5% or less and Amazon and Tesla don't even pay dividends. Add it all up, and Microsoft is a stock you can count on long-term, making it the perfect candidate to buy during a correction.

As Artificial Intelligence (AI) Stocks Fall, Investors Should Consider Buying More of These 2 Powerhouses | The Motley Fool

Artificial intelligence (AI) stocks generally delivered outstanding gains to investors in 2023 and 2024, but due to factors outside their control, this year is turning out to be a more challenging one for them. Investors have shifted into risk-off mode of late due to the nascent trade war that was triggered by U.S. tariffs, which has many people concerned that a slowdown in the U.S. economy is imminent. The rising uncertainty and fear about the outlook explains why major AI companies have witnessed stock pullbacks of late even as they've been posting solid quarterly results. However, the long-term economic potential of AI means that the proliferation of this technology is likely to continue. Market research firm IDC predicts that AI could add nearly $20 trillion to the global economy by 2030. This is the reason why it may be a good idea to buy shares of some top AI players benefiting from the technology's growing adoption right now. These two beaten-down AI powerhouses have been growing at a healthy pace and have the potential to sustain their impressive growth in the long run. Shares of AI poster child Nvidia (NVDA 5.27%) are down 17% in the last month, even as the company reported solid quarterly results in late February. That has left Nvidia trading at attractive valuations. Its trailing price-to-earnings (P/E) ratio stands at 38, which isn't all that expensive considering the terrific pace at which its bottom line is growing. Nvidia's forward P/E ratio of 25 is even more attractive, and is almost in line with the forward earnings multiple of the Nasdaq-100 (a tech-heavy index that can serve as a useful proxy for the broader tech sector). In that light, Nvidia looks like a bargain buy at these levels. The company's earnings shot up by a remarkable 130% to $2.99 per share in its recently concluded fiscal 2025, while revenue more than doubled to $130.5 billion. Moreover, Nvidia expects to keep growing at a remarkable pace despite its massive scale. The company's fiscal 2026 Q1 revenue guidance of $43 billion would translate into a year-over-year increase of 65%. Analysts are expecting Nvidia to clock 50% earnings growth in the current fiscal year. However, Nvidia has the ability to outpace those expectations as the demand for its latest generation of Blackwell data center graphics processing units (GPUs) remains robust. The company sold $11 billion worth of Blackwell processors in its fiscal fourth quarter, which was higher than anticipated. Blackwell GPUs accounted for nearly a third of Nvidia's data center revenue last quarter, and they are set to move the needle in a bigger way for the company thanks to their versatility. Nvidia points out that the Blackwell GPUs are far more capable than its previous-generation Hopper processors at AI inferencing -- the process of putting AI models to work once they are trained. As the demand for AI inferencing increases with the debuts of large language models such as OpenAI's o1 and DeepSeek's R1, so too is the demand for Blackwell processors. More importantly, Nvidia points out that its customers have been able to significantly lower their operating costs and boost performance simultaneously by deploying Blackwell GPUs. With all this in mind, it won't be surprising if Nvidia maintains its stranglehold over the AI chip space, where it reportedly commands an impressive 85% market share. In the end, it can be concluded that Nvidia remains a top AI stock as its days of outstanding growth are here to stay. Investors would be well advised to buy it while its price is beaten down. Meta Platforms (META 2.96%) stock has retreated 16% in the past month, making it a no-brainer buy. After all, it is now trading at 26 times trailing earnings even as fast-growing demand for its AI-based advertising tools is helping it corner a bigger share of a huge end-market opportunity. The digital advertising market grew by an estimated 12% last year. Meta, however, recorded much stronger growth of 22% in 2024 and generated $164 billion in revenue. Its earnings, meanwhile, grew by 60% to $23.86 per share, driven by a combination of higher spending by customers and its own cost-control initiatives. AI is playing a key role in helping Meta win a bigger share of its customers' marketing budgets. This is evident from the 14% year-over-year increase in the average price per ad that Meta charged last quarter. A big reason why advertisers are willing to spend more money on Meta's advertising tools is because they are getting stronger returns on that spending thanks to AI. Meta management asserted in January 2024 that its AI tools were driving a 32% increase in return on spending for advertisers. The social media giant has rolled out several AI-based features since then to help advertisers automate the creation, deployment, and optimization of ad campaigns. More importantly, it is continuing to add new AI features. So, it is not surprising to see why there has been a sharp jump in the adoption of Meta's AI ad tools of late. Management remarked on the company's January 2025 earnings conference call that "more than 4 million advertisers are now using at least one of our generative AI ad creative tools." That's a 4x jump in a period of just six months. This is resulting in financial gains for Meta as well. According to CFO Susan Li: Another way we're delivering value for advertisers is through increased automation of their ad campaigns with Advantage+. Adoption of Advantage+ shopping campaigns continues to scale with revenues surpassing a $20 billion annual run rate and growing 70% year over year in Q4. So, Meta seems on track to win a bigger share of the digital ad market in the long run. Grand View Research projects that the digital ad market could clock 15% annualized growth through the end of the decade to more than $1.1 trillion in annual revenue. Meta, therefore, has room to keep growing at a healthy pace, making it an ideal bet for investors looking to buy a cheaply valued AI stock that could fly higher in the long run.

1 Artificial Intelligence (AI) Stock Millennials Should Buy Today and Hold for Decades

Demand for artificial intelligence (AI) infrastructure, software, and services is about to reach a huge inflection point. This could be the biggest growth market in history, especially when it comes to business adoption. According to a recent survey by global consultancy McKinsey & Co., around 40% of businesses reported that they would increase investments in AI due to advancements in generative AI alone. That should be huge news because, according to new research from The Motley Fool, fewer than 10% of businesses nationwide currently use AI. So, in the coming years, we could see AI adoption by businesses rise nearly fivefold. If you want to profit from the AI revolution, there's one stock in particular you should add to your portfolio. This is my favorite AI stock Most investors following the AI craze are already familiar with Nvidia (NVDA 5.27%). Even after a recent correction, Nvidia remains one of the most valuable companies in the world, with a market cap of $2.7 trillion dollars. Investors who have followed the company are likely aware of a few things. First, Nvidia's main business line is producing graphics processing units (GPUs). GPUs make much of our modern technology possible. But the most exciting use case right now is with machine learning. Machine learning is a critical process for training and running AI models. Without it, the current AI revolution wouldn't be taking place. And which company makes the best GPUs right now for machine learning? You guessed it: Nvidia. By most estimates, Nvidia currently controls between 70% and 95% of the market for GPUs related to AI applications. If previous chip wars are any indication, this market share will fluctuate over time, perhaps even shrinking due to mounting competition. But for now, Nvidia's chips are arguably the best for AI applications. The company's leading gross margins (in the mid-seventies percentage-wise) are a strong testament to this, given that customers are willing to pay considerably more for Nvidia's products versus the competition. But this brings us to the secret weapon Nvidia possesses that many investors are unaware of: the CUDA advantage. CUDA stands for Compute Unified Device Architecture. It's essentially a developer suite that allows end users to customize chip performance for particular applications. In use since 2006, CUDA has created a high level of vendor lock-in over time. Today, CUDA is widely viewed as the standard for GPU acceleration. This means that much of today's AI ecosystem is built in parallel with CUDA, creating a level of "stickiness" that other GPU makers don't have. In a nutshell, Nvidia now controls both the hardware and the software end of the spectrum, giving it a huge competitive advantage beyond how well its raw chips perform. Nvidia currently has the lead in terms of GPU performance. But the CUDA advantage could help sustain this lead for far longer than previous chip cycles. But does all of this make the stock a buy right now? Should you add Nvidia to your portfolio right now? High-growth stocks typically have a lot of volatility because so much of their value is tied to the multiple the market assigns them. Small shifts in sentiment can send these multiples sharply higher or lower, creating an outsize effect on the stock price. NVDA PS Ratio data by YCharts. PS Ratio = price-to-sales ratio. TTM = trailing 12 months. After the recent pullback, Nvidia shares are cheaper than they have been in months. Still, on paper, shares remain pricey at 22.4 times sales. That's a hefty premium versus slower-growing peers like Advanced Micro Devices. But the AI revolution should continue to mature over the next several decades. And Nvidia's CUDA advantage means it will be at the center of this growth for some time. With enough patience, the company's rapid underlying growth rates could eventually make shares look like a bargain at 22.4 times sales. This requires a multi-decade holding period for the biggest gains, but that's something both millennial investors and younger generations can afford to commit to. Nvidia is an incredible stock, but it's expensive. However, that shouldn't be a problem for younger investors who have the luxury of long investment periods ahead of them. But if you're looking for an investment with more near-term visibility, you might want to look elsewhere, given how volatile Nvidia shares can be.

5 Red-Hot Growth Stocks to Buy in 2025 | The Motley Fool

With the Nasdaq Composite down more than 13% from all-time highs reached in late 2024, this market sell-off is creating some potentially nice long-term buying opportunities in the technology sector. Let's look at five growth stocks investors might want to consider scooping up during this dip. Nvidia (NVDA 5.27%) is the leader in artificial intelligence (AI) infrastructure, where its graphic processing units (GPUs) help provide the processing power needed to train AI models and run inference. The company's growth has been spectacular, with its revenue more than doubling in both its fiscal years 2024 and 2025 (ended in January). As long as AI infrastructure spending continues to grow, Nvidia is set to continue to be the biggest beneficiary. Currently, the best way to advance AI models is through more processing power. So, as the AI race continues, companies are committing more and more money to build out AI data centers. Nvidia, meanwhile, has created a wide moat in the GPU space through its CUDA software platform, helping it take about a 90% market share. The company got about a 10-year jump on the software side against its biggest rival, Advanced Micro Devices, and the CUDA moat is alive and well today, making Nvidia a great growth stock to buy. Nvidia stock is trading down nearly 22% from all-time highs reached in early January, but it still has plenty of growth potential, and that makes its price even more of a bargain. While Nvidia owns the mass-merchant GPU market, Broadcom (AVGO 2.18%) is carving out a nice niche with custom AI chips. Given Nvidia's high prices, more companies are turning toward Broadcom to help develop customer AI chips that can be used in conjunction with GPUs. These custom chips take time to develop but tend to perform better and be more cost-effective when used for a very narrow set of tasks. Broadcom currently has three main AI chip customers, which it says combined have a serviceable addressable market of between $60 billion to $90 billion for its fiscal 2027. In addition, it has recently added four more newer customers, including Apple. While Broadcom won't capture all of this spending, with some inevitably going to Nvidia, it still is a big opportunity for the company. The recent sell-off (the stock is down about 23% from all-time highs set in December 2024) lets investors get into the stock at a nice price. Alphabet (GOOGL 1.68%) (GOOG 1.75%) is the market leader in digital advertising through its Google search and YouTube streaming platforms. The company also operates the third-largest cloud computing business and is also a leader in the emerging fields of quantum computing and autonomous driving (Waymo). While some investors worry about the impact of AI on its search business, there has been no meaningful effect on its growth thus far. Meanwhile, the company's huge user base, long history of search data, and an extensive client list of advertisers give it a nice advantage. AI should become a good opportunity for the company, as it should be able to create new ad formats that can help monetize the AI Overviews it now generates. Traditionally, Google has only served ads on about 20% of its search results, so this could be a big new untapped market. In addition, the company is seeing great growth with its cloud computing unit, which saw revenue climb 30% last quarter and segment income soar 142%. The company was the first to develop a custom chip with the help of Broadcom, giving it a nice cost advantage moving forward as it builds out its data center infrastructure to help meet soaring demand. The recent sell-off (the stock is down about 21% from highs set early last month) is a great time to get into the stock for the long term. As AI continues to develop, Salesforce (CRM 2.82%) is looking to become the leader in agentic AI, in which AI agents will perform tasks at a user's behest without the need for much supervision from humans. This has a lot of real-world applications for businesses because these agents could handle customer service issues or analyze market data to help optimize marketing campaigns. Salesforce leads the way in agentic AI with the launch of Agentforce, which includes several out-of-box AI agent solutions. Customers can also customize agents through the use of no-code and low-code tools built into the platform while placing guardrails on what the agents can and cannot do. Meanwhile, the company recently launched its AgentExchange marketplace with over 200 partners to expand its use cases. Agentforce is a consumption product that costs $2 per interaction, so the opportunity for Salesforce is huge. Thus far, customers have been flocking to try the product, with the company gaining 5,000 Agentforce customers, including 3,000 paying, since its introduction in October. The recent drop in the stock's price (down nearly 26% since December 2024) opens up a nice opportunity to jump into the name. Trading off about 31% from early February highs, GitLab (GTLB 4.20%) is a fast-growing DevSecOps (development, security, and operations) platform that helps customers develop software while integrating cybersecurity throughout the process. This is a high-margin subscription business that is benefiting from AI. Growth is being driven by customers upgrading to its higher-tier Ultimate platform, which now represents about half of its annual recurring revenue (ARR). Meanwhile, its Dedicated solution, which is only offered on the Ultimate platform, has also been gaining strong traction. Dedicated offers customers data isolation and regional data residency. In addition, its AI-powered GitLab Duo add-on offering, which helps programmers complete their assignments by offering coding suggestions and automation, has also been helping drive revenue. This is helping GitLab both boost its number of new customers and grow within its existing customer base. Last quarter, it saw its number of enterprise customers with an ARR of $100,000 or more climb 29%, while its dollar-based net retention was a robust 123%. Numbers over 100% indicate that existing customers spent more with the company than the year before (including the impact of any churn). Overall, its revenue rose 29% last quarter, marking its sixth straight quarter of between 29% to 33% revenue growth. The sell-off is a great opportunity to pick up this high-growth stock.

