Nvidia Stock Plummets Amid AI Market Shifts: Is It Time to Invest?

As Nvidia stock plummets, is it time to invest?

Nvidia CEO Jensen Huang said that the AI chip giant is well placed to navigate a shift in the industry, in which businesses are moving from training AI models to getting detailed answers from them. The company has made billions of dollars selling its costly chips. Few technologies captured the market's attention quite like artificial intelligence (AI) over the course of the last few years. It comes as no surprise, however, given the enormity of the technology's potential power -- at least according to its ambassadors. The Sam Altmans (CEO of OpenAI) and Dario Amodeis (CEO of Anthropic) of the world see a not-too-distant future in which their products transform our economy and fundamentally reshaped the way most firms do business. But have you ever met a tech CEO that doesn't claim their company is changing the world? It's a good thing that AI optimism extends well beyond the C-suites of Silicon Valley. Investors can take comfort in the fact that organizations from the International Monetary Fund to the United Nations have made clear they believe AI will have a massive impact. Nvidia is riding the AI wave The not-so-secret sauce powering this AI revolution are the uber-powerful chips the technology demands. When you ask ChatGPT how to make the best roast chicken (hint: mix a little baking powder and salt to get that skin extra crispy), a hive of graphics processing units (GPUs) spring to life in a many-football-fields-sized data center somewhere in rural America. I'm not kidding: Meta Platforms is building one in Louisiana, on which you could lay 70 football fields. As you can imagine, to fill such an area, companies need to purchase a lot of GPUs. Without a doubt, no company has a hold on the AI GPU market like Nvidia (NASDAQ: NVDA) and it's been handsomely rewarded for it. Driven almost entirely by the sale of these chips, the company saw its revenue skyrocket since 2023. Check out the chart showing the sales growth compared to Meta (a major customer), Advanced Micro Devices (a rival chipmaker) and Alphabet (which relies on AI to improve its Google search engine, as well as in products such as Waymo, Nest and YouTube). NVDA Revenue (TTM) data by YCharts Its growth has been monumental. In the same period, Nvidia also vastly expanded its margins while continuing to innovate to stay well ahead of the competition. The fact is, that no company has been able to touch it when it comes to producing the best chips around. And with the capacity to greatly outspend rivals in research and development (R&D) and the ability to attract and retain the best talent, it seems unlikely to me that this will change any time soon. CUDA is key While a lot of attention is paid to Nvidia's edge in raw power, perhaps its most important, enduring advantage is in its CUDA platform. Think of CUDA as a sort of language that allows programmers to use GPUs for purposes other than rendering graphics (for which they were originally created). CUDA is the software foundation on which the complex scaffolding of AI is built. The higher-order development platforms and tools that almost all AI developers use are made to work with CUDA. This means that if a customer wanted to switch to a rival's chips, they would need to invest enormous time and money transforming their entire workflows and workforces -- either through retraining or firing and hiring new developers. While this isn't impossible, the cost of this makes it a nonstarter for most. CUDA keeps Nvidia's clients locked in to its ecosystem, willing to pay a premium. It's not an easy path forward Despite Nvidia's dominance, there are still a lot of challenges that lay ahead. I don't see any major hurdles in the near future that Nvidia can't easily clear. All signs point to the company continuing its blockbuster sales over the next year. Its major big tech clients have all committed to record amounts of AI-focused capital expenditures, much of which is earmarked for data center expansion. Longer term, however, a few big questions stand out. First, AI will have to begin delivering returns that can justify the vast sums being spent on its development. Promise and potential only get you so far. The shareholders of Alphabet, Meta, and their ilk will grow increasingly uneasy with the spending spree if a commensurate return isn't made clear. If this doesn't begin to happen within the next two years, I could see the money slowing. Second, while Nvidia is likely to maintain its edge for the foreseeable future, tech is an industry defined by disruption. An upstart chip firm using radical new technologies could burst onto the scene. Or, perhaps in less dramatic fashion, its major clients develop their own chips and make the switch in spite of the CUDA moat I discussed. Finally, Nvidia's success has become one of its biggest challenges -- at least for its stock price. The company delivered another monster earnings report last month, delivering nearly 80% sales growth year over year, yet Nvidia shares are down 21% in the last six weeks. There are macro factors that aren't helping, but the point remains that the market currently expects perfection from the company, and perfection doesn't exist -- unless you ask my fifth-grade violin teacher; then it does, and I'm just not capable of it. Still, there are few companies with the vision that Nvidia has demonstrated. Nvidia will be able to adapt to the challenges that lie ahead. It won't be all roses by any means, but I also think that over time, expectations of perfection will fade, and Nvidia's bottom line will continue to grow substantially. And considering that after the stock's recent decline, its price-to-earnings ratio (P/E) is now the lowest in many years -- well before the AI craze took off -- I think Nvidia makes a smart investment. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms and Nvidia. 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. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $664,271!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*. Don't miss out on the latest top 10 list, available when you joinStock Advisor.

3 Top Bargain Stocks Ready for the Next Bull Run | The Motley Fool

The recent market pullback has created some nice bargains in the technology space. Let's look at three stocks you can buy before the next bull market run. Trading at a forward price-to-earnings ratio (P/E) of 23 times based on this year's analyst estimates and a price/earnings-to-growth (PEG) ratio of near 0.4, Nvidia (NVDA 0.31%) finds itself in the bargain bin. Stocks with PEGs under 1 are typically considered undervalued, and it's difficult to find companies that have been growing as quickly as Nvidia. Nvidia has seen explosive growth, with revenue surging 383% the past two years from $27 billion in fiscal 2023 to $130.5 billion in fiscal 2025 (ended January). Meanwhile, analysts are expecting the company to grow its revenue by another 50% this fiscal year. This growth is being powered by the artificial intelligence (AI) infrastructure buildout, as Nvidia's graphics processing units (GPUs) are the preferred semiconductor chip used to provide the processing power needed to help train AI models and run inference. Meanwhile, in order to continue to advance AI models, these large language models (LLMs) need more and more processing power for training. This continues to lead to a surge in demand for Nvidia's chips, which are considered the best due to their hardware specs and because its CUDA software platform provides several libraries and tools to easily program its chips for various AI and high-performance computing tasks. As a result, the company has a more than 80% market share in the space. With AI infrastructure spending continuing to grow, Nvidia is well positioned to be a big AI winner. Another chip-related stock in the bargain bin is Taiwan Semiconductor Manufacturing (TSM 1.10%), or TSMC for short. The stock trades at a forward P/E of just 18 times and a PEG of around 0.6. The largest semiconductor contractor in the world, the company has become an invaluable part of the semiconductor value chain. It has several notable advantages over its competition, including much better economies of scale, technological expertise, and a well-trained work force. It's also a pure-play foundry, unlike Intel or Samsung, so it has no conflicts of interests with customers. This has helped the company become the leader in the space, especially with regard to advanced chips. Its ability to shrink chip sizes, which increases power while lowering power consumption, has made it an important partner to the largest chip designers in the world, including Nvidia and Apple. It also allowed TSMC to push price increases, which in turn is helping drive margin expansion. With AI chip demand continuing to soar, TSMC is set to see its strong growth continue. It's investing in capacity to try to keep up with demand, while also having pricing power, which is a strong combination. Trading at a forward P/E of just 17, Alphabet (GOOGL 0.05%) (GOOG 0.02%) is another leading tech stock on the clearance rack. The company's Google search engine holds about a 90% global market share, making it one of the premier digital advertising platforms in the world. However, the company is about much more than search. YouTube is the most watched video streaming platform and the fourth-largest digital advertising platform in the world in its own right. Meanwhile, the company's cloud computing unit, Google Cloud, is its fastest-growing segment, with revenue up 30% last quarter while segment operating income soared 142%. Google Cloud is known for its expertise in data analytics and machine learning, and it has a number of tools for AI development, data analysis, and data processing that make it an attractive choice for customers. It is also at the forefront of containers (packages containing things like code and libraries that apps need to run) and Kubernetes, which is the platform used to orchestrate containers. The pending acquisition of Wiz, meanwhile, will increase Alphabet's cybersecurity offering and help it become a leader in cloud security. Given the importance of Google Cloud and Wiz's strength in Kubernetes cybersecurity, this is a powerful acquisition that helps set the company's offering apart from the competition. Alphabet is also making strong inroads in the robotaxi market with its Waymo unit. The company has started to see market share gains in established markets and is beginning to expand to more cities across the U.S. It is testing its robotaxis in 10 new cities this year and has plans to launch services in Miami, Atlanta, and Washington, D.C. within the next two years. This also includes its first international foray, into Tokyo, Japan. Alphabet's collection of leading and emerging businesses are just too cheap to ignore at current levels.

Better Artificial Intelligence (AI) Stock: Nvidia vs. Broadcom

While Nvidia stock jumped more than 280% in the past two years, Broadcom recorded healthy gains of 160% during the same period. However, both AI stocks witnessed a substantial pullback in 2025 despite reporting solid growth in revenue and earnings. Nvidia stock retreated close to 18% this year, while Broadcom has recorded a sharper drop of almost 28%. The decline in their share prices can be attributed to the negative stock market sentiment this year arising out of the economic uncertainty created by the tariff-induced trade war. The probability of a U.S. recession has also been going up of late, which explains why investors are becoming risk-averse and are booking profits in stocks that have performed strongly in recent years. However, the pullback in shares of Nvidia and Broadcom could actually be a good thing for savvy investors looking to add potential long-term winners to their portfolios. That's because the AI market is currently in its early phases of growth and is expected to show an annual growth rate of 36% through 2030. But if you have to choose one of these two AI stocks right now, which one should it be? Let's find out. The case for Nvidia Nvidia kicked off the AI revolution three years ago with its powerful data center graphics processing units (GPUs) that were used by OpenAI to train its highly popular chatbot, ChatGPT. The chip designer became become the go-to supplier of AI GPUs for tech giants and governments across the globe, which resulted in a remarkable increase in the company's revenue and earnings. NVDA Revenue (TTM) data by YCharts Nvidia established a solid grip over the data center GPU market, controlling an astonishing 92% of this space in 2024, as per a third-party estimate. Nvidia's recent results indicate that it is unlikely to yield much ground in the data center GPU market as its latest products have become a runaway hit. Specifically, the company sold $11 billion worth of its latest generation of Blackwell AI GPUs in the previous quarter. Nvidia says that Blackwell "is the fastest product ramp in our company's history, unprecedented in its speed and scale." The initial success of the Blackwell processors can be gauged from the fact that rival Advance Micro Devices sold over $5 billion worth of AI GPUs last year. Looking ahead, the robust demand for Nvidia's AI GPUs seems here to stay as the company is witnessing strong demand for both AI training and inference applications. The company seems to have benefited from the recent breakthrough achieved by the arrival of cost-efficient reasoning models such as DeepSeek's R1, which led to an increase in demand for computing power. On its February earnings conference call, Nvidia management pointed out: Our inference demand is accelerating, driven by test time scaling and new reasoning models like OpenAI's o3, DeepSeek-R1, and Grok 3. Long-thinking reasoning AI can require 100x more compute per task compared to one-shot inferences. Blackwell was architected for reasoning AI inference. Blackwell supercharges reasoning AI models with up to 25x higher token throughput and 20x lower cost versus Hopper 100. Not surprisingly, Nvidia's rivals have been scrambling to accelerate the launch of new chips so that they can keep up. But that's easier said than done, as the chipmaker built a solid supply chain ecosystem and has a robust developer community that gives it an advantage over peers. Nvidia management remarked on the conference call that its "programmable architecture accelerates every AI model and over 4,400 applications, ensuring large infrastructure investments against obsolescence in rapidly evolving markets." As a result, the company has been able to achieve a 200x reduction in AI inference costs over the past couple of years. So, it won't be surprising to see Nvidia remaining the top player in the AI chip market in the long run, which is expected to generate a whopping $360 billion in annual revenue in 2030. Nvidia's data center revenue grew 142% in the latest fiscal year to a record $115 billion, and the size of the end-market opportunity suggests that there is still a lot of room for growth here. All this explains why Nvidia's revenue growth estimates for the next three fiscal years have seen upward revisions, with the company expected to show healthy double-digit growth even after the remarkable pace at which it has been growing in recent quarters. NVDA Revenue Estimates for Current Fiscal Year data by YCharts Nvidia, therefore, should continue to remain a top AI stock going forward. However, don't be surprised to see Broadcom follow in its footsteps. The case for Broadcom Broadcom doesn't compete directly with Nvidia in AI chips, as it sells application-specific integrated circuits (ASICs). These are custom processors that are designed to perform specific tasks, unlike GPUs, which are meant for general computing tasks. The specialized nature of the custom AI processors means that they can be more efficient and powerful while handling AI workloads, which is precisely the reason why Broadcom is seeing outstanding growth in its AI revenue. Broadcom's AI revenue more than tripled in the recently concluded fiscal year 2024 to $12.2 billion. However, a closer look at management's comments on the company's March earnings conference call suggests that its AI revenue could multiply impressively in the coming years. Broadcom's custom AI processors and networking chips are currently used by three hyperscale cloud customers. The company sees a potential annual revenue opportunity worth $60 billion to $90 billion from these three AI customers over the next three fiscal years. However, Broadcom has an additional four hyperscale customers that are utilizing its designs to manufacture custom AI chips. Two of these customers are on track to tape out their chips in 2025, which is the final development stage before the chips are sent for manufacturing. The other two hyperscale customers that Broadcom has added of late are going "to develop custom accelerators to train their next-generation frontier models." All this indicates that Broadcom's eventual AI-related revenue opportunity could be much larger than what the company is estimating. So, there is a solid chance that Broadcom may be able to outgrow Wall Street's growth expectations in the current and the next couple of fiscal years. AVGO Revenue Estimates for Current Fiscal Year data by YCharts A big reason why Broadcom's growth could be better than consensus estimates is because it is the leading player in the ASIC space, with an estimated market share of 55% to 60%. Broadcom's recent customer wins suggest that it could hold on to its impressive share in the future, which is why there is a strong likelihood that it will be able to significantly multiply its AI revenue in the future. The verdict It is clear that both Nvidia and Broadcom are dominant players in their respective AI semiconductor niches, which is why they are expected to keep growing at healthy rates going forward. What's more, their valuations tell us that investors cannot go wrong with either stock. Nvidia and Broadcom sport almost similar forward earnings multiples. NVDA PE Ratio (Forward) data by YCharts Investors looking to buy an AI stock right now can consider buying either Nvidia or Broadcom. In fact, they may even consider adding both these names to their portfolios as they are on track to capitalize on different but lucrative niches of the AI semiconductor market that should help them sustain their outstanding growth for years to come.