NASDAQ Correction: 2 AI Stocks That Aren't Worth Buying on the Dip | The Motley Fool

With the Nasdaq index in correction territory, many investors are trying to decide if it's a buying opportunity or if they should run for the hills. A correction is marked by an index declining 10% from its all-time high, which isn't quite as severe as a bear market. Additionally, stocks aren't necessarily a blanket buy or sell right now. Instead, I think there are certain ones that look like great bargains and others that still seem overvalued. Two stocks that I'm still not buying even after the sell-off are Apple (AAPL 1.82%) and Palantir Technologies (PLTR 8.31%). These are both incredibly popular stocks in the market, but I would need a further sell-off from them to consider buying, as they still have a very expensive price tag even after the drop. Apple is one of the most recognizable consumer brands in the world and built a strong ecosystem around its iPhones. However, Apple has struggled to launch a game-changing product over the past few years, and its sales have been flat since 2022. Although Apple's revenue is trending in the right direction, it's only projected to grow revenue by a mere 4.6% in fiscal year 2025 (ending around September 30). That's not quick growth by Apple and barely edges out the effect of inflation. In fact, Apple's $378 billion in revenue in January 2022 has the same buying power as $424 billion in December 2024 (when its last quarter ended), according to the U.S. Bureau of Labor Statistics. This means that Apple's growth over the past three years has fallen behind the rate of inflation, which isn't a good sign. Despite this, Apple still has a massive premium over its peers and the stock market. With the stock trading for nearly 30 times forward earnings, it's still far more expensive than it has been for the better part of two years. It's also valued at nearly 50% higher than the S&P 500, which trades at 21.2 times forward earnings. While brand value deserves some recognition, Apple's growth is projected to be far below the average growth rate of the S&P 500 (10%), which is a big red flag for me. Furthermore, other members of the Magnificent Seven are valued at much lower price tags (like Alphabet priced at 18.6 times forward earnings, Meta Platforms at 24.4 times forward earnings, and Nvidia at 25.7 times forward earnings), despite growing at a much faster rate. Alphabet, Meta, and Nvidia grew revenue at an 11.8%, 20.3%, and 77.9% pace, respectively, in their most recent quarters. So it doesn't make a ton of sense to be buying Apple stock right now, as it's still highly priced. As a result, I'd rather look at some of Apple's peers than Apple itself. Palantir is nearly the exact opposite of Apple in terms of growth. It makes AI-driven data analytics software used by both government and commercial entities. Its growth has been accelerating as the demand for its AI software ramps up, making Palantir one of the hottest stocks on Wall Street. That growth is expected to persist, with management guiding for $860 million in revenue in the first quarter, indicating a 36% growth rate. Palantir's management has a track record of under-guiding and over-delivering, so don't be surprised if this growth rate reaches nearly 40% when it reports Q1 results. Despite this strength, Palantir's stock has fallen over 30% from its all-time high, but I don't think that decline is steep enough. The problem is that Palantir's stock is so highly valued that even 40% growth over the next four years doesn't justify the stock price. If Palantir could grow its revenue at a 40% pace over the next four years (Wall Street analysts expect 32% and 26% growth in 2025 and 2026, respectively), it would have revenue of $11 billion. While that's a large increase from the $2.87 billion in revenue it's generating right now, it still isn't enough from a profit standpoint. Palantir's current profit margin is about 16%, but let's say it can increase that to 30%, which would place it among the best software companies in terms of profit margin. It would generate $3.3 billion in profits if it can do that. Still, even after monster growth that nobody is projecting and industry-leading margins, Palantir's stock would still trade for 59 times forward earnings. That's a massive premium to pay for a stock, especially when you consider that the stock price can't budge from today's levels over the next four years to fulfill that projection. With so much growth already baked into Palantir's stock, it would have to fall a lot further before I'd consider taking a position in it.

2 Artificial Intelligence (AI) Stocks That Are Worth Buying the Dip | The Motley Fool

The market was enchanted with artificial intelligence (AI) in 2023 and 2024. At one point, it felt like AI stocks couldn't go down. That vibe has changed in 2025. AI stocks have started to tumble quickly, with AI-related companies like Palantir Technologies and Tesla trading down over 30% from all-time highs. Investors are worried about slowing spend for these companies along with the general broad market weakness that has come with rising concerns about a possible recession as well as the Trump administration's various proposed and enacted tariffs. This price drop among AI-related stocks has presented some attractive buy-the-dip opportunities for investors focused on the long term. Here are two AI stocks to buy the dip on right now. Alphabet (GOOG 1.75%) (GOOGL 1.68%) has a manic-depressive reputation with Wall Street. Some days, it seems like the owner of Google, YouTube, and Google Cloud is lifted up as the most innovative AI company in the world. On other days, the narrative shifts to pessimism around upstart competition from the likes of OpenAI and others. To start 2025, the pessimism is taking the lead and it has provided a buying opportunity for this high-quality business. Alphabet's revenue grew 15% year over year in 2024 to $350 billion. Operating income grew 33% to $112.4 billion. If Alphabet is feeling the pain from AI competition, it isn't showing up in its financials. The company is innovating rapidly across its sprawling technology operation. It is bringing AI to the masses by embedding new tools in Google Search, selling cloud computing to third parties through Google Cloud, and expanding its robotaxi service, called Waymo, in major U.S. cities. That is just the tip of the iceberg. At its Google Deepmind division, researchers are working on cutting-edge AI advancements, such as embedding language models in humanoid robots. There is even work on quantum computing. If Alphabet is losing in AI, I see no evidence of that. With the stock down 20% from all-time highs, Alphabet now trades at a price-to-earnings ratio (P/E) of 20, which is well below the S&P 500 average of 28. Even if there are new competitive threats and macroeconomic risks with tariffs in the short term, now looks like a great time to load up on Alphabet shares and hold for the long haul. Unlike Alphabet, which almost every person in the world has interacted with, Applied Materials (AMAT 3.81%) is not a consumer-facing business. It develops and sells machines to help in the semiconductor manufacturing process, which is vital for AI innovation. Without advanced computer chips, it would be uneconomical to operate these advanced AI tools that companies like Alphabet have developed. Along with a wider group of semiconductor equipment companies, Applied Materials helps manufacturers shape, process, and analyze tiny transistors on semiconductors. Without these machines, you wouldn't get tiny 3-nanometer lengths between transistors, making the company a vital part of the AI supply chain. Applied Materials has grown along with the semiconductor market in the last few decades and is now a global giant. Analysts expect the industry to continue growing faster than global GDP, which will be helped by the boom in AI spending. This should lead to even more growth for Applied Materials. In the last 10 years, Applied Materials has grown its sales by close to 200%. With a consistent share buyback program, management has reduced shares outstanding by 34% in the last 10 years and plans to deploy at least 80% of its free cash flow to dividends and buybacks in the future. An additional $10 billion buyback authorization and 15% dividend increase was recently approved by the company's board of directors. With the P/E now below 20, Applied Materials looks like a cheap growth stock with an attractive capital returns program, making it a perfect stock to buy and hold for many years.

This Artificial Intelligence (AI) Stock Is a "Magnificent Seven" Leader. But Is It a Buy? | The Motley Fool

The AI business is evolving as it matures, creating opportunities for new leaders. There's no two ways about it. Nvidia (NVDA 5.27%) has been the proverbial talk of the town since 2023, shortly after OpenAI launched ChatGPT to start what would turn into a heated race for dominance of the artificial intelligence (AI) market. While Nvidia had been using its graphics processing technology for AI purposes well before that, this was a clear growth catalyst. Now more than 80% of Nvidia's revenue is in its AI data center business, making that division nearly 10 times as big as it was just three years ago. The stock has responded accordingly, of course. Not only has it earned a spot as one of the "Magnificent Seven" tickers, but it's outperformed all six other stocks in each of the past two years to become the planet's second-biggest company, as highlighted by The Motley Fool's own research arm. But as the old adage goes, past performance is no guarantee of future results. Is Nvidia ready to repeat the feat, and then repeat it again and again for the foreseeable future? Keep reading. There's little doubt that the artificial intelligence revolution is still in its early stages. Mordor Intelligence predicts that the AI hardware market alone is set to grow at an average annualized pace of 26% through 2030. Given Nvidia's dominance of the AI accelerator industry, this rising tide bodes well for the company as well as its shareholders. And all things considered, Nvidia stock's forward-looking price-to-earnings ratio of 26 isn't an unreasonable premium to pay for an equity of this sort. This year's top line is expected to soar more than 50%, after all, pulling per-share profits up the same amount with it. But, there's some thing else to consider. It's not always easy to see, but most veteran investors can -- and will -- attest to the fact that things change in ways that only become obvious after the fact. The problem is, by then it doesn't matter. The brewing change that should concern anyone interested in stepping into a stake in Nvidia at this time is the way the artificial intelligence hardware industry is evolving. While Nvidia is still the king of the industry, changes are surfacing. For instance, other compute-processing architecture designed by chip-design company Arm Holdings (ARM 5.26%) is not only proving more efficient for power-hungry applications like AI, but is proving more functional in terms of how artificial intelligence platforms increasingly operate. Specifically, while Nvidia's core technology can successfully power both inference-based and training-based AI, as artificial intelligence tech becomes better developed and more specialized, Arm's inference-processing tech is emerging as a favored approach. Many industry experts consider inference to be the future of AI. Even to the extent Nvidia can hold its own as inference-based models propagate, Nvidia is also now showing the world that it can't keep competitors at bay forever. Although it's modest progress, a growing number of AI service providers like TensorWave, Cirrascale, Vultr, and even Oracle and Microsoft are now buying Nvidia rival Advanced Micro Devices' (AMD 2.92%) newest artificial intelligence processors -- business that at one point in time would have almost certainly been Nvidia's to lose. Now it is. And AMD is arguably positioned to keep chipping away on this front. It's a worry for Nvidia's fans and investors simply because they've never actually seen the company face credible competition like this within the AI arena. Finally seeing it could cast bearish doubts, crimping the premium valuation that most people didn't mind supporting through this point. And never even mind the looming advent of quantum computing, which has enormous implications for the artificial intelligence industry with its whole new kind of computing potential. The good news is, there's an alternative Magnificent Seven stock that is a compelling AI buy at this time. Don't panic if you already own Nvidia. You're hardly doomed. You'll likely be fine, in fact. A lackluster Nvidia is still a better bet than plenty of other companies on their best days. If you're looking for a company with more artificial intelligence growth opportunity ahead of it than behind it, though, that company is Apple (AAPL 1.82%). Not everyone sees it. Interest in the company's generative AI solution (called Apple Intelligence) released in October of last year has been ho-hum. It did not spur a great deal of demand for the iPhone 16 introduced in September, even though that device is capable of directly running the Apple Intelligence app rather than punting AI work to the cloud. iPhone revenue for the quarter ending in December fell a bit year over year. Take a step back and look at the bigger picture, though. Apple's AI product itself is far from finalized, and perhaps more than that, consumers aren't quite ready to embrace the relatively new and unfamiliar technology. They will be, though. Wedbush analyst Dan Ives predicts that Apple's artificial intelligence effort will "spark a multiyear upgrade cycle that will result in a supercycle and ultimately drive iPhone growth." Then there's Apple's work on the artificial intelligence chip design and manufacturing front. While it's still not exactly clear how it intends to monetize them, reporting from last year indicates the company is working with Taiwan Semiconductor Manufacturing and Broadcom on Arm-based AI processors specifically meant for data centers. Most plausibly Apple will use them to serve iPhone owners and iOS users who choose to use Apple's existing and future artificial intelligence tools, keeping its customers in Apple's typical walled-off silo. Never say never, though. Apple has taken a somewhat surprising step by integrating OpenAI's ChatGPT into Apple Intelligence, giving iPhone owners a seamless means of using the third-party AI platform. It may be a hint that the technology giant is willing to entertain other growth-minded partnerships in the future. But what about the rise of quantum computing that poses a threat to Nvidia? Apple's artificial intelligence efforts have always been consumer-focused rather than on institutional needs. Quantum's high-level nature is mostly a non-factor for Apple. Regardless of what's in store for Apple, Nvidia isn't likely to remain the rockstar stock it's been until now. You could certainly do worse than Nvidia, but you could very plausibly do better, too. The artificial intelligence hardware is simply changing a bit too much now to not disrupt this vulnerably valued stock's story.

Got $1,000? 1 Underrated Artificial Intelligence Stock to Buy During the Nasdaq's Latest Correction | The Motley Fool

Less than three months ago, the Nasdaq Composite hit an all-time high, continuing a solid run that began two years ago. Since that mark, the index is down over 13%, including a 9% drop this year, and is in correction mode (as of March 11). While many tech companies dealing with artificial intelligence (AI) experienced surges over the past couple of years, that same hype (or lack thereof) has led to some significant drops alongside the Nasdaq correction. That said, one underrated AI stock is looking increasingly appealing during this recent sell-off: Alphabet (GOOG 1.75%) (GOOGL 1.68%). If you have $1,000 to invest, now could be a good time to consider scooping up some shares for the long haul. While many companies have embraced and thrown resources at AI-related projects over the past couple of years, Alphabet has been at the forefront of many AI innovations. It has an AI research company called DeepMind that has focused on developing advanced AI models, machine learning algorithms, deep learning frameworks, and reinforcement learning systems. DeepMind doesn't get the attention of other Alphabet companies, but it has been crucial to Alphabet's AI advancements, including the development of its AI model, Gemini. Being one of the first prominent players and having in-house AI research and development gives Alphabet a leg up on other big tech companies still building their infrastructure or relying on third-party models (like those produced by OpenAI). In 2024, Alphabet spent $52 billion on capital expenditure and plans to spend around $75 billion this year. Given the importance of AI initiatives to its growth, it's safe to assume a nice chunk will (or should) go toward that effort. And while spending more money doesn't guarantee success, it shows the company's willingness to invest aggressively in its fastest-growing segment. Assuming Alphabet does spend $75 billion, it would be more than a 130% increase from just 2023. Cloud computing is a high-growth business for many big tech companies, including Alphabet. Its Google Cloud platform trails Amazon Web Services (AWS) and Microsoft Azure in market share, but its market share has doubled in the past seven years to 12% and is some distance ahead of fourth-place Alibaba Cloud. In the fourth quarter (Q4), Google Cloud made $12 billion in revenue, up 30% year over year. Alphabet's CEO, Sundar Pichai, noted that the AI-powered Google Cloud platform was seeing stronger customer demand, and its financial growth underpins that. Google advertising should be Alphabet's bread and butter for the foreseeable future, but Google Cloud is beginning to hold more of its own weight. Of Alphabet's $96.5 billion in revenue in Q4, Google Cloud accounted for 12%. Just five years ago, it only accounted for around 5%. In the long term, Alphabet needs to depend less on Google Search, which was 56% of its Q4 revenue. It won't stop being Alphabet's money maker, but having Google Cloud pick up some slack is encouraging. A few months ago, Alphabet's stock was trading nearly 34 times its earnings. It wasn't as expensive as other Magnificent Seven stocks, but it also wasn't clearance-rack cheap. After recent drops, Alphabet's stock is entering bargain territory, trading at just over 20 times its earnings, much cheaper than its recent average. There's always risk when you invest in stocks, especially high-growth tech stocks like Alphabet. However, there is much less risk buying Alphabet at current prices than just a couple of months ago. Who knows if prices will continue to drop? But if you're interested in investing in Alphabet, now could be a good time to begin adding shares. If you're concerned about further drops, consider dollar-cost averaging and spreading out your investment to help offset volatility.

Market Correction: 3 Top Tech Stocks to Buy on the Dip

The recent market correction has brought on significant investor pain. With the market suffering the worst one-day drop since 2022 on March 10, buying may be the last thing some investors want to do. Nonetheless, the market has rebounded from every previous downturn in history and will almost certainly recoup the losses from this one at some point. Knowing that, investors should look at what stocks they might want to buy amid the correction. Now that many tech stocks are on sale, three Fool.com contributors have ideas on what stocks could recover from this downturn and elevate investor returns. Yet, I remain bullish on the company's stock. Here's why. First of all, investors need to gain some perspective. Reddit hasn't even been a public company for an entire year. The company's stock debuted via an initial public offering (IPO) on March 21, 2024. Since then, shares are up 159%. And that's after the shares took a nosedive. At its peak, shares were up more than 347% from their IPO level. RDDT data by YCharts While this most recent drop is nerve-wracking, the stock is still likely to register a triple-digit return in its first year, which, needless to say, is very impressive. Indeed, Reddit remains one of the best-performing growth stocks over the last 12 months -- even if its most recent performance is alarming. The second reason I remain bullish on Reddit is simple: The recent stock market volatility doesn't undercut my reason to own it. I'm bullish on Reddit because the company has a large and fast-growing user base and easy ways to monetize those consumers. As of its most recent quarter (ended Dec. 31, 2024), Reddit had nearly 102 million daily average users, which represented an increase of 39% from a year ago. Similarly, revenue (mostly from advertising) grew by 71% year over year to $428 million. Crucially, Reddit's business is not particularly sensitive to the concerns that are giving the stock market heartburn. Higher tariffs aren't likely to impact the company's business model. The recent pullback is a buying opportunity for long-term investors. An AI-driven focus may be game-changing for this data cloud company Will Healy (Snowflake): Snowflake (SNOW 4.19%) may finally be ready for its long-awaited recovery. It stood out for its leadership in the data cloud, with a platform that allows customers to store data while managing and deploying the data for analysis without risk of it being compromised or siloed. The potential for this technology took Snowflake's shares to a record-high closing price of $390 soon after its IPO in 2020. However, the 2022 bear market hit the stock hard, and just when it began a recovery in 2023, the sudden resignation of CEO Frank Slootman in early 2024 inspired another sell-off. Current CEO Sridhar Ramaswamy took the helm, and his AI background has allowed Snowflake to build on its platform Cortex AI, which it launched in late 2023. Cortex allows Snowflake customers to plug data into large language models safely, making it a critical AI company. Despite the correction in recent weeks, Ramaswamy's AI focus has helped boost the company's stock since he took the helm a little more than one year ago, and its financials indicate the recent decline is a hiccup rather than an indication of a longer-term problem. In fiscal 2025 (ended Jan. 31), revenue of $3.6 billion was a 29% increase from year-ago levels. High operating expenses, pushed higher by almost $1.5 billion in stock-based compensation, continue to weigh on Snowflake's financials, leading to a $1.3 billion net loss. Also, product revenue forecasts call for a 24% yearly increase in fiscal 2026, which would represent a growth slowdown. Still, adjusted free cash flow for fiscal 2025 was $942 million, meaning non-cash expenses, not operational expenses, have caused Snowflake's net loss. Moreover, its price-to-sales (P/S) ratio has fallen to 14, a near record low for the stock. Considering that valuation and the AI-driven technology of Snowflake's data cloud, investors could easily regret not buying shares during the market correction. Apple's 2.35 billion iOS devices make the stock a no-brainer for AI's next stage Justin Pope (Apple): Artificial intelligence is steadily entering its next phase. While AI hyperscalers continue to spend billions of dollars on chips and other hardware, the focus may soon shift to AI platforms and applications that bring the technology to consumers and businesses. I think Apple (AAPL 1.82%) will be a massive long-term winner here. The company is famous for its sticky ecosystem, which includes the iPhone, wearable accessories, tablets, and computers. Thanks to software that seamlessly ties everything together, the user experience is buttery smooth. As of earlier this year, Apple had approximately 2.35 billion active iOS devices worldwide. Its massive footprint gives the company an inside track to capture market share in consumer-facing AI. You've already seen the earliest iteration of Apple Intelligence, a package of generative AI features Apple introduced through software updates in its newest devices. Thus far, Apple Intelligence has reportedly failed to make a great first impression with iOS users. However, it's incredibly early. A full roll-out will take several years as iOS users upgrade to AI-capable devices, allowing Apple to experiment and improve Apple Intelligence. The stock trades at a price-to-earnings ratio over 31, which some may argue is expensive for a company trying to reignite growth. However, assuming Apple succeeds in AI, the stock should be fine over the long term. Analysts estimate Apple will grow earnings by an average of almost 14% annually over the next three to five years. Unless a competitor emerges that eats into Apple's vast user base, it seems appropriate to give the company the benefit of the doubt. Apple remains a world-class company that generated nearly $100 billion in free cash flow over the past four quarters alone. Until proven otherwise, Apple is on top of the consumer mountain, making it the most obvious consumer-facing AI stock you can comfortably buy and hold for the next five to 10 years.

Should You Forget Super Micro Computer and Buy 3 Artificial Intelligence (AI) Stocks Right Now? | The Motley Fool

Server systems builder Super Micro Computer (SMCI 7.91%) was a market darling a year ago. Is it time to turn away from this disgraced industry titan and seek more reliable investment avenues in the artificial intelligence (AI) market? Supermicro's stock had gained 2,760% in the two years leading up to March 13, 2024. Many hyperscale data centers were loading up on the company's hardware to drive their AI operations. But that turned out to be the peak of Supermicro's AI surge. Several financial filings were delayed, raising questions about the company's financial reporting quality. A few months later, the company's auditors resigned, citing unreliable data from Supermicro's management and audit committee. The stock fell as much as 84.8% from its March highs. Supermicro stock is up more than 125% from November's low point, and the company has addressed many of its alleged shortcomings. The belated reports have been filed, and a new auditor was hired in a hurry. But the current auditing firm is a slight step down from global superstars Ernst & Young, and the delayed filings might still need adjustments. For long-term investors who care about reliable management teams and dependable financial reports, the company lost a lot of credibility last year. It will take time to rebuild it. Luckily, there are many other ways to tap into the AI opportunity -- with world-class management teams and trustworthy reports. Read on to see why I prefer investing in Alphabet (GOOG 1.75%) (GOOGL 1.68%), IBM (IBM 1.04%), and Nvidia (NVDA 5.27%) right now. Before I start, let me just note that all four rely on one of the Big 4 auditor giants -- Ernst & Young for Alphabet and Pricewaterhousecoopers for IBM and Nvidia. I argued that Nvidia's stock price was too high for most of 2024. I even sold some of my shares in January, locking in a sweet 775% gain in less than three years. Well, the stock price is down 14% from that lofty perch, and it's starting to look affordable again. The rising tide of rival processor designers hasn't undermined Nvidia's leadership in the lucrative market for AI accelerators, and maybe they never will. Meanwhile, the company scores high in every review of its leadership quality. Soaring stock prices surely play a part in reviews based on employee feedback, but Nvidia's top scores have a long history. For example, Glassdoor called it the best place to work in 2022, citing data collected before OpenAI launched ChatGPT. Alphabet's Google division is another perennial name on Glassdoor's "best places to work" lists. Employees love the generous compensation and innovative company culture. And, of course, Alphabet is a leading provider of AI computing platforms and services. My Alphabet position started at a split-adjusted $15.03 per share in 2010. Apart from converting my vote-less Class C shares to vote-enabled Class A stubs in 2014, I haven't sold a share and am not likely to do it anytime soon. My original position has gained 992% so far, and the stock looks poised to continue growing in the long run. Alphabet is quite literally designed for long-term resiliency, bolstering the core operations of online search and advertising with a plethora of loosely related products and services. The next generation might know Alphabet for its self-driving Waymo taxis or maybe as the biggest name in quantum computing. Either way, Alphabet will roll with the punches and lead the technology sector into whatever era is coming up next. And don't forget that the stock looks very cheap today. Alphabet shares are changing hands at 20.5 times trailing earnings, a valuation ratio that would look modest for a mature, low-growth consumer goods business. Alphabet's sales have increased at a compound annual growth rate (CAGR) of 17.3% over the last five years, so it surely deserves a higher price-to-earnings (P/E) ratio. Last but not least, IBM tailors its AI product to business-class clients. Its data analytics and large language models (LLMs) come with data safety guarantees and auditable tracking features not found in other solutions. It took a while to clear IBM's WatsonX platform for mission-critical workloads, but Big Blue is making loyal long-term customers with every winning contract. So, IBM's stock has doubled in the last year, as the investor population is starting to catch on to its unheralded AI expertise. As for management quality, IBM is a textbook example of long-term planning and customer focus. IBM used to be my favorite low-price investment in the AI sector. Alphabet is a bit more affordable after Big Blue's recent gains, but the stock is still a great long-term investment.

2 Bargain "Magnificent Seven" Stocks to Ride the AI Investing Wave | The Motley Fool

So it's no surprise that these players caught investors' fancy and soared as the AI boom progressed. But in recent times, the Magnificent Seven haven't been leading gains. Instead, they've led declines. As investors worry about the effect U.S. President Donald Trump's import tariffs may have on the economy, companies depending on growth have seen their shares tumble. That's left the Nasdaq in correction territory, and Magnificent Seven players at much lower valuations than a few weeks ago. But here's some reassuring news: Though economic troubles may weigh on these and other companies in the near term, the long-term AI story remains hearty, with companies investing billions of dollars annually in their platforms. So now is a great time to invest in AI players with solid long-term potential. Let's check out these two bargain Magnificent Seven stocks. Meta is the leader in social media, via owning Facebook, Messenger, WhatsApp, and Instagram. More than 3.3 billion people use at least one of these platforms daily. So it's no surprise that advertisers rush to Meta to reach people where they know they can find them. This brings in billions of dollars in revenue annually for the tech giant. But Meta isn't only about social media. The company has big AI ambitions and is investing accordingly. Meta is already on version four of its large language model, Llama. This is a key tool to power its AI systems, such as the AI assistant found on its social media platforms. The efforts may be in their early stages. A few weeks ago, Meta said that capital spending may reach as much as $65 billion this year as the company pursues AI growth. This includes the construction of a data center that will be so big it could cover a good part of Manhattan. How will Meta eventually monetize this? Meta aims to create AI assistants for all of its users, something that could keep people on the apps longer -- and spur advertisers to spend more there. The investment may also lead to new products and services from Meta down the road. Today, this ambitious and profitable tech giant only trades for 23x forward earnings estimates. That's down from more than 29x just a few weeks ago, making it an excellent bargain buy. You may know Alphabet best for something many of us use daily: Google Search. The company owns this, the most popular search engine with about 90% market share, and generates revenue as advertisers connect with us there. But Alphabet has another significant source of revenue -- one that's been growing in the double digits. I'm talking about Google Cloud, the company's cloud computing unit. In the recent quarter, this business delivered a 30% increase in revenue to $12 billion. This growth was led by its presence in AI. Alphabet operates a global network of data centers and builds the products and services customers need when they're developing and operating an AI platform. So, by being present across the "full stack," Alphabet can gain in efficiency and keep customers coming back. This has delivered solid results. Alphabet says its customers now use more than eight times the compute capacity that they used just eighteen months ago. This is for the key AI tasks of training and inferencing models. So, Alphabet is immediately generating revenue growth as it sells its AI products and services to customers. On top of that, the company's using its AI tools to make its own products -- such as Google Search -- better and better. Right now, Alphabet is the cheapest of the Magnificent Seven stocks, trading for 18x forward earnings estimates. That makes it a fantastic -- and bargain -- way to ride the AI investing wave.