Nasdaq Correction: 3 Artificial Intelligence (AI) Stocks That Are Now Too Cheap to Ignore | The Motley Fool

These leading AI companies are some of the best stocks in tech to buy right now. One of the biggest trends driving the stock market over the last two years is artificial intelligence. Advancements in AI have the potential to change just about every industry in the world, and the technology is changing rapidly as big tech companies pour hundreds of billions of dollars into it. Investors' optimism about the possibilities unlocked by generative AI led a group of AI stocks to push the Nasdaq composite index up 43% in 2023 and another 29% in 2024. But 2025 has been a different story. The tech-heavy Nasdaq fell into correction territory in March, and it remains 13.5% below its all-time high as of April 2. The sell-off has been fueled in large part by growing economic uncertainty and worsening consumer confidence levels. However, for long-term investors, there are a handful of AI stocks that looked like bargains heading into 2025 that are now too cheap to ignore. Here are three stocks to put on your shortlist. Many investors originally saw the rise of AI chatbots like OpenAI's ChatGPT as major threats to Google parent company Alphabet (GOOG -3.11%) (GOOGL -2.99%). And while more and more consumers are shifting some of their search queries to AI tools, Alphabet has been a major beneficiary of the growth in AI spending and the advanced capabilities of generative AI. AI-powered tools like Circle to Search and Google Lens have driven more high-value product searches for Google. Meanwhile, the company is incorporating AI Overviews into more and more search results pages. These AI-generated answers to search queries have increased user satisfaction and engagement. On top of that, management says it's been able to monetize searches with AI Overviews at roughly the same rate as searches without them. However, the big growth driver for Google over the past two years and going forward is its cloud computing business, Google Cloud. Google Cloud provides compute power for developers to train and deploy new AI tools. Demand has grown quickly over the last two years, including a 30% increase in its most recent quarter. Importantly, Google Cloud's operating margin of 17.5% leaves a lot of room for improvement as it scales, as evidenced by the profit margins of its larger competitors. Management says the business would have grown even faster last year, but it remains capacity-constrained. It's investing roughly $75 billion to add computing capacity as quickly as possible. Those coveted processor cycles aren't cheap. Alphabet recently announced plans to acquire cybersecurity company Wiz for $32 billion after failing to buy it for $23 billion last year. If approved, the company would further bolster its cloud business, potentially adding appeal to attract new clients while adding capabilities that will retain existing customers. After falling over 20% from its highs at the start of the year, Alphabet stock now trades for just 17.6 times forward earnings estimates. That's an incredibly low price for a company with the immense growth potential of Google as AI powers its results on multiple fronts. Adobe (ADBE -3.74%) is another company many investors feel will get pinched by AI. However, the creativity unlocked by generative artificial intelligence could be a major value add for the premier software suite for graphic designers, photographers, and other visual artists. Adobe developed its Firefly AI model trained on its commercial stock image library. The tool is fueling faster adoption of Adobe's software and retention of its existing users. Management said it's seeing strong user growth of its free Adobe Express software, and generative AI MAUs climbed more than 4x in 2024. Total AI usage across its software suite increased by more than 3x last year. It's clear that AI is driving value for Adobe, as it has been able to increase pricing and lower churn. Management says AI-influenced average recurring revenue was more than $3.5 billion as of the end of 2024. It's not just Adobe's creative suite that's getting the AI treatment, either. Adobe has integrated AI into its ubiquitous Acrobat PDF software, enabling users to ask questions about documents, uncover key insights, and completely transform them into new material. It's also building out tools for marketers with its GenStudio line of software. GenStudio combines its marketing software and creative software with powerful generative AI tools to help advertisers develop and run campaigns across the web. Management said it sees the company reaching $30 billion in revenue by 2027, up from its guidance for $23.4 billion this year. That's 13% compound average revenue growth in 2026 and 2027. With stable operating margins, the company should see even stronger growth in earnings per share, as management consistently repurchases the stock as part of its capital return program. Adobe shares have fallen 35% from their 52-week high. At this price, the stock trades for just 18.7 times fiscal 2025 earnings expectations. Considering earnings growth should accelerate in 2026 and 2027, investors are getting a great deal at this price. Few companies are as integral to the advancement of artificial intelligence capabilities as Taiwan Semiconductor Manufacturing Company (TSM -5.36%), or TSMC. The company is responsible for manufacturing and packaging the most advanced GPUs and AI accelerator chips from top designers like Nvidia, Broadcom, AMD, and more. In fact, roughly two-thirds of semiconductor manufacturing spending goes to TSMC. There's a reason that the company holds such a dominant market share. It has unparalleled technological capabilities, enabling it to print chips nobody else can. That's especially valuable to a customer like Nvidia, which is constantly working to push the boundaries of what its chips can do. TSMC's technology lead benefits from a virtuous cycle. It attracts top customers willing to pay a premium for its product, which gives it more revenue than anyone else to invest in advancing its manufacturing capabilities. It's also able to invest in additional capacity to serve a growing customer base. So, when a chipmaker is seeing strong demand for an advanced chip design, there's only one option to actually print the chip: TSMC. Management expects AI-related revenue to double in 2025 after it tripled in 2024. In the long term, it expects compound annual growth in the mid-40% range over the next five years. It's investing heavily to achieve that goal. Capital expenditures will increase by 27% to 41% in 2025, reaching roughly $40 billion at the midpoint of management's outlook. The company also announced plans to expand its U.S. manufacturing facilities, with plans to invest an additional $100 billion in Arizona. That expansion will take some years to deploy, but the hope is that TSMC's U.S. investment plans will protect it from potential tariffs. Importantly, TSMC customers have proven willing to pay a premium for chips made in the USA. TSMC shares are down 24% from their all-time high reached earlier this year. At its current price, the stock trades for just 18.8 times forward earnings estimates. While there's certainly some geopolitical risk involved in buying the Taiwanese company, investors are getting a very good deal at the current price, considering the importance of the company to the future of AI.

Jensen Huang Recently Delivered Incredible News for Nvidia Investors | The Motley Fool

Nvidia (NVDA -7.62%) supplies some of the world's most advanced graphics processing units (GPUs) for data centers -- hardware that developers use to power and train artificial intelligence (AI) software. Demand for its chips far exceeds what it can currently supply, which helps explain how the company has added over $2.3 trillion to its market capitalization since the start of 2023. At Nvidia's annual GPU Technology Conference (GTC) last month, CEO Jensen Huang laid out some incredible catalysts that could accelerate the company's already rapid growth. With its stock currently trading down 27% from its record high amid the sharp sell-off in the broader market, this could be a significant buying opportunity. Large language models (LLMs) sit at the foundation of every AI application. These models are trained on mountains of data, and the more data an LLM can access, the "smarter" the resulting tool will be. However, training them requires massive amounts of computing power -- particularly parallel processing power -- which is why there is so much demand for Nvidia's data center GPUs. Up until recently, LLMs delivered "one-shot" responses, meaning a chatbot would rapidly generate a single output for every prompt input by the user. While this method was fast and effective, it failed to weed out inaccuracies, which detracted from their value and the user experience. Now, top developers like OpenAI, Anthropic, and DeepSeek are focusing on an entirely different approach called test-time scaling, or "reasoning." Rather than simply ingesting endless amounts of data, these models spend more time "thinking" before rendering responses to inputs. In other words, they make better use of the data they already have, and are more apt to clear up any inaccuracies behind the scenes before releasing the final output. This approach has been wildly successful, producing some of the most advanced AI models to date, such as OpenAI's GPT-4o series, DeepSeek's R1, Anthropic's Claude 3.7 Sonnet, and Alphabet's Gemini 2.5 Pro. However, reasoning models require significantly more computing power. Huang says each response consumes 10 times more tokens (words, punctuation, and symbols) because of how much "thinking" goes on in the background, and as a result, the models are also much slower to render a final output. Huang says GPUs will need to be 10 times faster to offset this, and he estimates that developers will soon need a staggering 100 times more computing power to deploy reasoning models with a satisfactory user experience. Nvidia's new Blackwell GPU architecture is a step in that direction. In some configurations, a Blackwell GB200 GPU can perform AI inference 30 times faster than the company's previous generation of chips, which were based on its Hopper architecture. Plus, last month, Nvidia revealed its new Blackwell Ultra architecture, which will be capable of delivering 50 times more performance than Hopper because it's specifically designed for reasoning models. The continuing shift toward reasoning models could be a significant tailwind for Nvidia's GPU sales. At GTC last month, Huang said the top four providers of cloud infrastructure services (and thus, the world's largest operators of data centers) have ordered a whopping 3.6 million Blackwell GPUs already, which is almost triple the number of Hopper chips they purchased last year. Those four cloud providers are Amazon Web Services, Microsoft Azure, Google Cloud, and Oracle Cloud Infrastructure. That list doesn't include other big spenders that are developing AI for their own purposes, like Meta Platforms, Tesla, and OpenAI, so the total number of Blackwell orders is almost certainly much higher. This could just be the beginning: Huang predicts AI infrastructure spending will top $1 trillion annually by 2028, and much of that will go toward AI accelerator chips such as those that Nvidia provides. Nvidia's data center business generated $115.2 billion in revenue during its fiscal 2025 (which ended Jan. 26). That was up 142% compared to the prior year. If Huang's forecast is right, the company's sales likely have substantial room to grow. The 27% drop in Nvidia stock from its recent all-time high has created an opportunity for investors to buy it at an attractive valuation relative to its history. It currently trades at a price-to-earnings (P/E) ratio of 36.9. That's its cheapest level in three years, and also a 38% discount to its 10-year average P/E ratio of 59.5. Moreover, Wall Street's consensus estimates (as provided by Yahoo! Finance) suggest that Nvidia's earnings per share (EPS) for fiscal 2026 will come in at $4.53. That gives the stock a forward P/E ratio of just 23.9. In other words, Nvidia would have to soar by 149% by the end of this fiscal year just to trade in line with its 10-year average P/E ratio of 59.5 (assuming Wall Street's EPS estimate proves to be accurate). With that said, I think investors should look beyond the next 12 months because, if Huang is correct, Nvidia shareholders' best returns might be realized over the next three to five years instead.

2 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run | The Motley Fool

The recent market sell-off has created some nice opportunities in the market for long-term investors, particularly among artificial intelligence (AI) stocks. This includes several AI semiconductor stocks besides Nvidia, which has also seen its stock come under pressure. Let's look at two AI chip stocks that investors can look to buy ahead of the next AI stock bull run. Advanced Micro Devices (AMD -8.57%) shares are down nearly 46% over the past year. However, that doesn't mean the company is performing poorly. In fact, AMD has seen strong AI-related growth over the past year, with its data center revenue soaring 94% to $12.6 billion. Data center growth decelerated a bit in its most recent reported quarter but still grew a robust 69% year over year, while overall revenue climbed 24%. While it's the distant No. 2 player in the graphic processing unit (GPU) space, the company is still riding the tide in AI infrastructure spending higher. AMD's chips continue to be used more for inference rather than training, which could be a good position to be in for the future. There should eventually be a shift toward inference as AI models mature, and there is a need for more real-time, rapid AI inference for things like cybersecurity detection, autonomous driving, and even personal shopping recommendations. Given that its chips are cheaper than those of Nvidia, it could eventually take some share in this market. Meanwhile, one place where the company currently shines is in the central processing unit (CPU) space. While GPUs provide the processing power, CPUs act more like the brain. While the market for data center CPUs isn't nearly as large as it is for GPUs, AMD has become the leader in the space and is gaining share. Last quarter, it said among hyperscalers (companies with massive data centers) that it had well above a 50% market share with its CPUs. It noted strong CPU gains within personal computers (PCs) as well. Management said AMD has a 70% market share on popular platforms such as Amazon, Newegg, and MindFactory. Management admits AMD's gaming segment has been weak, as there has not been a new gaming console launched in a few years. However, there is speculation a new Xbox could be released in 2027 and a new Playstation in 2028, which should lead to a rebound in this segment in a few years. Trading at a forward price-to-earnings ratio (P/E) of 22 times 2025 analyst estimates, AMD's stock is attractively valued, given its growth and the opportunities still in front of it. Broadcom (AVGO -4.97%) is another semiconductor company that has seen its stock take a hit, with its shares trading down roughly 32% so far in 2025. However, it has perhaps one of the biggest opportunities of all chip stocks ahead. Broadcom is making a name for itself as the go-to company to help customers design their own custom AI chips called ASICs (application-specific integrated circuits). While there are more initial upfront costs, and it takes considerable time to design them, custom AI chips perform better at the specific tasks for which they were designed and use less power than off-the-shelf GPUs. These chips are not as flexible in their uses as GPUs, but given the upfront costs, customers are not designing them for small projects. Alphabet was the first company to employ Broadcom in helping it design its custom Tensor Processing Units (TPUs), which are tightly integrated with Google Cloud's TensorFlow, its open-source library for machine learning. This tight integration has helped improve performance and lower power consumption costs while running Google AI workloads. Since then, Broadcom has been gaining more new custom AI customers. Including Alphabet, the company has three custom AI chip customers that are further along in their development. It believes these three customers represent a $60 billion to $90 billion serviceable market opportunity in its fiscal year 2026 (ending October 2026) alone. While some of this opportunity will go to GPUs, this is still a huge potential growth driver for the company. Meanwhile, it has been adding more AI chip customers recently, including Apple. It took about 15 months for Alphabet's chips to be designed and then deployed, which was considered very fast. So, this should lead to additional growth in a few years. In addition to custom chips, Broadcom also participates in the AI infrastructure buildout through its portfolio of networking technology components. These components, such as switches and network interface cards (NICs), help manage data flow and network communication. As AI clusters grow in size, this is becoming a more important part of the AI infrastructure puzzle. While its more commoditized chip businesses have been a drag, the company also owns an attractive software piece with VMware. It is driving growth by transitioning customers from perpetual licenses to subscriptions while also upselling them to its full VMware Cloud Foundation stack, which can virtualize entire data centers. At a forward P/E of under 26 times, Broadcom is an attractive stock to buy, given the big catalysts in front of the stock, especially with its custom AI chips.

Prediction: This Unstoppable AI Stock Will Be the Top Performing "Magnificent Seven" Stock of 2025 | The Motley Fool

While the "Magnificent Seven" stocks have been some of the best investments over the past few years, they've been poor performers in 2025. Investors are moving their money from stocks they deem risky to either cash or safer investments, and the Magnificent Seven are some of the stocks they turn to first to raise capital. These are: Meta is the best performing of the seven, as its stock price has been essentially flat since the beginning of 2025. The rest of the stocks are down at least 10% from their 2025 entry points, and most are down 20% from their highs established in February. However, we're just entering Q2, so there's a lot of time before flipping the calendars to 2026. Of these seven, which stock has the best chance to beat the rest? Tesla is easily the most volatile stock in this group, as it's dealing with some brand issues centering around CEO Elon Musk's involvement in President Donald Trump's administration. I'm not sure if it will be sorted out by the end of 2026, so I don't think Tesla will be the best pick. Apple has no growth to speak of and is only projected to increase sales by 4.6% this fiscal year, so it's also out. While I think Microsoft, Alphabet, Amazon, and Meta will have strong finishes to 2025, they don't have the growth that Nvidia has. Nvidia is my top pick of the Magnificent Seven, and I think it will be one of the best stocks in the market this year. While the market is worried about trade wars and tariff fears, Nvidia is going full steam ahead in powering the artificial intelligence (AI) revolution. Its graphics processing units (GPUs) are the computing muscle behind most of the AI models used today, and there could be incredible growth ahead. In 2024, data center capital expenditures reached around $400 billion. However, Nvidia expects that figure to rise to more than $1 trillion by 2028. That's monster growth for this industry, and Nvidia is well-positioned to capitalize on it with its best-in-class offerings. However, investors fear that Nvidia's stock has been on too big of a run and is too expensive right now. I think that's a bad way of looking at it, as Nvidia may not grow as rapidly as it once did but still has plenty of growth ahead to be the top-performing Magnificent Seven stock of 2025. If you look at its trailing price-to-earnings ratio (P/E), Nvidia is the second-most expensive of the Magnificent Seven group -- but only by a small margin (Tesla was removed from this chart because it trades for 131 times earnings, which makes the graph harder to read). Wall Street analysts project that Nvidia's revenue will grow at a 57% pace this year, which is faster than any other company in the Magnificent Seven. However, the trailing P/E ratio doesn't give Nvidia any credit for future growth. When you incorporate growth projections through the use of the forward P/E ratio, Nvidia's stock looks far cheaper than most of the Magnificent Seven. From this point of view, only Alphabet and Meta are cheaper than Nvidia, which makes me even more bullish on its stock than its peers. The market is selling Nvidia's stock due to fears of economic uncertainty that could potentially slow data center buildouts. However, competitors can't afford to fall behind in the AI arms race, so the bulk of planned spending should still occur. Once investors hear from the big tech companies about their Q1 results, I think it will be enough to turn these stocks around and head higher, with Nvidia poised to lead the way.

3 Artificial Intelligence (AI) Stocks to Buy During the Stock Market Downturn | The Motley Fool

With the stock market going through a downturn due to uncertainties about how tariffs will (or won't) affect the economy, it's opening up several investment opportunities in the artificial intelligence (AI) realm. AI has been the dominant trend in the market since 2023, so it should come as no surprise that these stocks are the first to sell off because investors are taking gains. Some also have a premium valuation that is only deserved if there is a ton of optimism in the market. I'm not focused on what will happen in the market in the next month or even the next year. Instead, I'm focusing on where the market is heading three to five years from now. With that mindset, AI stocks are still the best game in town, which is why I think investors should use the current dip as an opportunity to load up on some beaten-down AI stocks. There are multiple AI stocks that could be purchased right now, but I'm focusing on the ones with the best long-term outlook. That leads me to Nvidia (NVDA -7.03%), Taiwan Semiconductor Manufacturing (TSM -6.68%), and Broadcom (AVGO -4.97%). I think these three are fantastic picks, as all are expected to experience massive growth over the next few years. Nvidia CEO Jensen Huang sees a path toward data center capital expenditures nearing $1 trillion by 2028. Although the company won't capture all of that opportunity (there's more to a data center than Nvidia's GPUs), it is slated to take a large chunk of that spend. As a result, it should have a strong next few years, making it a great stock to load up on, with it down around 25% from its highs. Similar to Nvidia, Broadcom is slated to cash in on this massive build-out. Although Broadcom's business has many different offerings, its custom AI accelerator business is starting to take off. Custom accelerators, which Broadcom calls XPUs, compete against Nvidia's GPUs, as they are both hardware that clients can use to run AI workloads. However, workloads must be properly configured to run on an XPU, which makes them fantastic for one type of task but poor for any other. While XPUs may be more powerful than GPUs, their one-trick pony nature will keep them from completely dominating the AI computing sector. This is OK, as there is still huge demand for its XPUs. For its three customers that have created an XPU in collaboration with Broadcom, they believe a $60 billion to $90 billion addressable market will emerge by 2027. However, it also has four other clients that are coming online with their own XPUs, which will further expand this market. With Broadcom only generating $12.2 billion in AI revenue in FY 2024, this indicates massive growth. None of these companies can create their own chips, so they must purchase chips from chip foundries for their devices. Taiwan Semiconductor is a market leader in this area and supplies both Broadcom and Nvidia with chips for their various devices. By being a neutral party in the chip world, TSMC has an unparalleled vision of where their industry is heading, because chip orders are often placed years in advance. Over the next five years, Taiwan Semi's management sees AI-related revenue growing at a 45% compounded annual growth rate (CAGR). Overall, management expects a revenue CAGR of nearly 20%, which indicates huge growth ahead. This trio is expected to put up huge growth over the next few years, yet their stocks are on sale because of some short-term fears. Nobody knows exactly how tariffs will affect the global economy, but it's safe to say that most AI spending will likely still occur. Companies are looking for every advantage they can get over their competitors, and spending aggressively while others pull back will give them a leg up. As a result, most AI spending should still occur, as it will almost turn into a game of chicken with the AI hyperscalers. With the recent sell-off, all these are at least 25% down from their all-time highs. Each now trades for an attractive forward price-to-earnings (P/E) ratio. These stocks haven't been this cheap since the start of 2024, and are also nearing the valuation level of the broader market. The S&P 500 trades at 21.1 times forward earnings, so Taiwan Semiconductor already trades at a steep discount, and Nvidia and Broadcom aren't far behind. However, we know that all three of these companies are expected to grow much faster than the market over the next few years. This makes now an excellent time to scoop up shares of these AI leaders while they are on sale, as Q1 financial results announcements will likely turn these stocks around.

Prediction: This Artificial Intelligence (AI) Semiconductor Stock Could Start Soaring After April 16

The past year has been a difficult one for ASML Holding (ASML -2.74%) investors. Shares of the semiconductor equipment-making giant have lost more than 36% of their value during this period, but it won't be surprising to see the Dutch company's fortunes changing for the better when it releases its first-quarter 2025 results on April 16. ASML stock's struggle in the past year can be attributed to a combination of factors. Its weaker-than-expected performance in recent quarters, the overall negativity in the tech sector owing to the just ramped-up tariff war, and concerns about a potential slowdown in spending on artificial intelligence (AI) infrastructure are all headwinds. However, ASML's upcoming results could put these concerns to rest and help the stock regain its mojo. Let's look at the reasons why. ASML Holdings is on track to deliver a solid quarter ASML expects revenue of 7.5 billion euros to 8 billion euros for the first quarter of 2025. That would translate into an impressive top-line year-over-year jump of 46% at the midpoint of its guidance range. Investors can also expect a sharp spike in the company's earnings as it is forecasting a jump of 1 to 2 percentage points in its gross margin. Analysts are predicting a year-over-year jump of 85% in ASML's earnings for Q1 to 5.75 euros per share. Management remarked on the company's January 2025 earnings press release that "artificial intelligence is the key driver for growth in our industry." The company added that the growing adoption of AI applications is creating the need for more high-performance computing (HPC) and high-bandwidth memory (HBM) products. These products are manufactured using advanced chip nodes, which is why ASML management forecasted an increase in demand for its products and services. ASML's extreme ultraviolet (EUV) machines are used for manufacturing these advanced logic and memory chips. Not surprisingly, the adoption of these EUV machines is picking up momentum. Foundry giant Taiwan Semiconductor Manufacturing (TSM -6.68%), popularly known as TSMC, has been buying ASML's EUV lithography machines to manufacture advanced chips based on small process nodes that pack in more computing power and consume less energy. This explains why ASML saw a strong spike in new orders for its machines in the fourth quarter of 2024. The company's quarterly bookings figure jumped nearly 2.7 times on a sequential basis to almost 7.1 billion euros. Around 42% of ASML's bookings were for its EUV machines, and there is a good chance that it could continue to receive robust orders for its advanced chipmaking equipment, as recent developments in the semiconductor industry indicate. TSMC is one of ASML's key customers. The Dutch company got 15% of its revenue from selling equipment to Taiwan-based companies last year, suggesting that TSMC's capital spending this year could have a positive impact on ASML's business. After all, TSMC is set to increase its 2025 capital spending by almost a third at the midpoint of its guidance range when compared to last year's outlay of $30 billion. What's more, the foundry giant is set to direct 70% of this spending on advanced process nodes. As a result, it won't be surprising to see ASML's order book inflating further thanks to an increase in demand for its EUV lithography equipment. Micron Technology (MU -12.87%), another ASML customer, is also going to significantly increase its capital spending this year. The memory specialist has guided for a remarkable 73% increase in capital expenditures (capex) for the current fiscal year to $14 billion. Micron points out that the "overwhelming majority of the fiscal 2025 capex is to support HBM, as well as facility, construction, back-end manufacturing, and R&D investments." Micron's investments in building up its HBM capacity could head higher and drive further growth in its capital expenses. That's because the HBM market is expected to grow at an annual rate of 42% through 2033, according to Bloomberg Intelligence. The increasing HBM demand owing to the deployment of these chips in AI servers could therefore create the need for more EUV lithography equipment that ASML sells. A big reason to buy the stock before April 16 ASML is in a position to deliver stronger-than-expected results and guidance when it releases its quarterly report later this month. The stock could regain its mojo and go on a bull run if that's indeed the case, which is why it would be a good idea to load up on ASML stock while it is still cheap. ASML is trading at just 25 times forward earnings right now. That represents a discount to the tech-laden Nasdaq-100 index's earnings multiple of 29. The remarkable jump that ASML could deliver in its top and bottom lines and the potentially stronger investments in semiconductor capital equipment owing to AI could help change investor sentiment in its favor, which is why savvy investors looking to add a beaten-down AI stock that could soar in the long run would do well to buy ASML before its upcoming earnings report.

2 No-Brainer Artificial Intelligence Stocks to Buy Right Now | The Motley Fool

There's a lot of understandable concern in the market right now. Tariff uncertainty and worries that rising prices could lead to an economic slowdown are pushing share prices down across nearly every sector, artificial intelligence (AI) stocks included. While it's important not to dismiss real problems that might be on the horizon, it's just as crucial for long-term investors to look at stocks they want and ask themselves, "Is this a potential buying opportunity?" For some AI stocks that have tumbled over the past few months, the answer is "yes." That means opening a position or adding to one could be a smart move. Here are two artificial intelligence stocks that investors might want to consider right now. When ChatGPT burst onto the scene, it seemed to catch Alphabet (GOOGL -3.43%) (GOOG -3.21%) off guard. All of a sudden, another tool that could provide people with useful information more easily than searching online was readily available. Alphabet quickly shifted strategies to compete, rolling out new AI features embedded into its search tools. Most recently, it introduced an AI mode for search that expands its capabilities with more advanced reasoning that's better at follow-up questions. The company also continues to build out its Gemini chatbot, integrating its services into Google Workspace, and offering AI as part of its premium services. The latest version of Gemini is a good indicator that Alphabet is building its chatbot to be a leading player in the emerging AI agent space. Some estimates put the market size of AI agents at nearly $197 billion by 2034, and Nvidia CEO Jensen Huang has said that it will become a "multitrillion-dollar opportunity" in the coming years. Alphabet is also investing $65 billion to build new data centers to continue expanding its AI cloud footprint. While it trails Amazon and Microsoft, Google Cloud is still the third-largest cloud player, and its growing market share comes at a time when AI cloud sales are expected to surge to $2 trillion by 2030. Despite all of this, the stock's price is down 20% over the past three months. That drop is mostly due to tariff concerns and not because of Alphabet's underlying businesses. The decline means that the stock has a price-to-earnings (P/E) multiple of just 19.7, far cheaper than many of its tech peers and even lower than the S&P 500's P/E of 26.5. It might sound a little dramatic, but the dominance that Taiwan Semiconductor Manufacturing (TSM -6.68%) has in chip production means it is almost entirely building AI's future because the company manufactures an estimated 90% of the world's AI processors. A ramp-up in AI data center spending is fueling the growth of Taiwan Semiconductor Manufacturing (also known as TSMC), with 2024 sales jumping 30% to $90 billion. Management hinted that there's no reason to believe this will slow down anytime soon, and it expects AI revenue to double in 2025. Some AI naysayers think there won't be as much chip demand in the coming years as there has been recently, but with TSMC's dominance in advanced processor manufacturing, there's likely little long-term concern. Large tech companies are too afraid of falling behind in AI right now, and as AI services expand and improve, they will probably need more processors to achieve their goals. Like other tech stocks, TSMC has felt the share-price pinch lately and is down 20% over the past three months. That's an opportunity for investors who believe AI is just getting started and are looking to own one of the most important players in this space.