Nvidia Stock Is Down 20%. Is It Time to Buy the Dip on the AI Leader?

It's been a rough start to the year for Nvidia (NVDA 5.27%) shareholders. As of this writing, shares are down about 12% year to date and 20% below its January highs. The news from the company must be bad, right? Well, not exactly. Late last month, Nvidia reported fourth-quarter and full-year earnings for its fiscal 2025 period, which ended Jan. 26. The news was good, not bad. Nvidia impressed analysts and investors once again by exceeding both top- and bottom-line estimates. Guidance called for another jump in revenue in the current quarter to a record $43 billion. So, let's look at what has the stock plunging in 2025. Market correction = opportunity Some of the same things that have driven the Nasdaq Composite into correction territory have caused fear and uncertainty around Nvidia stock. The Trump administration has announced -- and changed -- several applications of import tariffs that could affect Nvidia's business. On top of that, national security concerns have raised the prospects for more export restrictions on Nvidia's powerful artificial intelligence (AI) chips. The tariffs themselves could have both direct and indirect implications for Nvidia. There are concerns that tariffs could hinder economic growth and create an inflationary environment. Either of those situations could negatively impact semiconductor chip sales. After all, if a company building out data center capacity believes returns on investments will be impacted, it may very well reduce or delay those investments. Nvidia's share price skyrocketed over the last 18 months as investors forecast impressive revenue growth to continue. It's been nothing short of amazing. Sales began to soar in 2023. Revenue jumped 126% in fiscal 2024, ending Jan. 28, 2024. It didn't slow down in fiscal 2025, either. Growth of another 114% for that period ended this January, and the stock continued to run higher. The 22% drop from its January high mark might just be a great opportunity for those who feared they missed out on owning Nvidia stock. As of this writing, it was trading at a price-to-earnings (P/E) ratio of just about 25 based on calendar year 2025 earnings. That's pretty attractive compared to the 10-year average P/E of 32 for the Nasdaq-100 index. That's its lowest level since earnings estimates skyrocketed early last year. The stock itself has more than doubled since the start of 2024. NVDA PE Ratio (Forward) data by YCharts Nvidia still has plenty of opportunities for growth. Barring any major development of a trade war or recession, revenue should increase about 50% this year. That's mostly driven by the Blackwell AI architecture, which is now in full production. There are many business development possibilities beyond that. Nvidia touches most everything The Rubin platform will succeed Blackwell with an even more powerful AI suite of offerings. But AI is more than just data center computing power, too. Companies developing autonomous vehicle (AV) technology are also loading up on Nvidia's products for training purposes. The company says all 30 of the existing top AV data centers are powered by it. Revenue in its gaming segment grew to over $11 billion last year. More than 200 million gamers and creators use Nvidia GeForce GPUs (graphics processing units). Millions of developers have downloaded its Monai open-source framework for healthcare imaging AI. Perhaps most potential will come from robotics as businesses utilize that evolving technology to improve efficiency. Nvidia says over 1.3 million developers already use the Nvidia Jetson high-performance computer platform for tasks including robotics, computer vision, and generative AI. Nvidia has many irons in the fire. While revenue growth will slow to about 50% this year, its lineup of AI chips and software stacks is unmatched and constantly improving. Add in the possible catalysts from other segments, and its very reasonable recent valuation, and it looks like a compelling time to buy the dip in Nvidia stock.

Stocks Sell Off: 2 Top Tech Stocks to Buy in March | The Motley Fool

If you haven't checked your 401(k) or brokerage accounts in the past month, I wouldn't suggest rushing to look at them now. The recent market corrections are likely hurting them. If you invest with a short-term mindset, it's undoubtedly a worrying time. But if you are a long-term investor, you might want to think of this time as a quite normal thing (though admittedly not fun). It can also be a great time to buy some quality stocks at a discount. Let's look at two top tech stocks you can buy this month while they are on sale. Nvidia (NVDA -1.50%) has been a market darling for the past few years, but even it has been caught in the recent market sell-off, down about 20% from its highs. For investors bullish on artificial intelligence (AI), this could be a great buying opportunity. AI has been all the rage recently, as the technology has made its way to the mainstream and is starting to play a vital role in our lives, albeit mostly as it relates to work at this point. AI is still in its early days, which is leading to a race of large tech companies and well-funded AI start-ups looking to build out better and more advanced AI models. In order to do this, AI models currently need to be trained using ever-increasing computing power. This is where Nvidia comes in. The company is the market leader in graphics processing units (GPUs), which are the primary chips used to provide the necessary processing power to train AI models and also to run AI inference. It has become the dominant maker of GPUs in large part due to its CUDA software platform, which it created to allow developers to program its chips for tasks beyond their original purpose of helping improve video game graphics. It took about a decade before its closest competitor, Advanced Micro Devices, created its own software platform, which not only gave Nvidia a huge technological head start, but also allowed it to become the de facto program on which developers learned to program GPUs. This has led to Nvidia being the biggest AI winner and the company best positioned to continue to benefit from AI infrastructure spending. And make no mistake, AI infrastructure spending is still on the rise. Much of this is coming from cloud computing companies, which operate infrastructure-as-a-service models. These companies provide customers foundational AI models and services that they then use to build out their own AI models -- and business has been booming. The big three cloud computing companies are all capacity-constrained, which is leading to huge AI infrastructure spending. Meanwhile, companies like Meta Platforms and OpenAI are building out their own AI data centers to try to create better AI models. This has all led to huge growth for Nvidia, which has more than doubled its revenue in each of the past two years. Meanwhile, strong growth is expected to persist as demand for its chips remains robust. Following the market sell-off, the stock is cheap, trading at a forward price-to-earnings (P/E) ratio of below 27 times 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of 0.5, with PEG ratios under 1 considered undervalued. While known as an e-commerce retailer, make no mistake Amazon (AMZN -1.03%) is a tech company through and through. In fact, its largest business by profitability is its cloud computing unit, Amazon Web Services (AWS). AWS was born out the company's need to better scale its own internal infrastructure. Then it realized other companies needed the same help. AWS was launched in 2006, essentially creating the infrastructure-as-a-service industry. Today it is the largest cloud computing company provider in the world, ahead of Microsoft's Azure and Alphabet's Google Cloud. Like its rivals, Amazon benefits from the AI boom as customers look to create their own AI models and applications through the AWS platform. Amazon helps its customers do this through its Bedrock and SageMaker platforms. With Bedrock, it offers its customers a number of already trained foundational AI models from both Amazon as well as other AI companies, such as Anthropic and DeepSeek, that they can then fine-tune. Meanwhile, customers who need more control and flexibility can use its SageMaker solution to then train and deploy more custom AI models. AWS has been seeing solid growth, including 19% revenue growth last quarter, but like other cloud computing companies, it has been capacity-constrained. As such, the company plans to spend a whopping $100 billion in capital expenditures (capex) this year, mostly aimed at building out data centers for AI. Amazon has always been willing to spend big to come out on top and this is just the latest example. The company has also developed its own custom AI chips through its Annapurna Labs subsidiary and some technology licensing from Marvell Technology, which it uses in conjunction with Nvidia GPUs. This helps give the company a cost advantage among its cloud computing peers. In addition to its cloud business, Amazon is still the leader in e-commerce, where it is using AI in a variety of ways. This includes offering AI tools to make it easier for third-party sellers to list their goods on its platform, to better match consumers with items, and to improve the customer review process. It has also been using AI to help reduce costs, from planning better delivery routes to using AI-powered robots in its warehouses. Trading at a trailing P/E of 36, the stock is at one of the cheapest valuations it has been in quite some time.

Nasdaq Correction: 3 Artificial Intelligence (AI) Stocks That Could Make You a Millionaire | The Motley Fool

Many investors are starting to panic with the Nasdaq index in correction territory (marked by the index being down at least 10% from its all-time high). However, corrections happen quite often, usually about once per year on average. This is the price of admission to the stock market, and investors must be patient (even if their portfolio is down more than 10% from its highs). The recent decline has erased gains made from September of last year, so we've only reset the clock about six months. Still, I think there are some excellent buying opportunities available in the market that could really accelerate your returns in the pursuit of becoming a millionaire. Why these three? They're all heavily invested in one of the largest technological shifts that we've ever seen: artificial intelligence (AI). The three stocks that I'm most interested in right now in the AI realm are Nvidia (NVDA -1.50%), Taiwan Semiconductor Manufacturing Company (TSM 1.31%), and Alphabet (GOOG -0.63%) (GOOGL -0.72%). These are fairly large companies, so the chances of one of them growing enough from a modest investment to make you a millionaire are pretty slim. However, I think all of these stocks have a chance to put up far better than market-beating returns, which will accelerate your path to becoming a millionaire. If you invest $500 per month into an S&P 500 fund that has historically returns about 10% annually, you'll turn your monthly $500 into $1 million in about 29 years. But, if you can improve your returns to 13% annually, you can achieve millionaire status about five years earlier. That's why finding companies that can beat the market is important, as they can rapidly accelerate your path to becoming a millionaire. All three of these companies are fantastic candidates for beating the market and have huge growth trends in their favor. Nvidia makes graphics processing units (GPUs) that are used to train AI models and power inference once they're deployed. Nvidia's GPUs dominate the market right now, and the company has put up incredible growth as a result. However, that growth isn't expected to slow anytime soon, with Wall Street analysts projecting Nvidia's revenue will rise 56% in FY 2026 (ending January 2026). This is because the AI buildout is far from complete, and many of Nvidia's largest clients have already announced record capital expenditures for this year, much of which will go to Nvidia. Nvidia's growth spurt isn't done yet, and investors shouldn't write off this long-term winner. Another beneficiary of the AI growth trend is Taiwan Semi, or TSMC, as it produces many of the chips that are powering various AI workloads. Nvidia is one of TSMC's biggest clients, but it also has many more that compete in the AI arena. TSMC's management predicts monster growth over the next five years, with AI-related revenue growing at a 45% compound annual rate and companywide revenue growing at nearly 20%. Because of TSMC's neutral position in the chip world, it has an unparalleled view into what demand is on the horizon, and when they say chip demand is going to more than double over the next five years, investors should pay attention and invest accordingly. While most of Alphabet's revenue comes from its advertising platforms (like the Google search engine and YouTube), it's also a big player in the AI arms race. Alphabet is integrating AI into its ad tools and providing AI-summed search results. But the biggest benefit it's seeing from AI is in its cloud computing wing, Google Cloud. Cloud computing is a huge beneficiary of AI, as few companies have the resources to buy massive computing power upfront. However, they can rent it from cloud providers like Google Cloud, which has spurred huge growth in this division. In Q4, Google Cloud's revenue rose 30%, making it one of Alphabet's fastest-growing divisions. This makes Alphabet a balanced investment, as it has the growth upside of AI and cloud, with the steadiness of its dominant advertising business. After the sell-off, all of these companies are pretty cheap, at least from a historical standpoint. While the Nasdaq has returned to its September levels, all three of these companies are far cheaper now than they were then. Furthermore, both Alphabet and TSMC are trading for under 19 times forward earnings, which is far cheaper than the Nasdaq and S&P 500 trade at. Nvidia is only slightly more expensive than the two indexes, but that premium still makes sense, considering its rapid growth. I think all three of these stocks make for excellent buys now, and their sale price boosts the odds of these three beating the market over the long term even more.