Nvidia Stock Plunged 19% in Q1: Time to Buy? | The Motley Fool

Nvidia (NVDA -7.03%) has been unstoppable. Its chips have been the preferred choice for video gamers for years, and now they are prized by the world's largest data centers. Over the last 10 years, the chipmaker's annual revenue has soared from $4.7 billion to $130 billion. Nvidia stock's meteoric rise hit a roadblock this year as investors weighed the consequences of tariffs on chip demand, in addition to increasing competition and other risks. The stock was down 19% in the first quarter. Demand for Nvidia's chips is still strong. Analysts are sticking with full-year revenue estimates that call for an increase of 57%, but the recent dip in the stock clearly reveals some investors doubting whether those targets are realistic in light of near-term headwinds. Should investors start a position while the stock is down, or take a pass? Nvidia is the dominant supplier of graphics processing units (GPUs) for data centers, which are used by all the leading cloud service providers. Its data center revenue jumped 93% year over year in the fiscal fourth quarter, with leading cloud services comprising about half of its data center business. Nvidia's new Blackwell computing system generated $11 billion of revenue in the quarter. "We're going to have to continue to scale, as demand is quite high, and customers are anxious and impatient to get their Blackwell systems," CEO Jensen Huang said on the fiscal Q4 earnings call. The stock's valuation looks very tempting, considering these demand trends. The shares trade around 24 times this year's consensus earnings estimate -- well below the stock's five-year average trailing price-to-earnings (P/E) multiple of 80. A low P/E for a high-growth business can often signal undervaluation and set the stage for significant gains. One reason the stock is down is the potential for increasing competition. Nvidia's sky-high profit margin of 56% says it is pricing its chips at whatever the market can bear, which reflects its status as the main supplier for artificial intelligence (AI) chips. This is great for Nvidia's profits, but it could push some of Nvidia's customers to look for less costly alternatives. For example, ChatGPT model maker OpenAI is reportedly designing its own AI chips to lessen dependence on Nvidia. Still, Nvidia has enormous resources to keep innovating to maintain momentum. Management said on the last earnings call that demand for AI inferencing is accelerating, driven by the popularity of models like OpenAI's ChatGPT. Inferencing could be a big deal for Nvidia's business. This is where a computer can anticipate and complete a task without human input. It is the next stage of AI development, but it requires 100 times more processing power per task. Nvidia's Blackwell was designed to meet this requirement. Every company faces risks, and Nvidia is certainly facing its share. While the potential impact of tariffs on leading chipmakers is still unknown, pressure on the rest of the economy could spill over to the chip industry, which historically ebbs and flows with the economy. Nvidia is also wrestling with chip restrictions in China, where sales of the company's data center chips are still well below the levels seen when chip controls were first put in place in 2022. However, China makes up a relatively small percentage of Nvidia's business. OpenAI's ambition to make its own AI chips is a risk to watch, but Alphabet's Google and Amazon have been deep into making their own chips without hurting Nvidia's momentum. These tech giants remain two of Nvidia's biggest customers. There is not a viable replacement for the raw horsepower that Nvidia's GPUs provide for developing advanced AI models, training self-driving cars, and building humanoid robots. Nvidia's recent earnings report shows that it is on course for another year of strong growth. It guided for fiscal Q1 revenue to be up roughly 65% year over year. While investors shouldn't ignore the risks, the stock is also offering solid value right now. I would still buy the stock, but it's wise to size your position for the possibility that one of these risks manifests itself. When customers are impatient to buy the product, revenue is growing at high rates, and the stock is trading at 24 times forward earnings, it's a bargain. If Nvidia meets long-term earnings growth estimates of 35% on an annualized basis, the stock could soar in value over the next several years.

3 Reasons to Buy Nvidia Stock Like There's No Tomorrow

Some of the best companies in the world have gotten caught up in the recent market sell-off, including Nvidia (NVDA -7.03%). The stock is trading down more than 25% off its highs set earlier this year as of this writing. However, this weakness has created a nice buying opportunity in the stock. Let's look at three reasons why investors should buy the stock like there is no tomorrow. 1. Nvidia is a cheap growth stock on sale The recent stock market pullback has left Nvidia at a very attractive valuation. It now trades at a forward price-to-earnings ratio (P/E) of only 24.5 based on this year's analyst estimates. That's not all, though; its price/earnings-to-growth (PEG) ratio is below 0.5. PEG ratios take into consideration a company's growth, and a multiple under 1 is generally considered undervalued. As such, Nvidia's stock is extremely cheap when you factor in its growth outlook. Data by YCharts. Nvidia has been one of the premier growth stocks in the past couple of years. Its revenue has skyrocketed 383% in the past two years, going from $27 billion in fiscal 2023 to $130.5 billion in fiscal 2025 (ended January). It's not often you see a company the size of Nvidia double its revenue in a year and then double it again the next year. Meanwhile, its strong revenue growth is expected to continue in 2025. Analysts expect the company to grow its revenue this year by another 54% to $204.4 billion and then another nearly 24% in 2026 to $252.4 billion. While Nvidia hasn't given any full-year guidance, it did forecast its fiscal Q1 revenue to jump by 65%. 2. Nvidia's business has a wide moat Nvidia is the clear leader in graphic processing units (GPUs), with an over 80% market share. GPUs were originally designed to speed up graphics rendering in video games. However, today, they have become the backbone of artificial intelligence (AI) infrastructure due to their ability to process vast amounts of data quickly. Along with their high memory bandwidth, this makes the chips perfect for handling the rigors of AI workloads. Nvidia, meanwhile, has set itself apart in the field with its CUDA software platform, which it created to allow its chips to be programmed for tasks outside their original purpose. Its closest competitor, Advanced Micro Devices, didn't come out with its own software solution to program its chips until about a decade later, giving Nvidia a big lead in this area. Meanwhile, the company has since built a collection of libraries and tools on top of CUDA, called CUDA X, that now allows developers to better utilize its software for AI applications. The moat that Nvidia has created was on display in recent testing done by semiconductor research company SemiAnalysis, which found AMD's GPUs unusable out-of-the-box for AI training due to bugs in its software and that this took away any on-paper advantages its GPUs may have had. Meanwhile, it noted that Nvidia's GPU's out-of-box performance was "amazing" with little need for any technical support from Nvidia engineers. 3. Nvidia is the AI infrastructure winner Given its wide moat, what really matters most for Nvidia at this point is AI infrastructure spending. The company has a dominant market share, so as long as AI data center spending continues to rise, the company is well-positioned to continue to grow. Right now, the only way to significantly improve AI models is through training them on larger and more diverse datasets. This requires more computing power, which comes from AI chips, particularly GPUs. As AI models have advanced, there has been a steep upward curve in the number of GPUs used to train them. Meta Platforms' Llama and xAI's Grok models are two of the best publicly available examples, with the latest versions of both models using 10 times as many GPUs to be trained on than their predecessors. Meanwhile, cloud computing companies are among the biggest buyers of GPUs as they look to expand capacity to keep up with AI workload demand. In addition to building their own AI models, these companies essentially provide AI as a service where they give access to pre-trained foundation models, machine learning frameworks, and APIs, which developers use to integrate AI into their existing apps. The three big cloud computing companies will spend around $250 billion expanding their data center infrastructure this year in aggregate to keep up with the growing demand for these services. In addition, other tech companies, such as the aforementioned Meta and xAI, are also spending big on AI infrastructure developing AI models, while OpenAI, the maker of ChatGPT, has announced plans along with Softbank and others to spend $500 billion on data center capital expenditure over the next few years through the Stargate Project. Large enterprises in various industries, meanwhile, are also investing in AI infrastructure, often taking on a hybrid cloud strategy where they use both on-premise infrastructure and cloud services. For its part, Nvidia sees AI data center infrastructure spending topping $1 trillion in 2028. If that happens, Nvidia's stock has plenty of upside from here.

1 Artificial Intelligence (AI) Stock That I Just Bought on the Dip | The Motley Fool

The artificial intelligence (AI) investment wave has taken a downturn over the past few weeks. The stock market has sold off across the board, and AI stocks have taken a bit more of a beating. This opened up a few investment opportunities and allowed me to add another stock to my portfolio: Broadcom (AVGO -4.97%). It's a very wide business and has its fingers in many industries, but there's one that I'm most excited about: custom AI accelerators. This business unit has the potential to grow massively over the next few years, and it could be exactly what the stock needs to crush the market. Right now, the AI computing market is dominated by graphics processing units (GPUs) mainly made by Nvidia. GPUs are fantastic at processing complex calculations due to their ability to compute in parallel. They're also extremely flexible at performing multiple tasks and can be used to mine cryptocurrency, process engineering simulations, discover healthcare drugs, or train AI models. However, if you consider what the AI hyperscalers are doing, it's clear that they don't need all of the incredible capabilities that Nvidia packs into a GPU. Instead, if they could do one type of workload very well (like train AI models or handle AI model inference), that would be all they need. That's where Broadcom's custom AI accelerators (which it calls XPUs) step in. The chips can be designed to handle a specific type of workload very effectively and far outperform Nvidia's GPUs at the cost of losing flexibility. Many AI hyperscalers are willing to make this trade-off, which is why Broadcom projects huge growth in this sector. By 2027, management expects that the market size for its XPUs will reach $60 billion to $90 billion. Considering that this division generated $12.2 billion in 2024, that's a huge uptick. And that market opportunity is from only three clients. Broadcom also has two clients that are expected to release their first XPU design later this year and two more that have recently asked it to help develop their own XPUs. This will massively expand the original range that management quoted, which is extremely bullish for the stock. While it's unlikely that Broadcom will be able to capture all of that market opportunity, if it can capture a decent chunk by 2027, it will significantly boost the stock. Over the past 12 months, the company generated around $54 billion in revenue. So, expecting revenue to double between now and 2027 isn't an outlandish assumption. That's only three years away, and most companies growing only at market pace double once every seven years. As a result, I would expect Broadcom's stock to trade at a premium to the market. This is exactly the case, as the S&P 500 (^GSPC -5.97%) trades for 21.1 times forward earnings. However, even with that premium, the company's expected growth should allow it to blow past the market in total return, which is why I bought the stock. There is one unknown: tariffs. President Donald Trump announced his list of tariffs, and Taiwan was one of the hardest-hit countries, with a 32% rate. This is a big deal because many of the chips that go into Broadcom's XPUs come from Taiwan Semiconductor Manufacturing. But there is a specific carve-out for semiconductors that exempts TSMC from tariffs for now. It will be some time before investors know the true effect. Nonetheless, I think the tailwinds powering the AI race will likely prevail and should still bolster Broadcom's XPU business, which is why I took a position in the stock. With the stock getting whacked alongside the broader market once the tariffs were unveiled, I may consider adding even more to my position.

1 Magnificent Artificial Intelligence (AI) Stock Down 25% to Buy Hand Over Fist Before April 17 | The Motley Fool

Taiwan Semiconductor Manufacturing (TSM -6.68%), popularly known as TSMC, is having a forgettable 2025 so far despite starting the year on a bright note. Shares of the foundry giant have slipped by more than one-third from the 52-week high they achieved on Jan. 24. TSMC's pullback is a result of the overall negativity in tech stocks on the back of the tariffs imposed by the Trump administration. It is feared that the tariff war will lead to an increase in manufacturing costs for technology companies that make products outside the U.S., bumping up the cost of deploying artificial intelligence (AI) data centers and forcing tech giants to rein in their spending. Additionally, tariffs are expected to negatively affect the U.S. economy's growth, which explains why there has been an increase in the probability of a recession. All these factors have weighed on TSMC stock this year. However, a closer look at the company's sales in the first two months of the year suggests that the stock could come out of the rut it is in. Specifically, it won't be surprising to see TSMC stock stepping on the gas once again following the release of its 2025 first-quarter earnings report on April 17. Let's see why TSMC is poised to deliver stronger-than-expected results and guidance this month. Taiwan Semiconductor's revenue in the first two months of 2025 increased at an impressive pace of 39% when compared to the first couple of months of last year. At this pace, TSMC seems well on its way to exceeding its revenue guidance for Q1 2025. When TSMC released its fourth-quarter 2024 results in January this year, the company guided for $25.4 billion in revenue for Q1 at the midpoint of its range. That would translate into a year-over-year increase of 34%, a big improvement over the 13% revenue growth it delivered in the year-ago period. However, Taiwan Semi's growth trajectory for the first two months of the year indicates that it could end up outperforming its own expectations. Meanwhile, earnings should also grow at a terrific pace, considering that TSMC is expecting a year-over-year jump of 5.5 percentage points in its operating margin. Not surprisingly, analysts are expecting a 49% increase in Q1 earnings from the prior-year period to $2.05 per share, though it could do better than that considering the robust AI chip demand. TSMC's surging sales can be attributed to the rapidly growing demand for AI chips that are now being deployed in multiple applications ranging from data centers to smartphones to personal computers (PCs) to automotive. Nvidia, which is one of TSMC's top customers, reported recently that it is witnessing an unprecedented demand for its latest generation of Blackwell AI graphics processing units. Taiwan Semiconductor fabricates the Blackwell GPUs designed by Nvidia. It has been focused on aggressively increasing its AI chip production capacity to fill Nvidia's orders. Reports suggest that Nvidia has cornered more than 70% of TSMC's advanced chip packaging capacity to meet Blackwell demand. What's more, TSMC's advanced chip packaging module shipments are reportedly increasing by 20% every quarter, which is why the company is looking to add two more facilities to boost supply. Nvidia is expecting its revenue to jump 65% in the current quarter, and it gets most of its revenue from selling AI data center chips. Throw in the supply chain improvements that TSMC is making, and it's easy to see why there's a good chance that its quarterly performance and guidance could crush Wall Street's expectations. Meanwhile, other AI chip companies such as Broadcom and Marvell Technology have also called for outstanding growth in their sales. Broadcom and Marvell are benefiting big time from the rapidly growing demand for custom AI processors, which they design and TSMC manufactures. Similarly, another TSMC customer -- Advanced Micro Devices -- is witnessing an uptick in demand for central processing units that power personal computers (PCs), a market that's getting a boost thanks to generative AI. The future seems bright for Taiwan Semiconductor, as it is in a solid position to make the most of the secular growth of the chip market thanks to AI. TSMC stock's recent pullback means that it can now be bought at under 25 times trailing earnings, while its forward earnings multiple of less than 19 points toward robust growth in the bottom line. These multiples are cheaper than the Nasdaq-100 index's price-to-earnings ratio of around 29 (using the index as a proxy for tech stocks). Analysts are expecting a 29% increase in TSMC's earnings in 2025. Even better, analysts have been increasing their earnings growth expectations for the next couple of years. However, there is a good chance that TSMC's growth could be better than analysts are expecting. The company is forecasting its revenue to increase at a compound annual growth rate (CAGR) of 20% for the next five years. That's why investors looking to add an AI stock that could deliver healthy long-term gains and that's trading at an attractive valuation right now can consider loading up on TSMC before it starts soaring.

Prediction: Taiwan Semiconductor Manufacturing Will Soar Over the Next 5 Years. Here's 1 Reason Why. | The Motley Fool

Taiwan Semiconductor Manufacturing (TSM -6.68%) is the world's leading semiconductor (chip) foundry. Its foundry business model means it makes chips tailored to its customers' specific needs, and key partners include Nvidia, Apple, and Advanced Micro Devices. The stock has been on a roll, up over 200% in the past five years, despite pulling back 25% year to date. And the next five years seem just as promising thanks to its role in the artificial intelligence (AI) pipeline. To see how vital the company, also known as TSMC, is to AI development, it's important to work backward, beginning with the end product: AI applications. For AI applications to be effective, they need to be trained using lots (and I do mean lots) of data. This data must be processed and managed in advanced data centers. A key component of those data centers is the graphics processing unit (GPU), which has fueled Nvidia's explosive rise to become the world's third-most valuable company in just a few years. But while Nvidia designs the GPUs, TSMC produces them. It's important to note that no other company is making powerful AI chips at the scale and efficiency of TSMC. That's why the company produces around 90% of the world's advanced chips. The AI-related demand has paid off for TSMC, too. Last year, its high-performance computing segment (which includes AI chips) grew 58% year over year and made up 51% of its $90.1 in total revenue. Over the next five years, management expects a mid-40% compound annual growth rate for AI accelerator revenue. Given this bullish outlook, the stock should be in for a good run over the next five years.

Nasdaq Sell-Off: 2 Solid Artificial Intelligence (AI) Stocks to Buy Hand Over Fist Before They Soar 70% to 85%, According to Wall Street | The Motley Fool

Technology stocks have taken a big beating in recent months as the Trump administration's policies have led investors to press the panic button amid concerns that the tariff-fueled global trade war could hurt the U.S. economy and may even send it into a recession. Investors have become risk-averse, which explains why high-flying tech stocks that were benefiting big time from the rapid adoption of cloud computing and artificial intelligence (AI) have pulled back substantially. The tech-heavy Nasdaq Composite index, which hit its most recent high on Dec. 16 last year, has shed nearly 23% of its value since then and now trades in bear territory. Tech investors got another big shock on April 3 as the Nasdaq Composite fell 6% in a single day in the wake of the wide-ranging tariffs announced by the Trump administration. That's not surprising as the trade war is expected to escalate manufacturing costs for tech companies with overseas supply chains. All this negativity explains why tech companies saw big sell-offs despite robust growth in recent quarters. However, the Nasdaq sell-off also means that there are solid companies that can be bought at attractive valuations right now. Let's take a closer look at two such names that are growing at an attractive pace and seem like great bargains right now. AI leader Nvidia's (NVDA 3.38%) stock price fell 13% last week following the announcement of what the Trump administration labeled as "reciprocal tariffs." Broadcom (AVGO 5.30%) saw a similar drop. The U.S. levied import taxes of 32% on products coming from Taiwan. Both Nvidia and Broadcom are fabless chipmakers that rely on Taiwan-based foundry giant Taiwan Semiconductor Manufacturing (TSM -0.68%) to fabricate their chips. Not surprisingly, both semiconductor stocks were in sell-off mode after tariffs were announced. However, a key thing to note here is that semiconductor imports are exempt from the tariffs levied last week, which should come as a reprieve for Nvidia and Broadcom (at least for now). The growing consensus is that chip stocks could see less of a headwind during the ongoing trade war. Truist Securities analyst William Stein adds that the race to develop AI applications, even at high costs, by customers of Nvidia and Broadcom could help them maintain their healthy growth levels. Another thing worth noting here is that President Donald Trump has adopted a soft stance on TSMC after the latter announced a $100 billion investment to build advanced chipmaking facilities in the U.S. This planned outlay will take TSMC's investment in the U.S. to $165 billion and is reportedly one of the reasons why semiconductor imports have been exempted from reciprocal tariffs. As such, Nvidia and Broadcom's manufacturing costs may remain in check, and they may be able to sustain their impressive growth rates considering the huge amounts being spent on AI infrastructure. U.S. tech giants are expected to raise their capital spending this year by 46% to $325 billion thanks to their AI efforts. Nvidia and Broadcom are expected to be key beneficiaries of this massive outlay. Nvidia dominates the AI data center graphics processing unit (GPU) market with a 92% market share. Broadcom reportedly controls an impressive 70% of the custom AI chip market. Both these markets are forecasted to see impressive growth in the long run. While the market for AI GPUs is expected to clock 31% annual growth through 2030 and generate $373 billion in annual revenue, Broadcom's addressable market in custom AI processors could exceed a range of $60 billion to $90 billion in the next three years. These lucrative markets already led to outstanding growth for both companies. Nvidia's revenue in the latest fiscal year shot up 114% to $130.5 billion along with a 130% increase in earnings. Broadcom reported a 25% jump in revenue in the first quarter of fiscal 2025 to $14.9 billion along with a 45% bump in the bottom line. Looking ahead, the potential improvement in productivity and the global economy thanks to the benefits of AI is the reason why these massive infrastructure investments could be sustainable in the long run. That's why buying Nvidia and Broadcom for the long haul could turn out to be a smart move, especially considering their attractive valuations and upside potential. As already noted, Broadcom and Nvidia saw robust growth in their revenue and earnings. Even better, their valuations make them bargain buys right now. Nvidia and Broadcom stocks trade at identical forward-earnings multiples of 22. What's more, their price/earnings-to-growth (PEG) ratio further indicates that they are cheap when factoring in the growth that they could deliver. Nvidia has a PEG ratio of 0.91 based on the five-year earnings growth that it could deliver (as per Yahoo! Finance), while Broadcom's reading stands at 0.39. A PEG ratio of less than 1 means that a stock is undervalued when its earnings growth potential is taken into account. Throw in the fact that analysts are upbeat about both stocks' potential performance in the coming year, and it is easy to see why investors should consider buying them. Out of 67 analysts covering Nvidia, 91% recommend buying it. Its median 12-month price target of $175 points toward an 85% jump from current levels. Meanwhile, 89% of the 44 analysts covering Broadcom recommend buying it, with the median price target of $250 pointing toward a 70% jump in the next year. Both stocks could indeed deliver such terrific gains based on their growth potential. Analysts expect Nvidia's earnings to increase by 51% in the current fiscal year, and Broadcom could deliver a 35% increase. So, investors can consider buying these two AI stocks following their recent pullbacks as they seem capable of soaring impressively in the next year and beyond.

2 AI Stocks That Are Screaming Buys in April | The Motley Fool

April has gotten off to about as bad a start as a month can have in the stock market. The S&P 500 plunged more than 10% in a two-day span following President Donald Trump's announcement of global tariffs, and the Nasdaq Composite has now entered a bear market, down more than 20% in less than two months. While the sell-off may be hard to endure, long-term investors know that falling stock prices are good for net buyers of stocks as they make them cheaper, allowing you to buy more shares. On that note, let's take a look at two AI stocks that are top buys right now. Arm Holdings (ARM 0.69%) has been an expensive stock since its initial public offering (IPO) in September 2023, but it's now trading down roughly 50% from its all-time high, making it less expensive than it's been at any time in more than a year. While the semiconductor sector is cyclical, Arm is more resistant to macroeconomic pressures than its peers due to its unique business model. Arm licenses its CPU architecture to companies like Apple and Nvidia, and then collects royalty revenue once the products with those designs are sold. That's proven to be a resilient business model as Arm already has royalty revenue in its pipeline, since it typically takes two years for its customers to go from licensing to production. Half of Arm's royalty revenue comes from designs that are at least 10 years old, showing its designs have a long shelf life. Arm also has a competitive advantage in its industry because its architecture requires significantly less power than competing alternatives such as the x86 architecture from Advanced Micro Devices and Intel. That's given it dominant market share in the smartphone segment and growing market share in cloud computing. Its forward P/E is now down to 55, which looks like a great price to pay for a stock with Arm's competitive advantages and growth potential. Another stock that has plunged in the last several weeks is AppLovin (APP 5.84%), a high-flying adtech stock. AppLovin was hounded by short-sellers, in part, because of skyrocketing growth last year. The stock has plunged due to its lofty valuation and fears about a slowdown in the economy, especially after Trump's global tariffs announcement. The short-seller charges appear to be trumped up, targeting the stock because of its rapid growth as the company has emerged as a leader in advertising software. Its purpose-built Axon AI-based recommendation engine has delivered extraordinary growth after being trained on the company's mobile games. AppLovin's growth appears to be just beginning as the company expands from mobile games to e-commerce, and in 2025 it aims to tap into Connected TV (CTV) advertising, a massive market, and expand to new industries beyond direct-to-consumer brands. It also has product improvements planned, including a self-service dashboard powered by AI agents. AppLovin's growth numbers speak for themselves as revenue in its advertising segment jumped 75% last year to $1.84 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was strong as well at $1.28 billion. Digital advertising tends to be vulnerable to economic slowdowns so it's not surprising to see the stock pull back in response to fears of a recession. The stock now trades at a forward P/E of less than 30. Those estimates could come down, but the company still has a long growth path ahead of it. That could be delayed, but it will come back as we get through this economic cycle. If AppLovin can deliver even a fraction of its recent growth rate, the stock should be a winner from here.

Prediction: After Losing Over $1 Trillion in Market Cap This Year, Nvidia Stock Will Rebound in Epic Fashion. Here's Why.

For much of the past two years, the S&P 500 and Nasdaq Composite were fueled to record levels thanks to a small collective of megacap artificial intelligence (AI) stocks. Known as the "Magnificent Seven," Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Tesla, and Nvidia (NVDA 7.99%) have largely been a good group of shares to own for the last couple of years. However, sentiment around these AI leaders has shifted significantly in 2025. As of this writing, each of the Magnificent Seven stocks has seen a negative return on the year. Nvidia's shares alone are down some 27% this year. Back in January, the chipmaker's market capitalization reached an all-time high of $3.7 trillion. Today, its valuation has cratered to $2.4 trillion. After losing over $1 trillion in market cap, is there any hope left for Nvidia investors? I think the answer is a resounding "yes." Let's dig into what caused Nvidia stock to spiral, and explore what tailwinds could reignite some life back into the semiconductor darling. What caused Nvidia stock to drop like a rock? There are several factors that have influenced the turbulence in Nvidia stock so far this year. For starters, the stock took a big hit in late January after a Chinese start-up called DeepSeek released an AI model similar to ChatGPT, but claimed that it built and trained its AI on older Nvidia chipsets. Seemingly overnight, investors went into a panic, wondering how demand for Nvidia's newest chip architectures would be impacted, given the DeepSeek claims. Over the last two months, ongoing step by the White House to implement new tariff policies have caused more trepidation across the capital markets. Investors have naturally started wondering how other countries might react to tariffs, and how any retaliatory policies could affect trade, prices, shipping, and overall business operations. These events have eventually morphed into one large, widespread tornado filled with fear. Given how much Nvidia stock has run up over the last two years, investors started taking gains and hoarding cash, given all the uncertainty over the broader macroeconomy and what specific business performances could look like going forward. Now what? Why do I think Nvidia stock is poised to rebound? I know this information might paint a dismal picture for Nvidia, but smart investors know that there is much more to the story, besides some geopolitical tensions and competing AI platforms from overseas. First, some of Nvidia's largest customers include its Magnificent Seven cohorts. For example, cloud hyperscalers Alphabet, Amazon, and Microsoft all use Nvidia chips in their data centers. Moreover, leadership at Meta Platforms and Tesla have also specifically referenced their reliance on Nvidia's graphics processing units (GPU) on multiple occasions -- typically during earnings calls. As we learned during Q4 and full-year 2024 earnings a few weeks ago, cloud hyperscalers are forecasting nearly $260 billion of capital expenditure (capex) spend this year, with Meta Platforms adding potentially up to another $65 billion on top of that sum. On top of this, investors have finally gotten a taste of how Nvidia's newest GPU architecture, Blackwell, is performing. During the fourth quarter, Blackwell generated $11 billion in revenue -- outperforming management's expectations. Moreover, during Nvidia's annual GTC conference a few weeks ago, CEO Jensen Huang revealed successor product lineups to Blackwell, underscoring Nvidia's commitment to innovation and the speed at which the company is moving. In my eyes, Nvidia's business might actually be in the strongest position it's been since the AI revolution started in late 2022. These trends showcase how robust demand is for AI infrastructure, an opportunity Nvidia should likely benefit from, given the successful results of the Blackwell launch and the company's plans to continue releasing even more superior technology for years to come. In all honesty, I wouldn't be surprised if Nvidia shares continue to fall in the near term. With that said, I think it's clear that the negativity surrounding Nvidia has more to do with broader concerns around the economy and less about the company's actual performance. Given the company's current trajectory and continued accelerated demand from its largest customers, I think Nvidia's actual business is in good shape. Sure, tariffs could put a dent in the company's cost structure and take a nominal toll on margins in the short term, but Nvidia's long-term picture remains intact. I think now is a time to heed the advice of Warren Buffett by taking advantage of the fear in the markets and be a little greedy. Shares of Nvidia look dirt cheap right now, and I think in time, investors will begin to realize that the company's actual performance is still impressive -- despite some headaches in the broader market. My prediction is that by the end of the year, much of the hoopla around tariffs and potential AI competition from overseas will subside, and Nvidia's financial performance will speak for itself. Hence, several months from now, I think Nvidia stock will experience some newfound excitement and rebound in epic fashion.