Nvidia's Stock Tanks Due to AI Market Volatility: Here's What History Says Happens Next | The Motley Fool

Nvidia's (NVDA 0.10%) fiscal 2025, which ended Jan. 26, featured impressive financial performance, with revenue soaring 114% year over year to $130.5 billion and diluted earnings per share rising 147% to $2.94. Despite the strong results, the company's stock is down about 14% since the earnings release on Feb. 26. Is this dip a buying opportunity, or is it better to avoid Nvidia now? Let's assess some important fundamental and historical trends to understand what they can mean for the company's share price trajectory in the coming months. Nvidia is currently battling several macroeconomic and company-specific headwinds. Investors are concerned about increasing macroeconomic uncertainty and rising geopolitical tensions. In addition, the Biden administration's "AI Diffusion" rules, which place stricter restrictions on artificial intelligence (AI) chip and algorithm exports to China, are set to take effect in May 2025. This can further exacerbate Nvidia's challenges. At the Morgan Stanley Technology Conference, Nvidia Executive Vice President and CFO Colette Kress highlighted that the company's export volumes to China are already half of what they were before the export controls. A tightening in export restrictions can make it difficult for Nvidia to compete in China. Furthermore, the Trump administration's plans to impose tariffs on imported goods from China, Canada, and Mexico could disrupt Nvidia's supply chains and increase overall manufacturing costs. Nvidia is also seeing a significant deceleration in growth rates of its highly coveted data center segment. Compared to triple-digit growth rates in the prior quarters, the data center segment grew by a modest 20% year over year in the fourth quarter of fiscal 2025. This slowdown, coupled with intensifying competition from U.S. and non-U.S. AI players, has raised questions about the sustainability of Nvidia's premium valuations in the coming years. Despite the many challenges, Nvidia is a dominant force in the AI market. The recently introduced Blackwell architecture system has proved to be the fastest product ramp-up in Nvidia's history. Blackwell Systems contributed $11 billion in revenue in the fourth quarter. With Blackwell, Nvidia is eyeing the huge global AI inferencing market (deploying and running trained models), estimated to grow from $106 billion in 2025 to $255 billion in 2030. The company has already earmarked many early GB200 (Grace-Blackwell Superchips comprising two Blackwell B200 GPUs and one Grace CPU) deployments for inferencing workloads. CEO Jensen Huang has also highlighted "reasoning AI," a more complicated type of inference workload, as a major opportunity for the company, as is evidenced by the release of new models such as OpenAI's o3, DeepSeek-R1, and Grok-3. Reasoning AI requires 100x more compute resources per task compared to simple AI inferencing tasks. With Blackwell systems architected specifically to support reasoning AI inference models and involving 20 times lower cost compared to previous Hopper 100 chips, Nvidia is well-positioned to capture a significant share of this opportunity. Nvidia also stands to benefit from a phenomenon called Jevons paradox. Accordingly, as foundational models become more resource-efficient and can be trained at lower costs, they will make AI more accessible and ubiquitous across a wider range of uses. As demand surges, spending on AI infrastructure will further surge. Hence, the release of DeepSeek-R1 and other competitive models can be a boon in disguise for Nvidia. Consequently, Nvidia is gearing up to grow rapidly in multiple AI-powered verticals such as agentic AI, physical AI (robotics), autonomous vehicles, and sovereign AI. Once a stock market darling, Nvidia stock seems to have taken a heavy beating due to increasing economic uncertainties, rising tech sector volatility, and intensifying competitive pressures. An increase in insider and institutional selling activity in the past year also seems to have affected investor confidence. However, this is not the first time Nvidia has seen a significant drawdown in share prices. There have been multiple instances when the stock crashed and recovered even stronger. The company's stock fell by almost 55% from its peak of nearly $292 in October 2018 to $124 in December 2018 on the back of excess GPU inventory due to a dramatic decline in crypto mining demand. However, Nvidia tackled this challenge by refocusing on data center and gaming segments. Subsequently, the company's stock rebounded by nearly 80% in 2019. Nvidia's shares also tanked on fears around the COVID-19 pandemic. Again, it recovered by almost 129% from the lows in March 2020 to the end of 2020 on a split-adjusted basis, driven by a robust rebound in gaming demand, rising data center revenue, and strengthening AI businesses. Finally, Nvidia saw a pullback of almost 19.5% in July 2024 due to worries about a potential slowdown in AI spending. However, the stock had recovered by 40.6% by October 2024, as investor confidence rose for the company's fundamentals and financials. Hence, a majority of the time, Nvidia's stock demonstrates short-term volatility, with strong corrections followed by recoveries. If this trend continues, investors can expect the stock to rally in the next few months. However, investors should be vigilant of the broader technology landscape to prevent getting trapped in a longer consolidation phase. Investors can opt for a dollar-cost averaging strategy to build a position in this stock while controlling overall risks.

Better AI Buy in the Nasdaq Correction: Nvidia vs. AMD | The Motley Fool

Artificial intelligence (AI) stocks scored massive wins for investors last year and led the Nasdaq to a double-digit gain. This momentum continued into the early days of 2025, but in recent weeks, these once top-performing stocks have struggled. Investors' concerns about the economy and the potential impact of President Donald Trump's tariffs on imports from Canada, China, and Mexico have weighed on stocks -- especially those of high-growth companies. All of this has driven the Nasdaq Composite (^IXIC -1.96%) into correction territory. Last week, the index fell more than 10% from its latest peak in December. But savvy investors know that in these tough times, bargains are multiplying. Declines in the major names in AI mean some are a steal right now -- and that signals an excellent buying opportunity. It's important to remember that uncertainty about the economy may be a problem today, but it doesn't change the overall positive long-term outlook for AI. Today's $200 billion AI market is forecast to reach beyond $1 trillion by the end of the decade, and this could generate explosive growth for certain AI companies. Two winning companies that likely have more to gain down the road are Nvidia (NVDA -0.14%) and Advanced Micro Devices (AMD -2.66%). These AI chip giants each saw their valuations sink in recent times and have fallen into bargain territory. Which is the better buy in the Nasdaq correction? Nvidia dominates the AI chip market, holding an 80% share. The company's graphics processing units (GPUs) may be the most expensive around but also offer the highest performance -- something that has kept the world's biggest tech companies flocking to Nvidia. For example, demand for the tech giant's latest release, the Blackwell architecture, exceeded supply. All of this has translated into solid growth for Nvidia throughout this AI boom. Quarter after quarter, the company has generated double-digit or triple-digit revenue growth, and revenue has reached record levels. In the most recent period, quarterly revenue rose 78% to a record of $39 billion, and full-year revenue soared 114% to a record $130 billion. Some investors worry that the high price of Nvidia's GPUs could put the brakes on growth at a certain point, especially as rivals develop better and better products. But Nvidia's focus on innovation, with a pledge to update its GPUs annually, could make it very difficult for competitors to gain significant market share. Considering all of this, Nvidia, trading for 25x forward earnings estimates -- down from 50x earlier this year -- makes a dirt cheap buy for the long term investor. AMD is the second-biggest player in the AI chip market. However, with a market share of about 10%, its AI growth story hasn't been as explosive Nvidia's. The company makes GPUs to power AI workloads and is known for offering solid performance at a reasonable price. This is great because it gives cost-conscious customers a quality option, which could result in more and more orders as AI chip needs grow. Even though big tech companies, such as Microsoft, flock to Nvidia for GPUs, they also are customers of AMD. Microsoft, for example, uses AMD's flagship MI300X GPUs to drive several GPT 4-based Copilot services. AMD aims to keep up with Nvidia by also launching innovations on an annual basis. Even though Nvidia is likely to stay well ahead, AMD still could generate massive growth by applying this strategy. AMD called last year "transformative" for the company as it progressed in the AI market. In the fourth quarter, the company's data center revenue surged 69% to a record $3.9 billion; for the year, it soared 94% to a record $12.6 billion. Like Nvidia, AMD has seen its valuation tumble recently and offers an interesting buying opportunity. It now trades for 21x forward earnings estimates, down from more than 27x back in January. As mentioned, both companies make excellent additions to an AI portfolio, but if I could only choose one to buy during this Nasdaq correction, I'd go for Nvidia. The company has a solid hold on its market position and a plan -- a focus on innovation -- to maintain this leadership over the long run. All of this should translate into many more years of earnings growth. Considering Nvidia's recent drop in valuation, now looks like the perfect moment to get in on this AI winner that has what it takes to extend its winning ways well into the future.

Nasdaq Correction: 3 No-Brainer Artificial Intelligence Stocks to Buy Right Now

The Nasdaq Composite (^IXIC -1.96%) is in correction territory as investors have been dumping growth stocks amid concerns related to tariffs, trade wars, and a potential slowdown in the economy in the months ahead. Buying shares of companies at a time like this can be unnerving, but if you're committed to holding on for the long term, the moves you make today could pay significantly in the future. Chipmaker Nvidia has become synonymous with AI in recent years as companies rely on its next-gen chips to create advanced AI models. It's coming off a tremendous year with the company reporting sales of $130.5 billion for the fiscal year ending Jan. 26. That's more than double the $60.9 billion it posted in the previous year. And Nvidia's still expecting plenty of growth ahead, projecting that revenue for the current quarter will come in around $43 billion, which would be up 65% from a year earlier. While the stock may be one of the most valuable in the world based on its impressive bottom line, it isn't all that pricey. It trades at a forward price-to-earnings (P/E) multiple of 26, which is based on how analysts think the company will perform in the year ahead. By comparison, the average stock in the Technology Select Sector SPDR Fund (XLK -1.90%) averages a forward P/E of 25. Nvidia is trading at barely any premium over the average tech stock, despite its impressive performance and outlook. The stock is down around 14% in the past month, so now may be an excellent time to add it to your portfolio. Though there may still be some volatility ahead, it can be a fantastic investment to hang on to for years to come given its leadership position in the AI chip market. 2. Amazon Another company that's big on AI is Amazon. The company's online marketplace has revolutionized retail, making it incredibly difficult for brick-and-mortar businesses to remain competitive when the tech giant offers fast delivery, even same-day delivery in many markets. With the use of robots to help drive efficiency and speed up its logistical operations, the company has been firmly entrenched in AI for many years. But there are many more opportunities on the horizon. The company has an upgraded Alexa+ assistant that utilizes AI, which Amazon is going to charge $19.99 per month to use (it will, however, be available to Prime members for free). It has also invested $8 billion into AI company Anthropic, which makes the Claude AI chatbot. AI is still a huge part of Amazon's growth strategy, and that isn't changing anytime soon. For a company like Amazon, which reported $33 billion in free cash flow in 2024, it has plenty of money at its disposal, which it can deploy toward opportunities in AI, making it a compelling investment for the long haul. It's a bit more expensive than Nvidia, trading at a forward P/E of 30, but it's still a great buy. There are many things to love about Amazon stock, as this growth beast is only going to get bigger in the future. 3. Advanced Micro Devices The third most enticing AI play on this list is Advanced Micro Devices, or AMD. It's a key rival for Nvidia, but AMD's slow rollout of AI chips and question marks about how competitive they'll be has resulted in investors feeling lukewarm about the stock. In the past 12 months, it has lost around half of its value. It's the cheapest stock on this list, trading at a forward P/E of 22. That's not a bad price for the chipmaker, as its products could offer companies lower-cost alternatives to Nvidia's expensive chips. AMD launched its newest chips toward the latter part of 2024, so it may take a while to see how well they perform. The company grew its sales by a modest 14% last year to $25.8 billion, but there is potential for tens of billions in revenue growth ahead, if you follow the forecast of Lisa Su, the company's CEO. AMD may be a riskier play in the short term, as its chips still need to prove to investors they can offer formidable competition to Nvidia's chips, but given the vast need for AI chips as a whole, AMD should be able to generate much more growth in the years ahead.

These 3 Artificial Intelligence (AI) Chip Stocks Tumbled During the Nasdaq Sell-Off, Losing $1.16 Trillion in Market Cap. Here's the 1 Worth Buying Right Now. | The Motley Fool

The fears driving the market lower won't have as big of a long-term impact on this chipmaker. It's been a long time since investors have had to face the reality that stock prices can, indeed, decline. You have to go back all the way to Oct. 2023 to find the last time one of the major stock indexes fell more than 10% from its all-time high, marking what's known as a correction. Sometimes those corrections are slow and gradual, as in 2023, and other times the losses come much more swiftly -- as they did recently. From Feb. 19 through Mar. 10, the Nasdaq Composite dropped nearly 13%. The sell-off was fueled by President Donald Trump's trade policies and fears that he would enact additional tariffs on Taiwan, a key supplier of chips used in AI data centers. As a result, some of the biggest movers were the artificial intelligence stocks that pushed the Nasdaq to new all-time highs in February. Nvidia (NVDA 5.27%), Broadcom (AVGO 2.18%), and Taiwan Semiconductor Manufacturing Company (TSM 1.46%) all saw huge drops in their stock prices. Combined, they lost $1.16 trillion in market cap during that period. While it might be tempting to pick up shares of all three companies at these lower prices, one of them stands out as an incredible value with a sustainable competitive advantage. There are numerous factors that have led to the drop in AI stocks over the last few weeks. Greater economic uncertainty has hurt consumer confidence as U.S. trade policies increase geopolitical tensions. If there's one thing markets hate, it's uncertainty. Perhaps the biggest uncertainty hitting chipmakers, though, is the potential for the Trump administration to enact new tariffs on Taiwan, home of Taiwan Semiconductor Manufacturing Company, or TSMC. Nearly all of the biggest chipmakers, including Nvidia and Broadcom, rely on TSMC to produce and package their chips. The foundry, as chip manufacturers are called, attracts nearly two-thirds of all spending on chip fabrication. A tariff on Taiwan would substantially increase costs for Nvidia and Broadcom (and practically every other chipmaker). As a result, they'd have to increase their prices or take a hit to their profit margins (probably both). Higher prices also means they could see lower demand for their chips. While the big tech companies buying Nvidia and Broadcom chips have massive budgets, they don't have infinite money. And with increasing pressure on those companies to show meaningful returns on their investments, there's probably not much room in the budget to increase spending. That lower demand works its way back to TSMC, which faces the challenge of substantial fixed costs. Lower utilization rates of its facilities means it could see a big drag on profitability if tariffs go into effect or demand declines for any other reason. TSMC has tried to take matters into its own hands to appeal to the Trump administration. It committed to investing an additional $100 billion in the U.S. on top of its plans to expand its facilities in Arizona over the next two years. If the current administration wants more chip manufacturing to take place in the U.S., TSMC is signalling its willingness to make that happen. Amid the current sell-off, it's important for investors to think about the long-term potential of any investment. Nvidia's position looks most precarious in the long run. Higher costs for its chips could accelerate a shift from its biggest customers to more cost-efficient alternatives. Meta Platforms is already working on a custom AI accelerator chip for training its Llama foundational models. It's reportedly aiming to use those chips for training by 2026. It currently uses its own chips for machine learning and expanding its use to AI inference this year. The other three hyperscalers have expressed similar aspirations and have seen good results with their custom silicon. It's worth noting Meta and Alphabet both rely on Broadcom's technology to create custom chips. So, rising costs could end up benefiting Broadcom's custom AI accelerator business. Management said it expects that business combined with its network solutions to reach a serviceable addressable market between $60 billion and $90 billion by 2027. However, its networking chips remain a substantial portion of that business, so the effect could be muted. TSMC, meanwhile, might not be as impacted long term as some might think. It's hard to overstate how big its technology lead is. Nvidia CEO Jensen Huang called TSMC "the world's best by an incredible margin." Switching from TSMC to another foundry isn't a viable option for Nvidia, Broadcom, or most of its other most core customers. First of all, there aren't many options that have the manufacturing scale they need. Increasing production capacity takes a long time. Second of all, these chips are designed with TSMC's processes. In some cases, they're designed with custom TSMC processes, such as Nvidia's Blackwell platform. It would take months of redesign and validation to switch to a competitor. Lastly, the resulting product would likely decline in quality as other foundries can't match TSMC's capabilities. TSMC likely has the most sustainable long-term competitive advantage, and that's a self-reinforcing phenomenon. As TSMC attracts more revenue for high-end chip designs than any other foundry, it's able to invest more in research and development, new equipment, and capacity expansion, thus positioning it to win even more contracts in the future. While the foundry could see a downward blip in demand, it doesn't face a significant competitive threat. What's more, demand should remain relatively stable as hyperscalers switch to lower-cost alternative GPUs or their own custom silicon. TSMC has contracts with all of them, including Meta for its new custom AI chip. Most importantly, the stock trades for an absolute bargain. After the sell-off in recent weeks, investors can buy it for less than 20 times forward earnings estimates as of this writing. Even if it does see some margin contraction and slower demand growth in the short term, that's a price that can easily absorb the hit for a company with otherwise incredible growth prospects and strong competitive advantages.