Why New AI Winners Marvell Technology, Credo Technology, and Nebius Group Plunged in March

Both Marvell and Credo reported earnings early in the month, and both actually reported fairly good results. However, the problem was that all three of these AI stocks rallied in a big way in 2024, and came into the month with high valuations. Therefore, any imperfections were amplified, as uneasiness over potential tariffs and the threat they pose to AI capital spending increased through the month. These new AI darlings deliver, but investor expectations were sky-high Marvell had perhaps the most interesting earnings release of these stocks during March. Revenue rose a solid 27% year over year, and adjusted non-GAAP (generally accepted accounting principles) EPS rose 30.4% to $0.60. Both figures came in ahead of analyst expectations. Marvell's strong numbers were mainly due to its custom ASIC revenue, where the company provides semiconductor IP to major cloud companies that make custom AI accelerators. That segment has skyrocketed over the past two years, and management also projected very strong growth for this year as well. However, when management was asked about a competitor potentially vying for Marvell's main customer Amazon, CEO Matt Murphy reiterated that Marvell saw strong growth in Amazon revenue this year and next, but wouldn't comment on whether Amazon was working with another company on another custom ASIC, or "XPU." So while the current picture looks good for Marvell, that uncertainty really slammed the stock, given that Marvell's valuation had ballooned to over 81 times adjusted earnings at its January highs. Credo Technology was also a recent highflier heading into its earnings release in early March. Credo produces IP that goes into AI chiplets, but the company's main growth driver has been its active electrical cables (AECs), which connect data center switches more efficiently, and in a smaller form-factor, than many competing technologies. Even though the stock had begun correcting in February, shares still weren't cheap entering the month. Prior to its March 4 earnings report, the stock still traded at around 20 times sales. Credo actually blew away analyst expectations, with revenue up a whopping 154.4% and adjusted EPS rallying 525%, and the stock rallied immediately in the aftermath. However, the jump was short-lived, as tariff and economic fears soon intensified, putting into question the company's future growth projections. At its lofty multiple, there was plenty of room for Credo to fall. Nebius, meanwhile, used to be known as Yandex, essentially the "Google" of Russia, the country's leading search engine, along with other technology assets. The stock had stopped trading on the Nasdaq when Russia invaded Ukraine in 2022, but after Yandex divested its Russian assets, the stock began trading once again on the Nasdaq in August 2024, and is now headquartered in Amsterdam. Renamed Nebius, the company is now using its data center expertise to build an AI-focused "neocloud," akin to CoreWeave. The company has raised cash from divestitures and a funding round late last year, and has just begun to scale its business. While the company made just $37.9 million in revenue last quarter, that figure was up 466% over the prior year. While earnings before interest, taxes, depreciation, and amortization (EBITDA) was negative at -$75.5 million, that was actually an improvement over the prior year. Nebius' valuation is a bit hard to figure, given that the reimagined company is relatively early in its life cycle. It achieved a $90 million annualized revenue run-rate (ARR) last quarter, which actually missed expectations, but management sees that growing to $220 million in just the first quarter, which would be a big inflection. Another positive? Nebius has $2.45 billion in cash and no debt, about half its current valuation. That's unlike CoreWeave, which has a debt load some investors may find problematic. However, like the other two, Nebius' valuation, which had rallied to over $10 billion around the time of its late February earnings, was perhaps far too ahead of itself. Thus, when earnings weren't perfect, the stock plunged, along with skepticism about the general economy. As exciting as AI is, remember valuation The tech market is dealing with two potential revolutions today: the Trump administration's new tariff policies that threaten to upend existing supply chains from Asia, as well as the ongoing AI revolution. Given that concerns about the former have recently overtaken enthusiasm for the latter, the recent sell-off may be a fantastic buying opportunity. Just be aware that even companies well-positioned in AI are still be prone to big sell-offs if their valuations get stretched. And while it's a great thing to have a long-term outlook, AI technology investors should be aware of valuation when deciding to take on or add to AI positions.

Prediction: This Artificial Intelligence (AI) Stock Will Be Worth More Than Nvidia in 2030 | The Motley Fool

Nvidia has emerged as one of the most valuable companies in the world thanks to the AI movement, but the company's long-term growth looks questionable. Megacap technology stocks have been some of the biggest and longest-standing beneficiaries of the artificial intelligence (AI) revolution. While growth stocks in the tech sector have experienced at least some form of action since AI emerged as a megatrend, these gains have been fleeting for most companies -- leading to prolonged periods of outsize volatility. But for big tech, the gains have been quite steady over the last couple of years. The company that has enjoyed the most upside so far is semiconductor powerhouse Nvidia, which has seen its market value rise by trillions -- making it one of the most valuable companies in the world. While owning Nvidia stock has helped some investors realize unprecedented gains and wealth, I see a different member of the "Magnificent Seven" as the better long-term opportunity. Let's explore the dynamics between Nvidia and Amazon (AMZN -2.61%) and assess why the e-commerce and cloud computing darling could be the more valuable company by next decade. Over the last two decades Amazon has extended far beyond its e-commerce marketplace. Today, the company operates across cloud computing infrastructure, advertising, streaming and entertainment, logistics, grocery delivery, subscription services, and more. By diversifying its ecosystem, Amazon has acquired a lucrative combination of retail and corporate consumers. For a couple of years now, Amazon has quietly been pouring billions into a number of AI-related initiatives as it begins to build the next phase of its business. Some of the higher-priority moves the company has made includes investing $8 billion into a start-up called Anthropic, which has become an integral component of the company's cloud computing platform, Amazon Web Services (AWS). Amazon has also been focusing on building AI data centers, its own line of custom silicon chipsets, and doubling down on robotics automation processes for its fulfillment centers. If you look at the revenue and profit trends above, you might be questioning why Amazon is making these investments in the first place. Well, just check out the disparity between Nvidia's growth and Amazon's. It's clear that the slopes of Nvidia's revenue and profit lines are far steeper than Amazon's. With that said, I'd caution investors against dismissing Amazon's potential. Revenue and operating profits in AWS have been accelerating considerably since the Anthropic partnership commenced a couple of years ago. In addition, Nvidia sells some of the most important pieces of hardware and software needed to develop AI. In other words, Nvidia has been enjoying faster gains compared to its peers because companies need their products. Amazon, by contrast, has spent the last two years building new products and services that have yet to fully scale. For these reasons, I think Amazon is in the early days of a new period of exponential growth. Below, I'll detail why Nvidia may be staring at a considerable slowdown over the next several years. The primary tailwind fueling Nvidia's business for the last couple of years is demand for compute and networking equipment for data centers. Companies investing in AI infrastructure rely heavily on chipsets called graphics processing units (GPUs), which is a piece of hardware that Nvidia specializes in designing. For a while, Nvidia had the luxury of virtually no direct competition. This provided the company with an enormous bargaining chip in the form of pricing power -- essentially charging a premium for its GPUs as companies all around the world lined up to buy them. Although the launch of Nvidia's newest GPU architecture, Blackwell, is off to a strong start, I am beginning to question how much longer the company's pricing power is going to last. Advanced Micro Devices has finally launched its own line of competing GPUs, the MI300 accelerators. Although AMD's data center GPU business is much slower than that of Nvidia, it is growing at a fast clip while maintaining profitability. In addition, AMD is able to compete with Nvidia when it comes to price -- which has helped the company attract the likes of Oracle, Meta Platforms, and Microsoft as early adopters of the MI300 architecture. Beyond direct competition, other hyperscalers such as Microsoft and Alphabet are joining Amazon in developing their custom silicon chips. With the addition of more chipsets coming to market, Nvidia faces the risk that businesses begin to see GPUs as a commoditized piece of hardware. As a result, Nvidia may be forced to loosen its pricing structure in order to remain competitive in the GPU realm -- a dynamic that will likely begin to show some meaningful deceleration across sales and profit margins. The chart below illustrates the price-to-earnings (P/E) ratio for Amazon and Nvidia over the last three years. It's interesting that the ongoing sell-off in the Nasdaq has converged both companies' P/E multiples to essentially the same value (hovering right around 30). In other words, although Nvidia's market cap of $2.3 trillion is much higher than Amazon's $1.8 trillion, both businesses are valued similarly on a P/E basis. While I do think each stock is poised for a rebound, I think investors may begin to apply some more scrutiny over Nvidia. The company has been sizzling hot for the last two years and the momentum was surely going to stall out at some point. Now as more competition begins to enter Nvidia's core market, the company is going to have to invest in other areas of the AI landscape in order to continue winning over enthusiasm from growth investors. By contrast, Amazon has already been making a number of investments -- many of which have yet to scale and fully bear fruit. For these reasons, I think Amazon is the better buy and hold than Nvidia right now, as I think the company is positioned to accelerate both sales and profits for years to come -- hence commanding a premium multiple over its peers down the road.

Best AI Stock to Buy Now: Nvidia vs. Palantir Technologies | The Motley Fool

Among the 27 analysts who follow Palantir, the median target price is $96 per share. That implies a roughly 18% upside from the current share price of around $81, as of April 8. Investors shouldn't necessarily take Wall Street at its word. Here's a closer look at Nvidia and Palantir. The investment thesis for Nvidia is simple: Its dominance in accelerated computing, a discipline that brings together specialized hardware and software to speed up complex data center workloads, means Nvidia is ideally positioned to monetize artificial intelligence (AI). Its graphics processing units (GPUs), also called AI accelerators, are the most coveted chips on the market. And the company is a leader in AI networking gear. Beyond that, Nvidia supplements its data center hardware with a robust suite of software development tools called CUDA. The platform comprises hundreds of code libraries, frameworks, and pretrained models that assist engineers in building everything from AI agents to autonomous cars and robots. No other chipmaker has a software ecosystem remotely comparable to CUDA. Toshiya Hari at Goldman Sachs last year wrote, "We believe Nvidia will remain the de facto industry standard for the foreseeable future given its competitive advantage that spans its hardware and software capabilities." Nvidia reported exceptional financial results in the fourth quarter, beating estimates on the top and bottom lines. Revenue increased 78% to $39 billion on strong momentum in the data center segment driven by demand for AI infrastructure. Meanwhile, non-GAAP (adjusted) earnings rose 71% to $0.89 per diluted share. Wall Street expects Nvidia's adjusted earnings to increase 51% in fiscal 2026, which ends in January. That estimate seems reasonable given that Grand View Research anticipates 36% annual growth in AI spending across hardware, software, and services through 2030. And the current valuation of 35 times earnings looks cheap by comparison. Investors should feel comfortable buying a position in this AI stock today. The investment thesis for Palantir centers on its unique ability to operationalize artificial intelligence for clients across the commercial and government sectors. To elaborate, while many companies provide AI development tools, Palantir actually helps customers build and deploy AI applications in a way that solves problems and improves decision-making. Chief Revenue Officer Ryan Taylor recently explained, "Our unique capability lies in moving from prototype to production." Also, CTO Shyam Sankar added, "Years of foundational investments in our infrastructure and ontology have positioned us uniquely to harness and deliver on AI demand." Forrester Research in the second half of last year ranked Palantir as a leader among AI platform providers. Palantir looked strong in the fourth quarter as it beat expectations on the top and bottom lines. Customers climbed 43% to 711, and the average spend per existing customer ticked up 20%. Revenue increased 36% to $828 million, the sixth straight acceleration, and non-GAAP earnings climbed 75% to $0.14 per diluted share. Wall Street expects Palantir's adjusted earnings to increase 37% in 2025. That estimate may be a little low given International Data Corp. (IDC) anticipates 40% annual growth in AI platform spending through 2028. But the current valuation of 200 times earnings would look pricey even if Palantir's earnings grow twice as quickly as Wall Street anticipates. I think patient investors can buy a very small position today, but I also believe Nvidia is the better buy at its current price.

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

The artificial intelligence (AI) trend played a central role in the stock market's rise over the past couple of years. Numerous companies benefited from the proliferation of this rapidly advancing technology, and investors bought their shares hand over fist based on impressive growth rates and sunny long-term prospects. However, 2025 is so far turning out to be a far-less-happy experience for those with tech-heavy portfolios. Investors have been selling off AI stocks and booking profits as they look to preserve their capital amid the ongoing volatility and economic uncertainty caused by President Donald Trump's actions to adjust the economy to his liking. The tech-laden Nasdaq Composite index has already entered bear market territory (down more than 22% as of Tuesday morning), and it remains to be seen how long the negativity is going to last amid the ongoing trade war triggered by Trump's tariff policies. JPMorgan analysts predict that the U.S. economy will enter a recession in 2025 thanks to the tariffs. So it won't be surprising to see investors staying on the defensive and protecting their capital. Yet at the same time, savvy investors sitting on surplus cash may want to consider picking up shares of top AI stocks that are trading at attractive valuations amid the ongoing sell-off. That's because AI adoption is currently in its early phases and the technology is expected to see widespread growth thanks to the productivity gains it could deliver. Two AI stocks that got hammered down to attractive valuations recently are C3.ai (AI -5.17%) and The Trade Desk (TTD -2.41%). Both could turn out to be big winners in the long run. Enterprise AI software provider C3.ai's stock trades down by 44% year to date. As a result, it trades at a price-to-sales ratio of 6.5, well below its 12.3 P/S ratio at the end of 2024. The company's sales are growing at a healthy rate, and its generative AI solutions are gaining traction among a diverse customer base. As a result, C3.ai's growth rate is accelerating. Revenue in the first nine months of its fiscal 2025 increased by 25% year over year, compared to the 15% growth it reported in the first nine months of its fiscal 2024. That can be attributed in part to the company's strategy of partnering with major cloud service providers such as Microsoft, Alphabet's Google, and Amazon, and offering its generative AI solutions on their platforms. The good part is that the company has been extending its relationships with these tech giants to improve visibility and increase its reach. Explaining its partner strategy, C3.ai arranged for its generative AI service to analyze its Q2 and Q3 financial reports and then summarize them through statements read out by the AI on the company's February earnings conference call. C3.ai's agentic AI said: The most significant development in Q2 was the expansion of our strategic alliance with Microsoft Azure, which we believe will be an inflection point in the enterprise AI industry. This partnership not only expanded our sales reach but also shortened our sales cycles, positioning us for accelerating growth. C3.ai said it shortened its sales cycle by 20% following its expanded Microsoft partnership. Even better, it witnessed a 460% quarter-over-quarter increase in the number of agreements it signed with customers. Not surprisingly, it's following a similar playbook with other cloud partners as well. It recently expanded its relationship with Amazon Web Services to offer "advanced enterprise AI solutions together, further enhancing our global reach and execution speed." All this helps explain how C3.ai closed 66 agreements last quarter, up by 72% from the prior year. Another thing worth noting is that its existing customers -- both government and commercial -- adopted more of its solutions. This is probably one of the reasons why analysts have raised their revenue growth expectations for the company. With the demand for generative AI software solutions expected to grow at an annualized rate of 30% through 2033, there is a good chance that C3.ai will continue growing at healthy rates beyond the next three years, which is why buying this AI stock following its recent slide looks like the right thing to do from a long-term perspective. Share prices of The Trade Desk have crashed by 60% so far this year, and one reason why is because of the poor quarterly results and guidance it released in February. However, with the bad news already priced in and The Trade Desk trading at 59 times earnings right now -- as compared to 189 times earnings at the end of 2024 -- it seems to be worth buying. After all, The Trade Desk has been growing at a faster pace than the digital ad market in which it operates. It has been using AI in its programmatic advertising platform for the past seven years, automating the purchase and sale of digital ad inventory in real-time with the help of big data. This is one of the reasons why advertisers have found The Trade Desk's platform attractive, driving healthy growth in its revenue over the years. Now, it is doubling down on integrating AI into its programmatic advertising platform. The company pointed out on its February earnings conference call that it is transitioning all of its clients from a legacy platform to its AI-powered Kokai platform, which is more effective and improves "the ability of advertisers to find value and precision as they expand their audiences and grow their businesses." That's a smart thing to do considering that the adoption of AI in the digital ad market is expected to grow at an annualized rate of almost 27% through 2030. So the Trade Desk's efforts to make AI pervasive across its programmatic ad platform should ideally help the company sustain its healthy growth rates in the long run. The Trade Desk will be working on bolstering its sales force, making structural changes to the business, and making its product development teams more agile to keep up with the changing trends in the programmatic ad space. These efforts will weigh on its bottom-line growth in 2025 -- analysts expect the company's earnings to grow by just 8% to $1.79 per share. But the forecast for the next two years points toward better times. So, The Trade Desk's relatively attractive valuation and the massive opportunity in the programmatic ad market -- which is expected to generate a whopping $2.75 trillion revenue in 2030 -- are the reasons why buying this stock makes sense right now as the addition of AI-focused tools should allow it to corner a nice chunk of this space.