Nasdaq Correction: 2 "Magnificent Seven" Stocks Down 19% and 21% You'll Regret Not Buying on the Dip | The Motley Fool

The Nasdaq-100 is made up of 100 of the largest nonfinancial companies listed on the Nasdaq stock exchange. It has delivered a return of 343% over the past decade, doubling the gain of the more diversified S&P 500 thanks to its high concentration of the world's largest tech stocks. But the Nasdaq-100 can also be more volatile during times of uncertainty, and it's currently in correction territory after a 13% decline from its recent peak. Some of the largest constituents in the index, namely the "Magnificent Seven," are leading the decline. This group of seven companies earned their nickname for their tendency to outperform the broader market (notwithstanding the occasional rough patch) and their incredible size. Here they are, along with their recent market caps: I want to focus on two of these stocks because of their attractive valuations relative to the rest of the group, and their potential to capitalize on emerging themes like artificial intelligence (AI). Shares of Meta Platforms and Alphabet are down 19% and 21%, respectively, from their record highs, and here's why investors might regret not buying them on the dip. Meta Platforms is the parent company of the Facebook, Instagram, and WhatsApp social networks, which serve over 3.3 billion people every day. The company generates revenue by selling advertising slots to businesses, so the more ads it can show each day, the more money it makes. Since almost half the world's population already uses Meta's apps, attracting new sign-ups is becoming harder, so the company is focusing on engagement instead. It's using AI in its recommendation engines to learn what type of content users like to see, so it can show them more of it to keep them online for longer. Toward the end of 2024, CEO Mark Zuckerberg said this strategy drove an 8% increase year over year in the amount of time users spent on Facebook, and a 6% increase for Instagram. Introducing new products is also part of management's engagement tool kit. The company launched an AI chatbot called Meta AI last year that is accessible through all of its existing apps. Users can ask it questions on a variety of topics, or invite it into their group chats to settle debates and recommend fun activities. Meta AI had over 700 million monthly active users at the end of last year, which makes it one of the most popular chatbots in the world. It is powered by the company's Llama family of large language models (LLMs). They are open-source and have attracted over 600 million downloads, which allows the company to lean on an enormous community of developers to fix bugs and improve the models far more quickly. Thanks to this approach, these models have become some of the most powerful in the industry. Zuckerberg thinks the upcoming Llama 4 version will actually outperform some of the best closed-source models from developers like OpenAI. If that's true, Meta AI could become one of the industry's "smartest" chatbots, which could attract new users and create more opportunities to generate revenue. Meta generated a record $164.5 billion in revenue last year, up 22% compared to 2023. Its earnings per share (EPS) soared by 60% to $23.86. That places its stock at a price-to-earnings ratio (P/E) of 24.7, making it the second-cheapest Magnificent Seven stock; only Alphabet is cheaper. Based on the company's robust financial growth and its leadership potential in AI, the recent 19% dip in its stock price presents a great long-term buying opportunity for investors. Alphabet is the parent company of Google, YouTube, and the self-driving car developer Waymo. Google generates more than half of the conglomerate's total revenue, led by its search engine, which sells advertising slots to businesses. AI chatbots have threatened the dominance of Google Search over the last couple of years, because they provide internet users with a convenient new way to access information. Alphabet is investing heavily in AI to ensure Google maintains its 90% market share in search. It launched AI Overviews last year, which appear at the top of the traditional Google Search results when users type in a query. They combine text, images, and links to third-party websites to provide a holistic, AI-generated response, which can save users from sifting through web pages to find the information they need. Alphabet says Overviews monetize just as well as the traditional search format, so they shouldn't hurt Google's ability to generate revenue. In fact, the company says users are searching more frequently thanks to Overviews, because they can refine their questions and extract more intricate information than before. Overviews are powered by Alphabet's Gemini family of LLMs, which the company developed in-house to rival the impressive models from start-ups like OpenAI and Anthropic. Not only is Gemini playing a crucial role in improving Google Search, but it also powers a stand-alone chatbot of the same name, and an AI assistant that is embedded in Google Workspace apps like Gmail, Docs, and Sheets. Lastly, Google Cloud deserves a special mention because it's the fastest growing segment of Alphabet's entire business. It has become a go-to destination for businesses and developers seeking state-of-the-art data center computing capacity, and LLMs (including Gemini), which they use to create their own AI software. In the final quarter of 2024, Google Cloud customers were using eight times the amount of computing capacity for AI training and AI inference workloads than they were 18 months earlier. Google Cloud's AI developer platform, Vertex AI, experienced a fivefold increase in customers last year overall. Simply put, Alphabet's various AI efforts are generating a significant amount of momentum, which doesn't quite line up with the recent 21% drop in its stock price. Normally, when a company's fundamentals are improving but its stock is moving lower, that spells a buying opportunity for investors. The company grew its EPS by 38% during 2024 to a record $8.04, and as displayed in the chart I shared earlier, that places its stock at a P/E ratio of just 20.2. Not only is it the cheapest Magnificent Seven stock by far, but it's also 32% cheaper than the Nasdaq-100 index overall, which is trading at a P/E of 29.8. Alphabet is still facing some regulatory headwinds, but the recent dip in its stock could make it a fantastic long-term buy nonetheless.

3 Artificial Intelligence (AI) Stocks That Can Weather President Trump's Tariff Storm | The Motley Fool

The threat of tariffs looms over many companies because they make anything imported more expensive. If that is the only source for products, then consumers or businesses may hold out on purchasing them to wait out tariffs in the hope that they will be reduced. Furthermore, if products become more expensive in general due to tariffs, it could reduce consumer confidence and cause spending to drop across the board. Many investors are worried about this, which is why the stock market has sold off so heavily over the past week. However, I think three companies can weather the storm caused by President Trump's tariff policies, and each looks like a strong buy following the sell-off. Many companies could (and likely will) emerge on the other side of these tariffs just fine, but I'm focusing on AI hardware suppliers, as these are the companies most affected by tariffs. Nvidia (NVDA 5.27%), Taiwan Semiconductor Manufacturing (TSM 1.46%), and Broadcom (AVGO 2.18%) are all crucial suppliers for AI hyperscalers, and I think they will be just fine amid the tariffs. The reason? The big AI companies can't live without the hardware suppliers' products. Nvidia makes graphics processing units (GPUs) that are deployed in vast quantities to train AI models and then operate them once deployed. Its GPUs and the infrastructure that supports them are the best in the game and have little competition. If you include other competitors, they also source parts from outside the U.S., so they are subject to the same fears as Nvidia. With how vital GPUs are to the AI race, the company will be just fine. Broadcom is in a similar business: It makes connectivity switches and custom AI accelerators (which it calls XPUs), among many other things, but these two product lines in particular are expected to provide massive growth over the next few years. Currently, only three companies use Broadcom's XPUs, and by 2027, this division will be pursuing a $60 billion to $90 billion market opportunity. However, four more customers are getting their XPUs up and running, which will add to this opportunity. Considering that revenue over the past 12 months totaled $54 billion, this would be huge growth. While there are some fears centered around tariffs for these two, the push for AI supremacy is much greater. As a result, investors need to look past the short term and realize that there is still a ton of long-term potential with Nvidia and Broadcom. Taiwan Semiconductor (or TSMC for short) is a major supplier for both of these companies. Neither of them can actually manufacture chips, so they have to get them from somewhere, and TSMC is the best option available for high-end chips. President Trump threatened to levy a tariff on Taiwan, but that threat seems to have faded away after TSMC announced another $100 billion investment in U.S. semiconductor production facilities. Taiwan's president and the CEO of Taiwan Semiconductor denied that President Trump forced this expansion, but the end result is the same: Trump got what he wanted by having TSMC move more of its production to the U.S. So, one of the most crucial suppliers that might have driven up prices for Nvidia and Broadcom products doesn't need to worry about tariffs right now -- and these three are free of the burden of tariffs, at least right now. Until the market is convinced that the threat of tariffs is gone, these three will likely continue to sell off, which gives investors a huge opportunity to buy shares for a fantastic price. Following the sell-off, these three find themselves at price points rarely seen over the past year. First, Taiwan Semiconductor looks ridiculously cheap at 18.8 times forward earnings. It's one of the world's most important companies, yet it trades at a lower multiple than the broader S&P 500 (^GSPC 2.13%), which has a 19.8 forward earnings multiple. This pricing mismatch doesn't make much sense, and investors should pounce on the opportunity. Nvidia is also quite inexpensive considering how vital its GPUs are, and the decline from where it spent most of 2024 is another golden opportunity to buy shares on the cheap. Lastly, Broadcom is the most expensive, but if the XPU market takes off as predicted, this could be a bargain price for the stock. All three stocks look like fantastic buys, but investors must have a long-term mindset. The companies will likely be successful investments over a three- to five-year time frame. But there could be some more short-term pain since it's impossible to call a market bottom in the middle of a sell-off.

Nasdaq Sell-Off: 2 AI Stocks That Are on Sale in 2025 | The Motley Fool

These two AI-powered stocks can be compelling picks on the dip. The Nasdaq Composite has had a dream run in the past two years, buoyed by declining inflation, interest rate cuts, and a solid artificial intelligence (AI) boom. However, that momentum seems lost now, considering the tech-heavy index has declined about 10% in 2025. The U.S. market is now concerned about a potential U.S. recession and the impact of new trade policies -- fears that the Trump administration has failed to calm. In the face of heightened market volatility and low investor confidence, some prominent analysts expect the Nasdaq to see even more selling in the coming days. While this pullback is worrisome, it can also prove to be a smart time to buy stakes in some fundamentally strong Nasdaq stocks that have seen a significant correction. Here's why Nvidia (NVDA 5.27%) and Microsoft (MSFT 2.58%) fit the bill. Let's assess why these stocks could prove compelling picks now. Nvidia released a strong fiscal 2025 performance (ended Jan. 31, 2025) on Feb. 26, with revenue growing 114% year over year to $130.5 billion and operating income rising 147% to $81.5 billion. While the company faces gross margin pressures due to the ongoing ramp of Blackwell architecture chips, it expects gross margins to revert to mid-70s levels in fiscal 2026. Blackwell architecture chips are undoubtedly a major growth catalyst for Nvidia and contributed $11 billion in sales in the fourth quarter. These chips have been designed mainly for inference (deploying and running AI models) and reasoning workloads, with 25 times higher token output and 20 times lower cost than previous H100 chips. Reasoning is a special use case in inference workloads, involving more computation per task for resolving complicated and multistep problems. Besides inference, Blackwell architecture has been optimized for all other AI workloads, including pre-training and post-training deployed across cloud, on-premise, and enterprise. Unsurprisingly, major cloud service providers, such as Microsoft, Meta Platforms, and Alphabet, are using Blackwell graphics processing units (GPUs) to process their AI workloads. Nvidia accounted for almost a 92% share of the data center GPU market (AI hardware market) in 2024. The company has also created a strong moat for its hardware business with its Compute Unified Device Architecture (CUDA) software stack (a comprehensive parallel programming development environment optimized for running AI and high-performance computing workloads on Nvidia chips). Since CUDA is already well-adopted by developers and AI researchers globally, switching to competitors' chips can involve significant costs for client organizations. Subsequently, Nvidia's hardware-software offerings are finding applications in new use cases in areas such as agentic AI, robotics, sovereign AI, and autonomous vehicles. Despite the many pros, investors are disappointed with Nvidia's decelerating data center growth and margin pressures amid a difficult macroeconomic environment marked by export controls, tariff wars, and surging geopolitical pressures. Subsequently, Nvidia's shares have tanked by nearly 28% from their 52-week high ($149.43 as of Jan. 6). Nvidia is trading at just under 20 times sales, significantly lower than its historical five-year average of 26.2, and at 36.4 times trailing-12-month earnings, lower than its historical five-year average of 71.6. More impressively, Nvidia's price-to-earnings-to-growth (PEG) ratio is just 0.25, which is modest for a company with exceptional growth prospects. Considering Nvidia's AI market leadership, robust hardware-software ecosystem, and corrected valuation, the stock may be a smart buy now. Shares of Microsoft are down by about 10% in 2025. While the fall is not as steep as seen in Nvidia stock, the dip has created an attractive entry point for astute investors. Microsoft came out with a healthy financial performance in the second-quarter of its fiscal 2025 (ended Dec. 31, 2024), with revenue rising 12% year over year to $69.6 billion and net income increasing 10% to $24.1 billion. Despite this, the stock performed negatively due to investor concerns about weak third-quarter guidance and a slowdown in the Azure cloud services business due to capacity constraints. However, Microsoft is well-positioned to benefit from a phenomenon termed as Jevons Paradox. Accordingly, increased price performance gains for AI hardware and software in inference workloads will lead to exponentially greater access and demand for AI hardware and software services. The company's strategic partnership with OpenAI has also been a major pillar of its AI strategy. In the second quarter, commercial bookings were up by 67% year over year, driven by Azure commitments from OpenAI. With OpenAI's cutting-edge AI models, Microsoft has revamped its entire product ecosystem. Furthermore, since OpenAI's application programming interfaces (APIs) currently run primarily on Azure, it helps Microsoft further attract clients to its cloud platform. The tech giant is also at the forefront of the ongoing agentic AI revolution with its CoPilot offerings. Microsoft 365 CoPilot is seeing strong adoption across enterprises of all sizes. Coupled with CoPilot Chat and CoPilot Studio, Microsoft is aggressively pushing forth the usage of AI agents in organizational workflows. Microsoft's shares trade at just over 30 times trailing-12-month earnings, which seems rich for a company with moderate growth numbers. However, that valuation is cheaper than its historical five-year average of 33.2. The company also returned a hefty $9.7 billion to shareholders as dividends and share repurchases in the second quarter. The company's commercial remaining performance obligations (RPOs, indicative of future revenue that can be earned from existing contracts) were $298 billion at the end of the second quarter. Thanks to high long-term revenue visibility, Microsoft enjoys a premium valuation. Hence, it makes sense to pick at least a small stake in this stock now.

2 Artificial Intelligence (AI) Stocks With 41% or More Upside, According to Wall Street Analysts | The Motley Fool

The potential for artificial intelligence (AI) to improve the fortunes of leading businesses has been a huge catalyst for the stock market over the last few years. IDC anticipates spending on AI, including infrastructure and business services, to reach $632 billion by 2028. AI promises to bring greater efficiency to business operations and labor productivity, but it will require substantial investment in advanced chips to make AI smarter. The following stocks of leading chip companies could offer upside of 39% to 48% based on the average analyst price target. Advanced Micro Devices (AMD 2.92%) has played runner-up to Nvidia in the graphics processing unit (GPU) market for many years. But these are the main suppliers of general-purpose GPUs, which have left AMD with a profitable market to fill out on its own. The average price target on Wall Street is currently $148.34, implying upside of 51% over the recent $98 share price. AMD's revenue grew 14% year over year in 2024, while non-GAAP (adjusted) earnings per share grew 25%. The company has enjoyed strong demand for its Ryzen central processing units (CPUs), in addition to GPUs for data centers. AMD's data center business made up half of its $25.7 billion in total revenue last year. Still, Wall Street was disappointed that AMD did not provide specific revenue guidance for its data center GPUs in its fourth-quarter earnings report. After offering guidance throughout 2024, analysts took this as a weak signal for near-term sales momentum. Moreover, AMD's chips made for gaming and other markets are still experiencing weak demand, with revenue down in these segments. It's also not yet clear what impact tariffs might have on the chip industry, but AMD's conservative valuation may already be pricing this risk in. Concerns over AMD's sales momentum may be overblown, as management cited strong customer interest for its upcoming Instinct MI350 GPUs launching later this year. The stock trades at an attractive forward price-to-earnings (P/E) multiple of 21, which is modest for a growing chip company and could justify the shares climbing back toward Wall Street's price target over the next year or so. Arm Holdings (ARM 5.26%) designs chips that are used in virtually every smartphone, cloud computing, and several other markets. After falling 40% off its recent highs, Wall Street analysts are still bullish on the stock's return prospects with an average price target of $158.43, implying 41% upside over the recent $112 share price. Arm-based processors are in high demand for their low cost and high energy efficiency. With the escalating costs of investing in AI infrastructure, in addition to the increasing power needs of large data centers, Arm is in a strong competitive position. Arm's revenue grew 19% year over year to $983 million in the most recent quarter. It earns revenue from royalties and licensing fees, which allows the company to convert more than half of its revenue into free cash flow. More products and devices will become more technologically advanced, especially with AI. This could spell significant growth for Arm, which already has a strong presence in edge computing markets including the Internet of Things, smart home devices, and self-driving car systems. The only thing that may keep Arm stock from reaching the consensus price target in 2025 is valuation. The stock trades at an ultra-expensive 191 times free cash flow and 148 times earnings. Even using 2026 earnings estimates, the stock still looks fully valued at 55 times forward estimates. A high valuation is why the stock has remained volatile over the last year despite strong demand for Arm-based processors. Investors could remain flat in 2025 until the company's growth catches up to its high earnings multiple.

Prediction: Nvidia Stock Will Soar This Year (and It May Start After March 18) | The Motley Fool

Nvidia (NVDA 5.27%) stock has been a major winner for investors during the artificial intelligence (AI) boom. This AI chip leader saw its shares surge a mind-blowing 2,000% over the past five years. This is thanks to demand for the company's graphics processing units (GPUs) -- the chips powering key AI tasks like training and inferencing. But it's also due to Nvidia's expansion beyond the GPU to offer an entire portfolio of related products and services, making the company the go-to destination for anything AI. In recent times, though, the stock, along with the general market, has been in the doldrums. This month, the Nasdaq and the S&P 500 entered correction territory, falling 10% from their most recent highs, as investors worried about the impact President Trump's tariffs on imports would have on the economy and corporate earnings. Nvidia has slipped about 12% over the past month. But I don't think Nvidia will suffer for very long. In fact, I predict Nvidia stock will soar this year -- and the positive momentum may start after March 18. Let's find out more. First, a quick summary of Nvidia's story so far. The company's dominance in the GPU market -- it holds 80% share -- and general AI strengths have led to double- and triple-digit revenue growth quarter after quarter in recent years. Last year, revenue surged 114% to more than $130 billion, a record level. And Nvidia has delivered high profitability on sales with gross margin topping 70% even during times of higher expenses, such as the recent launch of its Blackwell architecture. Importantly, Nvidia's focus is on innovation, with a pledge to update its GPUs on an annual basis and the company is on the way to showing it can keep the promise. Nvidia just launched Blackwell in the recent quarter and aims to release Blackwell Ultra later this year -- then the Vera Rubin architecture is expected to follow just months after that. Now, let's consider my prediction. I think that all of these elements will lift Nvidia shares this year, along with the idea that the long-term AI growth story hasn't changed. Even if the Trump administration's tariffs weigh on companies and the economy in the near term, this doesn't change the fact that the world is moving toward accelerated computing. Analysts expect today's $200 billion AI market to reach more than $1 trillion by the end of the decade, and Nvidia is perfectly positioned to benefit as it sells tools and services to address every phase of AI growth and use. But why will this positive momentum begin now? Nvidia's annual GTC AI conference happens this week, and chief executive officer Jensen Huang will keynote on March 18. He's already offered us some clues about what he'll talk about: "Come to GTC, and I'll talk to you about Blackwell Ultra, Vera Rubin, and then show you what we place after that," Huang said during Nvidia's recent earnings call. So, it's likely Huang will deliver key details about timing and performance of these upcoming products. This could reassure investors about the potential for Nvidia to keep growth going over the long term -- even through challenging times. On top of this, Nvidia stock has reached bargain levels, offering investors a fantastic entry point. Its recent decline left it trading for only 27x times forward earnings estimates, down from as much as 50 in January. Of course, Nvidia stock may not take off immediately on March 18 or 19 and steadily roar higher for the rest of the year -- general economic and policy news could get in the way until some of the uncertainty lifts. But news Huang delivers during the conference may offer the stock a lift and get the ball rolling. All of that means now is a great time for investors to look at Nvidia through a long-term lens and pick up shares of this top AI stock.

4 Phenomenal Chip Companies to Ride the Artificial Intelligence (AI) Investing Wave | The Motley Fool

Despite the market sell-off centered around tech stocks, investors need to keep their focus on the long term. We're still in the early innings of the AI investment wave. We've barely scratched the surface of integrating AI into business and regular life, and there will be more development in this space over the next five years. As a result, I think investors need to look at which stocks look like strong bargains, as the market is full of many opportunities to purchase the best AI stocks on sale. I'm focusing on four companies that are key suppliers in the AI race: Taiwan Semiconductor (TSM 1.46%), ASML (ASML 2.79%), Nvidia (NVDA 5.27%), and Broadcom (AVGO 2.18%). These are critical companies and without them, the AI revolution wouldn't look the same. I'll start with Taiwan Semiconductor (TSMC), as all roads lead to it. Taiwan Semiconductor is the world's leading chip foundry, and clients like Broadcom and Nvidia come to it with chip designs that they want to have fabricated. Because TSMC has leading technology and a strong track record for innovation, it's the top option in this space, which gives it great insight into what trends are occurring in the chip industry. Over the next five years, Taiwan Semiconductor's management expects AI-related revenue to grow at a 45% compound annual growth rate (CAGR) pace. That's monster growth, but it makes sense in the grand scheme of things. TSMC expects its revenue compound annual growth rate to approach 20%, which is fantastic considering the company's size. This massive demand is also why Taiwan Semiconductor announced an additional $100 billion investment, on top of the $65 billion it already committed, in building more facilities in the U.S. TSMC's management said the company is building where the demand is, and with its U.S. production facilities already selling out capacity through 2027, it's clear that the U.S. is a great place to build new factories. This also boosts ASML, as ASML makes machines that every high-end chip fabricator needs. ASML's top machine is an extreme ultraviolet (EUV) lithography machine that helps lay the microscopic electrical traces on chips. Nobody in the world has ASML's technology, giving it a technological monopoly status. As a result, when TSMC announces capacity expansion, you should automatically think that ASML will benefit. Nvidia and Broadcom are large customers of TSMC, and they are a large part of the reason it is projecting a massive increase in AI-related revenue growth. Nvidia makes graphics processing units (GPUs) that are incredibly useful for handling large and complex computing tasks like AI training. Nvidia has a strong grip on this market and shows no signs of slowing down. Broadcom has a similar product line, as it has helped some tech giants design custom AI accelerators called XPUs. XPUs can outperform GPUs in specific tasks, as a workload must be set up in a particular way to take full advantage of an XPU design. This makes them critical in developing AI models, but not the greatest at other workloads that GPUs can sometimes be assigned. There's a massive market for both of these products, and although they will be competing for sales, there's a large enough market that both of them can thrive. All four of these companies have incredibly strong tailwinds blowing in their favor, and it would take a lot to derail the AI investment movement in the industry. As a result, I think all of these companies will be just fine over the long term. But right now, each one looks like it can be purchased for a great price. Because each company is growing so much, I'll focus on its forward price-to-earnings (P/E) ratio, which is a better measure of where a company is going. Taiwan Semiconductor is clearly the cheapest, at less than 20 times forward earnings, which is an unbelievable bargain. If you would make me choose one stock from this group of four, it would undoubtedly be TSMC. However, the price tags on ASML, Nvidia, and Broadcom are also much cheaper than they've been in the past, giving investors the green light to invest in some of these AI leaders. While these four could experience some more short-term pain, I have a hard time picturing a future in which they aren't significantly higher five years from now. I'm using today's weakness as an opportunity to scoop up these stocks for a great price.