Nvidia and Palantir Are Down 37% and 41% From Their Respective All-Time High -- but It Isn't Time to Buy Just Yet | The Motley Fool

Wall Street's artificial intelligence (AI) darlings aren't the bargains you might think. Though numerous factors played a role in sending the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite to respective closing highs in late 2024 and early 2025, nothing has been more pivotal for the investing community than the evolution of artificial intelligence (AI). Giving software and systems the capacity to reason and act without the need for human oversight affords AI a seemingly limitless growth runway. It also opens the door for AI-driven software and systems to evolve to learn new tasks without human assistance. In Sizing the Prize, the analysts at PwC estimate AI will grow into a $15.7 trillion addressable global market by 2030. If this forecast is even remotely in the ballpark, it means countless businesses involved in AI hardware/infrastructure and real-world application are going to benefit. As of the closing bell on April 4, shares of Nvidia and Palantir had respectively plunged 37% and 41% below their all-time high. While some investors might view this significant downdraft as an opportunity to pounce, three glaring headwinds suggest it's not time to buy shares of either company just yet. Over the next 10-plus years, there's a high likelihood AI will transform industries and meaningfully improve the operating efficiency and margins of prominent public companies. But over the short run, history is definitely not in the corner of AI giants like Nvidia and Palantir. Dating back to the proliferation of the internet in the mid-1990s, every next-big-thing technology has endured an early stage bubble-bursting event. Without fail, investors consistently overestimate the initial adoption rate and early stage utility of next-big-thing trends. With expectations overshooting reality, the bubble eventually bursts. The simple fact that most businesses are nowhere close to optimizing their AI solutions or generating a positive return on their investments in artificial intelligence signals that investors have, once again, overestimated early utility and adoption rates. If there's a silver lining here for Nvidia and Palantir, it's that both benefit from healthy backlogs. Palantir typically signs multiyear contracts with the U.S. government for its Gotham platform, while overwhelming demand for Nvidia's Hopper and Blackwell GPUs have orders backlogged. Even if the AI bubble bursts, as history suggests it will, sales wouldn't immediately fall off for either company. Nevertheless, businesses on the cutting edge of next-big-thing trends are typically hit hardest when bubbles burst. If history were to rhyme once more, shares of Nvidia and Palantir would have considerably further to fall. Although most investors are probably tired of hearing about President Donald Trump's tariff policy, it's the second big reason of three why investors would be wise to keep their distance from Nvidia and Palantir Technologies. On April 2nd, a day Trump referred to as "Liberation Day," he introduced a sweeping 10% global tariff, as well as a flurry of reciprocal tariffs on countries that have historically held adverse trade imbalances with the U.S. While President Trump's goal is to raise revenue via tariffs, protect American jobs, and return manufacturing back to the U.S., it's quite possible this approach could have negative consequences. In December, four New York Federal Reserve economists at Liberty Street Economics published a report that examined the performance of stocks exposed to Trump's China tariffs in 2018-2019. Unsurprisingly, companies exposed to China tariffs performed worse on days these tariff announcements were made. But what you might not realize is that these underperforming companies also, on average, saw their sales, profits, employment, and labor productivity decline from 2019 to 2021. Even though Nvidia doesn't import from China, it does have contractual agreements in place with chip fabrication giant Taiwan Semiconductor Manufacturing. Countries that are critical to the semiconductor industry were hit with sizable tariffs, which could negatively impact Nvidia's margins, as well as hurt demand for its products in these overseas markets. While Palantir doesn't have to worry about direct tariff implications -- it offers cloud-based, AI- and machine learning-driven platforms -- there is the possibility that worsening trade relations caused by tariffs could reduce demand for the company's solutions outside the U.S. The final of three reasons that explains why Nvidia and Palantir Technologies aren't worth buying just yet is their respective valuations. To state the obvious, value is itself subjective. What one investor finds to be pricey might be viewed as a bargain by another. Nevertheless, history has left little margin for error with either company. For example, when Palantir reached its all-time closing high of $124.62 per share on Feb. 18, its price-to-sales (P/S) ratio hovered around 100! To put this figure into context, other leading businesses of next-big-thing trends, such as Amazon, Microsoft, and Cisco Systems prior to the dot-com bubble, peaked with P/S ratios ranging from 31 to 43. Even Nvidia's P/S ratio topped out at 42 last summer. Despite losing 41% of its value, Palantir's P/S ratio is still hovering around 60, which is a level history conclusively shows isn't sustainable. It should be noted that while Nvidia's P/S ratio has more-than-halved to 18, it's still considerably pricier than its "Magnificent Seven" peers, relative to sales. Magnifying this valuation concern is the reality that the stock market is historically pricey. It entered 2025 with the third-highest Shiller price-to-earnings (P/E) Ratio when back-tested to January 1871. Using correlations as a guide, the five previous times the Shiller P/E surpassed 30 during a bull market eventually led to declines of 20% (or greater) in the Dow, S&P 500, and/or Nasdaq Composite. When the stock market rolls over, companies with premium valuations tend to get hit hard, as you're probably noticing with Nvidia and Palantir. However, the stock market isn't close to being inexpensive, despite the recent tumble in equities. With more downside projected by the Shiller P/E Ratio, shares of Nvidia and Palantir are likely to be dragged lower.

Stock Market Crash: 3 Tech Stocks You Can Buy and Hold for the Next Decade | The Motley Fool

With the stock market falling more than 10% in two days, we have officially witnessed a stock market crash. Stocks, meanwhile, remain volatile given uncertainty over the impact of tariffs and the ongoing trade war. While I would not rush into stocks, this could be a good time to start dipping your toe slowly into high-quality names that you'd want to own for the next decade or more. Let's look at three tech stocks that fit that bill. Despite semiconductors being exempted (for now) from the tariffs slapped on Taiwan, Nvidia (NVDA -1.64%) has not been spared in the recent market sell-off. However, it is still the best-positioned company in the world when it comes to benefiting from the buildout of artificial intelligence (AI) infrastructure. It's also left the stock trading at a very attractive valuation with a forward price-to-earnings ratio (P/E) of under 21 times based on this year's analyst estimates and a price/earnings-to-growth (PEG) ratio below 0.4. Stocks with PEGs under 1 are generally viewed as undervalued, so Nvidia's stock is very cheap based on this metric. Nvidia's graphic processing units (GPUs) have become the backbone of AI infrastructure due to their fast processing power, while the company's CUDA software platform and AI-specific libraries and tools that make them easily programmable for AI workloads have created a wide moat for the company. With AI still viewed as a once-in-a-generation opportunity, it is still a high spending area for companies despite the recent market turmoil. Cloud computing companies, which help customers customize foundation AI models and deploy them on their infrastructure, have been leading the way with spending to keep up with demand. Meanwhile, companies building their own foundation AI model have also been spending big on AI infrastructure. Enterprises have been looking to use hybrid cloud solutions when it comes to AI, needing to beef up their on-premises infrastructure. With AI infrastructure still poised to increase, Nvidia's stock looks like a solid long-term option. Another stock that has been punished is Amazon (AMZN -2.61%), with the recent market sell-off taking the stock to one of the cheapest valuations in its history. As of this writing, it is trading at a forward P/E of around 27 times. Amazon is the world's largest e-commerce retailer and the world's largest cloud computing company by market share. The company is investing heavily in AI to improve both its businesses. Its cloud computing segment, Amazon Web Services (AWS), is the biggest beneficiary so far, with the segment seeing 19% revenue growth last year. Meanwhile, it's spending big to keep up with growing demand, with a capital expenditure (capex) budget of around $100 billion this year. The company's services for helping customers customize their own AI models and apps using its own and third-party foundation models have been a strong growth driver. Meanwhile, the company has developed its own custom AI chips that can help performance and use less energy, helping to save on costs. Amazon has also brought AI to its e-commerce businesses, which is helping the company become more efficient. It is doing things like using AI to optimize routes for its delivery drivers and deploying AI-powered robots that can recognize damaged items before they are shipped, and those are saving the company money. Along with its strong, high-margin, sponsored ad business, Amazon is seeing nice operating leverage. This could be seen last quarter as its North American e-commerce segment revenue rose 10%, while the segment's operating income soared 43%. Amazon is a high-quality company on sale. Alphabet (GOOGL -1.59%) (GOOG -1.92%) is the dominant player in search with Google, but that's not all the company does. It has a vast digital advertising network, where it serves ads both to its own sites as well as third parties. Google is the world's largest digital advertising platform, while its YouTube streaming service is the fourth largest. The company continues to have an opportunity with AI as it develops its own AI chatbot with Gemini, incorporates AI into its search results, and provides AI Overviews. In addition, Alphabet owns the third-largest and one of the fastest-growing cloud computing companies with Google Cloud. Revenue for this segment jumped 30% last quarter, but like other cloud providers, growth could have been even more if it were not capacity-constrained. The company is also in the process of buying cloud cybersecurity company Wiz, which should help differentiate this business even more. It has also developed its own custom AI chip, which, when used together with GPUs, helps improve AI inference times and lower costs. Alphabet has also taken the lead in the robotaxi market with Waymo, which is the only service currently offering paid rides in the U.S. While it's still early in the game, Waymo has been gaining significant traction in its early markets and is now expanding more rapidly into new cities. This business has a lot of potential. In addition, it is also at the forefront of quantum computing with its Willow chip. Trading at a forward P/E of 16 times, Alphabet's stock is in the bargain bin.

Got $3,000? 2 Artificial Intelligence (AI) Stocks to Buy and Hold for the Long Term | The Motley Fool

It's hard to watch the value of your investments falter in a short period, but everyone is in the same boat. The good news is that market declines are historically excellent buying opportunities. Markets can fall but they inevitably hit bottom and skyrocket back to new highs over time, providing handsome gains for investors who ride through the volatility. If you've got $3,000 you don't need for other life priorities like reducing debt, this is a great opportunity to invest in competitively positioned companies at better prices. The technology sector will continue to churn out monster winners over the long term. Spending on artificial intelligence (AI) is expected to reach $1.1 trillion by 2031, according to Statista. Here are two stocks to profit off this trend over the long term. Nvidia (NVDA -1.64%) is enabling the rapid adoption of AI. Its graphics processing units (GPUs) are used in everything from playing video games to powering the largest data centers, where the AI magic happens. It has led the GPU market for many years and continues to dominate, making it one of the best AI stocks to consider holding for the long term. CEO Jensen Huang will go down as one of the great business leaders of the 21st century. He started Nvidia over 30 years ago and instilled a corporate culture that constantly looks for new opportunities. This is how Nvidia adapted its GPU technology from running video games to powering entire computing systems for training large language AI models. Nvidia's share of the AI chip market is estimated to be over 80%. It is seeing growing demand from several markets. Leading cloud service providers make up about half of its data center revenue. Nvidia also expects revenue for its autonomous vehicle solutions to reach $5 billion this year. Leaders in healthcare like Mayo Clinic and Illumina are using Nvidia's technology to speed up drug development and AI-powered health services. Competition will intensify, as other semiconductor companies and cloud leaders are making their own custom AI chips. But Nvidia is a good bet for the long term based on its pace of innovation. In addition to chip hardware, Nvidia also offers software tools like CUDA and TensorRT, which help customers get the most out of Nvidia's GPUs for a given task. Nvidia offers everything needed to build a data center for the AI era. Nvidia is strong financially. It earned $73 billion in net income on $130 billion of revenue last year. The company has $35 billion of net cash sitting in the bank. These resources are enabling it to continue innovating to meet growing demand for advanced computing systems. With Nvidia seeing demand across multiple markets like healthcare and automotive, the stock is a good buy on the dip and should continue to reward long-term investors. Snowflake (SNOW 1.59%) is a leading cloud-based platform that helps companies gather valuable insights from their data. Its data management services are offered through the leading cloud services, including Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, and it is starting to see strong adoption for AI offerings. Its cloud-agnostic position is an advantage. Companies can use Snowflake's data services across multiple clouds, which enables more collaboration and positions the business to capture market share as demand for AI software increases. Over 4,000 customers are now using Snowflake's AI and machine learning tools on a weekly basis. The stock's recent decline sets up a great buying opportunity. Snowflake continues to report strong revenue growth and sees existing customers spending more on its services. This is noted by a 28% year-over-year increase in product revenue last quarter, with a 126% net revenue retention rate. Snowflake now has 580 customers generating more than $1 million in product revenue, up from 461 a year ago. Competition is tight in the cloud market, but a key sales pitch for Snowflake's services is cost savings. Management said on its last earnings call that it is seeing more customers save over 50% by moving their data from other providers to Snowflake. AI adoption is pushing more companies to find cost-effective ways to use AI with their data so they don't get left behind. This is a huge opportunity for Snowflake. The market for enterprise infrastructure software is expected to double from 2023 levels to reach $342 billion by 2028, according to Gartner. Snowflake is not profitable on a net income basis, but it generated $884 million of free cash flow on $3.4 billion of product revenue last year. The company's growth on top of a lower share price has brought its price-to-sales multiple down to 12, which is reasonable for a fast-growing cloud leader and should set the stage for attractive long-term gains.

The Stock Market Has Crashed: My Top 5 Dirt Cheap Tech Stocks to Buy Now | The Motley Fool

President Trump's announcement of tariffs on imports from countries worldwide has rocked the stock market -- and the tech-heavy Nasdaq Composite (^IXIC 12.16%) has led the decline, crashing more than 20% from its most recent high. Why are tech stocks being hit so hard? These companies rely on production of parts and finished goods in countries around the world, from China to India -- and the companies now will have to pay the new import duties as they bring these items into the U.S. All this has prompted investors to worry about tech earnings ahead, fleeing shares of these companies. As a result, the valuations of many well-established tech players have plummeted, leaving them at dirt cheap prices. Of course, Trump's tariffs represent a risk, and we don't yet know how the situation will play out. But throughout time, solid companies always have been able to manage challenges and go on to recover and grow. It's unlikely the government and tech giants themselves will allow the worst to happen. This means now is a good time for long-term investors to go bargain hunting for stocks that may win over time. Here are my top five dirt cheap tech stocks to buy now, each trading for 23x forward earnings estimates or less. Nvidia (NVDA 18.34%) is the global leader in artificial intelligence (AI) chips, and this has helped the company generate double- and triple-digit quarterly revenue growth over the past couple of years. We're still in the early phases of AI growth, with, as chief executive officer Jensen Huang says, about $1 trillion of outdated computers to update worldwide -- so a huge growth opportunity lies ahead. The company recently released its latest chip architecture, Blackwell, and demand soared past supply, showing Nvidia's strength in the marketplace. To reinforce its leadership, Nvidia recently shared its roadmap to update chips on an annual basis, with detailed information on advancements to come. Today, Nvidia stock trades for 21x forward earnings estimates, down from about 50x just a few weeks ago. This represents a rare opportunity to get in on the leader in a high-growth market for a song -- and investors who seize this chance may thank themselves a few years from now as the AI boom continues. Meta Platforms (META 14.45%) represents another strong bet on the future of AI. The company is known for its social media apps, from Facebook and Messenger to WhatsApp and Instagram -- but today, it's building its presence in AI too. Meta AI, available across its apps, has become the world's most-used AI assistant, and Meta aims to eventually develop AI assistants to help all its users across their needs. Why is this important? These AI assistants will spur us to spend more time on Meta's apps -- and that should encourage advertisers to advertise more there, lifting Meta's revenue. The company announced as much as $65 billion in AI spending this year and aims to build a data center so big that it could cover part of Manhattan. Right now, Meta is trading for 20x forward earnings estimates, down from 29x back in February. This is a great moment to get in on Meta for its long-established leadership in social media and the billions in advertising revenue that it generates -- as well as the company's potential to become an AI giant. Broadcom (AVGO 18.31%) is a networking powerhouse, producing thousands of products used in a variety of areas -- from data centers to your living room. Revenue has soared in recent times as big cloud service providers (CSPs) scale up their AI infrastructure and come to Broadcom for networking solutions and its XPU chips. Typically, Broadcom's chips are used for networking-related tasks such as managing the flow of data -- this is compared to Nvidia's graphics processing units (GPUs), which generally are used for jobs like the training and inferencing of models. In the most recent quarter, AI revenue jumped 77% to more than $4 billion, and Broadcom expects this positive momentum to continue. Three major CSPs are on track to each reach 1 million XPU clusters in 2027, and Broadcom is working with two other CSPs to help them create AI accelerators tailored to their needs. Broadcom shares trade for 23x forward earnings estimates, down from more than 35x earlier this year. As the AI growth story continues, Broadcom should benefit, making today's price a very reasonable entry point for investors. Oracle (ORCL 12.17%) has seen explosive growth in recent quarters thanks to a platform that offers users its database management expertise and a flexible cloud offering. I say "flexible" because Oracle makes it easy to use its cloud, along with other clouds such as Microsoft's Azure or Amazon Web Services, for example. This has been a winning strategy for Oracle, with multicloud database revenue from Microsoft, Amazon and Alphabet's (GOOG 10.08%) (GOOGL 9.90%) Google Cloud soaring 92% in the recent quarter. Customer demand has reached records, and the company aims to double its data center capacity this year to keep up. Remaining performance obligations, or contract amounts not yet invoiced, of $130 billion offer us reason to be optimistic about revenue ahead too. Today, Oracle trades for 21x forward earnings estimates, down from more than 30x just a few weeks ago, making it another smart bargain addition to any growth portfolio. Alphabet, trading for 16x forward earnings estimates right now, is the cheapest of the "Magnificent Seven" stocks -- the group of tech giants that led market gains over the past two years. As owner of Google Search, the world's most popular search engine, and Google Cloud, a high-growth cloud services provider, Alphabet has built a strong business that generates billions of dollars in earnings quarter after quarter. On top of this, Alphabet is heavily investing in AI and using its own large language model, Gemini, to improve Google Search -- and Alphabet sells Gemini-powered AI tools to customers of Google Cloud. The tech giant, like Meta, recently pledged to reinforce spending in AI this year, announcing $75 billion in capital expenditures, and this could put it on track for long-term AI leadership. And that's why right now Alphabet looks like a steal that long-term investors won't want to miss.

Nvidia Stock Dropped 35% From Its High. History Says This Will Happen Next.

Nvidia (NVDA 18.34%) has been one of the biggest winners of the generative artificial intelligence (AI) boom. The stock advanced 1,000% between the launch of ChatGPT in November 2022 and January 2025, when its price peaked at $149.43 per share. Nvidia stock has since fallen 35% due to escalating trade tensions and concerns about the sustainability of AI infrastructure spending. However, history says shares could soar from here. The chipmaker suffered three drawdowns exceeding 35% in the last decade, and the stock returned an average of 305% during the next two years. Here's what investors should know. History says Nvidia shares could soar 305% in the next two years Nvidia generated immense returns for shareholders in the past decade as its graphics processing units (GPUs) revolutionized computer graphics and data center computing. Its share price increased 17,400% during that period. But even the best companies go through difficult times. Despite generating tremendous returns, Nvidia shares declined more than 35% three times in the past decade, and investors can learn something for those incidents: To summarize, Nvidia stock declined more than 35% three times over the past decade. But the stock not only rebounded and reached new highs, but also returned an average of 305% during the subsequent two years. Applied to the current situation, those numbers suggest Nvidia shareholders could see triple-digit gains by April 2027. Past performance is no guarantee of future results, but there is still an important lesson for investors: Demand for Nvidia GPUs has faltered in the past, much like investors fear will happen in the future. However, demand has always recovered because the company builds the fastest data center accelerators on the market, and the use cases are always evolving. Nvidia is the market leader in AI accelerators Nvidia GPUs are the industry standard in accelerating data center workloads like training machine learning models and running artificial intelligence (AI) applications. The company has about 98% market share in data center GPUs, and more than 85% market share in AI accelerators, according to Morgan Stanley. Some investors are worried about DeepSeek, a Chinese AI start-up that reportedly trained sophisticated large language models while spending much less money than OpenAI and other U.S. companies. The market reacted as if the cost efficiencies would hurt demand for Nvidia GPUs by allowing U.S. companies to spend less on AI infrastructure. However, many analysts expect the opposite outcome. As costs decrease and AI becomes accessible to more companies, total demand for Nvidia GPUs should continue to increase. Moreover, Nvidia has opportunities beyond large language models and generative AI, such as physical AI applications like autonomous cars and robots. Those use case will continue to drive demand for its chips and systems. Also, Nvidia supports its GPUs with adjacent data center hardware like central processing units (CPUs), networking gear, and interconnects. That vertical integration lets Nvidia design data center systems with a superior total cost of ownership versus products from other chipmakers. That advantage should keep the company at the forefront of the AI revolution. Nvidia stock is a worthwhile investment at its current price Admittedly, in the coming years, Nvidia will face more competition from ASICs (application-specific integrated circuits) developed by Broadcom and Marvell. ASICs are custom chips purpose-built for specific workloads such as artificial intelligence. But the threat to Nvidia is not as great as many investors imagine. Nvidia supports its GPUs with a extensive suite of software development tools called CUDA, but there is no equivalent for ASICs, which means companies must develop applications from scratch. That means ASICs are only an option for companies with technical expertise. Moreover, Morgan Stanley says the Nvidia B200 GPU will offer twice as much performance per unit cost than the best ASIC on the market. Consequently, while Nvidia will likely lose some market share in the coming years, its GPUs may still account for over 80% of AI accelerator sales by 2030. That hints at durable revenue growth because the AI accelerator market is projected to increase at 29% annually during that period, according to Grand View Research. Additionally, Nvidia has adjacent opportunities in networking gear and software, such that Wall Street expects earnings to increase at 38% annually through fiscal 2027, which ends in January 2027. That makes the current valuation of 32 times earnings look cheap, especially because Nvidia topped the consensus estimate by an average of 10% in the last six quarters. Nvidia shares are down 35% from their record high, but the stock has rebounded from worse losses in the past. There is no telling how long it will take for that to happen, but Nvidia still has a long runway for growth, and the stock looks cheap at its current valuation. For those reasons, patient investors should feel confident buying a position today.

Why Nvidia Stock Could Be Tech's Biggest Bargain in 2025 | The Motley Fool

Amid the rubble of President Donald Trump's escalating trade war, Nvidia (NVDA 18.34%), the semiconductor powerhouse fueling the artificial intelligence (AI) revolution, has watched its share price crumble 28% since the start of 2025. With the company's shares now trading at just 16.3 times 2028 projected earnings in response to Microsoft's slowing data center construction and America's newly implemented reciprocal tariffs, this historically cheap valuation may represent a once-in-a-generation buying opportunity for patient investors. Here's why. While investors worry about spending slowdowns in AI, Nvidia continues cementing strategic partnerships that expand its already vast technological moat. Most recently, the chipmaker announced a significant collaboration with Alphabet through its Google Cloud division to bring agentic-AI capabilities to enterprises using the Nvidia Blackwell platform. Agentic AI systems actively make decisions, solve problems, and function autonomously, unlike traditional models that simply respond to specific prompts. These advanced systems operate more independently, completing complex tasks without constant human direction, which opens new possibilities for enterprise automation and intelligence. This partnership addresses critical confidential computing needs, allowing organizations to locally harness Google's Gemini AI models while maintaining data sovereignty and regulatory compliance. For industries handling sensitive information like healthcare, finance, and government, this collaboration enables AI innovation without compromising security, creating an entirely new market segment for Nvidia's hardware. Nvidia is also making significant inroads into robotics and physical AI systems. At the recent GTC conference in San Jose, California, the company showcased numerous robotic applications powered by its technology, from surgical robots to autonomous delivery systems. These physical embodiments of AI represent another massive growth vector beyond data centers. The economic impact of robotics by 2035 can't be overstated. According to recent market forecasts, the global robotics market is projected to grow from $65 billion in 2024 to a staggering $376 billion by 2035, representing a compound annual growth rate of 17%. The humanoid robot segment alone is expected to reach $38 billion by 2035, a sixfold increase from earlier projections only a few years ago. This dramatic upward revision reflects accelerating AI progress, particularly in multimodal physical AI that can perceive, understand, and interact with the three-dimensional world. For instance, Nvidia's Isaac Sim software platform enables developers to create and train robotic systems in simulated environments before deploying them in the real world. This novel capability was demonstrated through robotic arms that could precisely mirror human movements, opening up a range of real-world applications from manufacturing to healthcare. Despite headwinds, Nvidia's market leadership in graphics processing units (GPUs) and AI acceleration remains unchallenged. The company's GPUs process data in parallel, with unmatched efficiency, making them ideal for AI workloads, while its proprietary Compute Unified Device Architecture (CUDA) software platform creates enormous switching costs for customers, protecting its market position against emerging competitors. What truly differentiates Nvidia is its expanding footprint across the entire AI stack, from hardware to networking, software, and services. The recently announced Blackwell platform and partnerships with major cloud providers demonstrate how the company continues pushing technological boundaries while deepening integration into enterprise AI ecosystems. All in all, Nvidia's core competitive advantages are unlikely to be usurped by competitors anytime soon, creating a healthy margin of safety for long-term investors. At 16.3 times 2028 earnings, Nvidia stock offers tremendous value. After all, the chipmaker is pioneering the next computing paradigm. While tariffs and big-tech spending fluctuations present meaningful near-term risks, the company's strengthening partnerships and expanding technological capabilities position it for sustained leadership in the unstoppable AI revolution. What are the risks? The bearish case centers on potential competition from in-house chip development by major tech companies and possible migration to alternative open-source tools challenging CUDA's dominance. Additionally, historical boom-and-bust cycles in Nvidia's gaming segment contribute to its near-term risk profile. Nevertheless, for investors with the patience to weather trade-war disruptions, the stock's current valuation offers an attractive entry point. Agentic AI and advanced robotics, after all, should prove to be extraordinary catalysts for the stock over the next 10 to 20 years.

Nvidia Is Sinking Today. Is It Time to Buy the Artificial Intelligence (AI) Stock? | The Motley Fool

The stock market saw nearly unprecedented single-day gains yesterday after President Donald Trump announced that goods from all countries except for China would have an import tax rate of 10% and that his administration's higher reciprocal tariffs would be suspended for 90 days. But Trump also announced that tariffs on Chinese products would be increased from 104% to 145%. Investors concentrated on reciprocal tariffs being paused for all other countries yesterday, but today the market is reacting to the potential impacts of the escalating trade war between China and the U.S. With Thursday's sell-off, Nvidia stock is now down 21% year-to-date and 29% from its high. Nvidia's share price will continue to see big swings amid the rapidly shifting macroeconomic backdrop. Even though the company retains clear leadership in advanced graphics processing units (GPUs) and other AI hardware, investors' focus has understandably shifted to the macro picture. And it makes sense to take a somewhat cautious approach when there's still so much uncertainty on the horizon. For long-term investors, I think that buying Nvidia stock at today's prices can still lead to impressive returns. But rather than buying into the stock all at once, I would recommend treating pullbacks as investment opportunities as part of a dollar-cost-averaging strategy. The share price has been pushed to a level that looks cheap by conventional metrics, but macroeconomic and geopolitical risk factors open the door for continued sell-offs.