Apple Just Gave Taiwan Semiconductor Investors Great News | The Motley Fool

Over the last several weeks, technology companies have reported earnings for the fourth quarter and full calendar year for 2024. Among the biggest influencers in artificial intelligence (AI) are the "Magnificent Seven" companies: Nvidia, Microsoft, Meta Platforms, Amazon, Alphabet, Tesla, and Apple. Within this cohort, Microsoft, Amazon, and Alphabet are forecast to spend nearly a quarter-trillion dollars on AI infrastructure just this year. While that's quite a hefty price tag, I don't find this spending out of the ordinary. Over the last few years, each of these tech titans have plowed billions into leading AI start-ups including OpenAI and Anthropic, as well as invested significant capital into data centers and custom chipware. One member of the Magnificent Seven that has been suspiciously quiet throughout the AI revolution is Apple. Well, that just changed. The iPhone maker recently announced that it plans to invest $500 billion over the next four years -- allocated across areas including manufacturing, silicon engineering, and AI. Below, I'll assess the details of Apple's massive AI initiative and make the case for why investors in Taiwan Semiconductor Manufacturing Company (TSM 0.30%) should be particularly excited. There are multiple components to Apple's $500 billion commitment to U.S. infrastructure. As part of the initiative, Apple will be constructing a manufacturing facility in Houston, Texas to house servers. The primary reason to build this server unit is to further support infrastructure around Apple Intelligence -- the company's AI system equipped with features from ChatGPT. Another component of Apple's plan includes bolstering manufacturing spend for advanced silicon, specifically in Arizona. This is where TSMC investors might want to pay attention. Over the last several years, TSMC has built advanced fabrication facilities in Phoenix, AZ as part of a $65 billion AI chip initiative. According to Apple, the company is the largest customer of TSMC's Fab 21 plant in Phoenix. Just days after Apple announced its plans to invest $500 billion into the U.S., TSMC announced a $100 billion project of its own -- whereby the company plans to build new fabrication and packaging facilities. Given Apple is already an important customer of TSMC (to say the least), I'm encouraged by both companies' commitments to bolster their infrastructure in the U.S. I see Apple's ambitions in manufacturing and silicon engineering as an important step in the company's ongoing efforts to compete in an intense AI realm. Moreover, I think TSMC's interest in expanding its U.S. footprint should bode well for the company's future growth prospects -- particularly from leading U.S. AI players such as Apple. As of this writing (March 14), shares of TSMC have fallen by about 12% this year -- underperforming both the S&P 500 and Nasdaq Composite. I think that the declines seen in TSMC stock are primarily a result of more macro trends. What I mean by that is over the last couple of weeks the capital markets have seen abnormal levels of volatility, thanks in large part to uncertainties surrounding President Trump's tariff policies. As a result, technology stocks -- which have largely been carrying lofty valuations for the last two years -- have started to see some oversized selling activity, and I think TSMC has simply been dragged into this dynamic. I think the ongoing selling is a prime opportunity to buy the dip in TSMC stock right now. As the chart above illustrates, the sell-off in TSMC has led to significant contraction in valuation. Right now, shares of TSMC trade at a forward price-to-earnings (P/E) multiple of just 19.1 -- nearly the lowest level in a year. The way I see it, the sell-off in TSMC stock is not correlated to any fundamental changes in the company's operation. In fact, recent results published by the company indicate that demand trends remain incredibly robust. I think this is a rare instance in which a growth stock is experiencing a prolonged period of cooling off despite a lucrative combination of strong current growth and an encouraging long-term outlook. I would not be surprised to see TSMC's sales and profit growth climb even higher as Apple's infrastructure investments begin to take shape. What's even better is that Apple's $500 billion investment is a four-year-long project, meaning TSMC should be in a position to witness consistent demand for one of the world's largest AI players. In my eyes, TSMC is trading at a bargain price point and remains a compelling long-term opportunity for AI investors.

Market Correction: 2 No-Brainer AI Chip Stocks to Buy Right Now | The Motley Fool

As of this writing, both stocks are down a little more than 20% from their recent highs. Let's examine why these two AI chip stocks look like no-brainer buys at these levels. Nvidia is the undisputed champion of AI chips with its graphics processing units (GPUs). While originally designed to help speed up the graphics rendering in video games, today GPUs are used for a variety of tasks. However, the most important of these uses, at least in terms of revenue, are to train large language models (LLMs) and run inference for AI. GPUs have become a key part of AI infrastructure due to their parallel processing capacity and high memory bandwidth, which together allow large amounts of data to be processed quickly. Nvidia is not the only company that designs GPUs, with Advanced Micro Devices, and to a lesser extent Intel, also making these chips. However, Nvidia has a dominant market share of over 80% in the GPU space as a results of its CUDA software platform. Nvidia created CUDA back in 2006 to allow developers to program its chips for tasks beyond their original purpose in order to expand the market for GPUs. The use of GPUs in other areas was slow to develop and AMD did not introduce a competitive software offering until about 10 years later. Meanwhile, developers learned to program GPUs on Nvidia's platform, while the company had a decade-long lead in improving its platform. With the advent of AI, Nvidia was able to build a collection of GPU-accelerated libraries and tools designed specifically for AI on top of the CUDA platform with CUDA-X. This has created the wide moat the company sees today. As such, as long as AI infrastructure spending continues to be strong, Nvidia remains very well positioned, as its GPUs remain the main chips used to train AI models and run inference. AI infrastructure remains robust, as cloud computing companies build out data centers to keep up with growing demand and a number of tech companies rush to create better AI models. Currently, the chief way to improve AI models is through brute computing power strength, which means using more and more AI chips. The recent market sell-off leaves the stock attractively valued. It trades at a forward price-to-earnings (P/E) ratio of 27 times 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of about 0.5, with PEG ratios below 1 often viewed as the threshold for a stock being considered undervalued. Broadcom participates in the AI infrastructure market in two main ways. The first is through its networking technology portfolio through which it supplies switches, network interface cards (NICs), and other components. Switches are an essential part of AI infrastructure as they allow data to be transferred between GPUs and servers while helping manage the flow of data to avoid network congestion. NICs, meanwhile, allow computers to communicate with each other, allowing AI workloads to be distributed across multiple servers. Broadcom is a leader in ethernet switching technology, where it competes with other ethernet switching companies as well as with Nvidia's InfiniBand switching technology. As AI clusters become bigger, there is a need for more high-bandwidth, low latency ethernet switches, which is benefiting Broadcom. The other area in which Broadcom is involved in the AI infrastructure buildout is by helping customers develop custom chips, known as application-specific integrated circuits (ASICs), for AI. These custom chips are designed for very specific tasks, and as such they can outperform mass-market GPUs while also having lower power consumption. The downside is that these custom chips offer less flexibility, while the cost and time to develop them is much greater. The company's first custom AI chip customer was Alphabet, where it helped the cloud computing company develop its Trillium sixth-generation tensor processing unit (TPU). It took about 15 months for the chip to be designed and deployed within Google Cloud's data centers, which was considered quick. Since then, Broadcom continued to add additional AI chip customers, bringing its total to seven. Among its three AI chip customers that are the furthest along in their development, Broadcom sees a serviceable address market of between $60 billion and $90 billion in its fiscal year 2027 (ending October 2027) as they look to expand to 1 million AI chip clusters. For context, Broadcom ended last quarter at about a $16 billion AI revenue run rate (this is quarterly revenue that is annualized). While Nvidia will capture its fair share of this market as well, this is a huge opportunity for Broadcom. Meanwhile, it should see continued AI growth as its new AI chips move into production in later years. The sell-off has dropped Broadcom's valuation to a forward P/E ratio of just over 29, which will prove to be inexpensive if it can capture much of the AI opportunity in front of it.

2 No-Brainer Artificial Intelligence (AI) Stocks to Buy in March | The Motley Fool

The companies that are enabling the growth of artificial intelligence (AI) have led the stock market to new highs over the last few years. Concerns over near-term headwinds to the economy have weighed on stocks this year, but investors that take advantage of this volatility to buy top AI stocks at lower valuations should realize great returns down the road. PwC's Sizing the Prize report reveals that AI could increase global gross domestic product by 14% by 2030. That would be over $15 trillion in value added to the economy.Here are two stocks of incredibly strong businesses to help you profit from this opportunity. Amazon (AMZN -1.03%) is one of the strongest brands in retail, with over 200 million customers paying membership fees to receive Prime benefits like free shipping and digital entertainment, among other perks. But the online superstore is also a major player in AI, which could have a major impact on its growth potential. Amazon Web Services (AWS) is the leading cloud service provider and is one of Amazon's fastest-growing businesses, with revenue up 19% year over year in the fourth quarter. It is experiencing strong demand for AI-related services that allow businesses to build AI applications and automate business processes. It will continue to be a major growth catalyst for Amazon's business. While cloud revenue only makes up 15% of its total business, AWS comprises around half of the company's operating profit. What's more, Amazon's AI investments also benefit its online retail business. It has launched AI-powered shopping assistants like Rufus and Amazon Lens, which lets customers take a picture of a product and find it in Amazon's mobile app. These AI tools could play a big role in converting more sales and continuing to grow Amazon's $247 billion in revenue from its online store. Amazon has massive resources to keep innovating on behalf of its customers. Its net income grew to $59 billion last year on $638 billion of total revenue. Wall Street analysts are projecting the company's earnings to grow at a compound annual rate of 21%. With millions of people making repeat purchases with their Prime membership, on top of the growth potential in cloud services, this might be the only AI stock you need. Alphabet's (GOOG -0.63%) (GOOGL -0.72%) Google and YouTube are two valuable internet brands that are benefiting from AI. The strong growth the company has experienced over the last year shows how efficiently Alphabet can realize returns from its AI investments across digital advertising and cloud services. Alphabet is one of the leading online advertisers, primarily due to operating the most widely used search engine. Google Search generated $54 billion of the company's $96 billion in total revenue in the fourth quarter. Advertising is a lucrative business, helping Alphabet generate $100 billion in net profit on $350 billion in revenue in 2024. The downside is that ad spending is dependent on a growing economy. However, Alphabet's revenue still grew 10% in 2022 when the ad market was tanking, and that's largely because more of the $1 trillion in annual ad spending is gradually shifting to digital platforms. Alphabet can capture more of that opportunity by integrating AI across all its services. Google's Gemini AI model is considered one of the best models currently available. Gemini powers all of the company's products that have over 2 billion users, including Search, Gmail, Maps, and YouTube. AI is making Google's services more helpful and driving increasing usage. This can lead to higher spending from advertisers. Google also operates one of the leading enterprise cloud services. Google Cloud posted revenue growth of 30% year over year in the fourth quarter. It is seeing strong demand for AI-powered data analytics, cybersecurity, and Vertex AI, a developer platform that helps customers build and deploy their own AI models. Analysts expect the company's earnings to grow at an annualized rate of 17% over the next several years. The stock's modest forward price-to-earnings multiple of 18 makes it a buy right now.

2 Top Artificial Intelligence Stocks to Buy Right Now | The Motley Fool

The stock market gave back some gains over the last month, as Wall Street weighs the effect of President Donald Trump's tariff policies on the economy. But no matter what happens in 2025, the adoption of artificial intelligence (AI) will continue. AI is anticipated to add trillions to the global economy through labor productivity increases alone. Investors can take advantage of the market sell-off to build positions in leading chip companies that are enabling this generational shift. Here are two great stocks to buy now. Nvidia's (NVDA -1.50%) chips have almost become the backbone of the economy. Cloud services can't operate without data centers, and Nvidia's graphics processing units (GPUs) are found in every major cloud company's infrastructure. Nvidia has led the GPU market for 20 years, but it has continued to expand its offering to be a complete end-to-end solution for building data centers, or what Nvidia calls AI factories. In addition to its widely used H100 GPU and Blackwell computing hardware, it offers software, networking equipment, and services that have widened its competitive moat. The company's financial performance shows how vital its technology has become for data center operators. Its total revenue doubled last year to $130 billion, with 88% coming from sales to data centers. The company expects to report roughly $43 billion in revenue for the fiscal first quarter of 2025, representing 10% growth over the previous quarter. There have been concerns that AI researchers may start adopting lower-cost methods of training AI models, which could pressure Nvidia's revenue. This is one reason the stock is currently down 9% year to date. But Nvidia's new Blackwell computing platform just brought in $11 billion of revenue last quarter, and the company's Q1 revenue guidance indicates that demand for its products remains robust. Analysts expect Nvidia to post revenue growth of 56% this year, while earnings are anticipated to increase 50%, according to Yahoo! Finance, yet the stock is trading at just 27 times forward earnings. That is a bargain for a company that's growing this fast and serving a vital role in the global AI infrastructure supply chain. The surging demand for high-powered chips for AI workloads is playing right into the hands of the leading chip foundry. Taiwan Semiconductor Manufacturing (TSM 1.31%) has spent years perfecting the process of testing and manufacturing the most advanced chip technologies, so companies like Nvidia, Broadcom, and other leading semiconductor producers can focus on chip innovation. Without TSMC, the global economy would collapse. Counterpoint Research estimated TSMC's market share at 64% of the global foundry market as of third-quarter 2024, over five times the share of its next closest competitor. TSMC's chips are used in everything from phones to data centers. Its manufacturing capacity was capable of making 16 million 12-inch equivalent silicon wafers in 2024, which translates to billions of chips depending on the size. TSMC is currently experiencing strong momentum. Revenue grew 37% year over year in the fourth quarter, driven by high-performance chips used for AI. The expertise it has in manufacturing is also translating to sky-high margins, where it converted 43% of revenue into a profit last quarter. The company earns high returns on capital, so it's a positive sign for long-term growth that management has been on offense, investing more capital to expand capacity. It recently announced a $100 billion investment to build new chip-making facilities in the U.S., along with other plans, including a facility in Germany specifically focused on the automotive and industrial markets. It expects chips used for AI to drive most of its growth in the coming years. And the company expects long-term revenue growth to grow at a 20% annualized rate. Investors can bank on it, given TSMC's record of delivering a compound annual growth rate in revenue and earnings of 18% since 1994. Taiwan Semiconductor is a no-brainer buy with the stock trading at a reasonable forward price-to-earnings of 19.