You can spread your investment across these five stocks...
This may be one of the best times ever to invest in technology stocks as we're facing a game-changing moment. The development of artificial intelligence (AI) is just getting started, and this technology has the potential to revolutionize our daily lives and how many businesses operate. The results could save time and money and even result in major transformations such as the discovery of life-saving medicines. Analysts predict the AI market, valued at about $200 billion right now, could reach beyond $1 trillion by the end of the decade.
So now is a great time to invest $50,000 across a basket of stocks present in the area of AI. (This should be part of a diversified strategy so I would only advise investing this entire amount in AI stocks if you already have built a solid portfolio including other industries and stocks. Otherwise, consider investing a smaller portion, according to your investment style, in the following stocks and the rest across quality players in other industries.)
Most of the following AI powerhouses already are winning today -- one is a recovery play -- and they all might have a lot more to gain down the road. You could you, too, if you invest in them early on.
Image source: Getty Images.
1. Nvidia
Nvidia (NVDA -0.03%) may be the first stock many investors think of when someone mentions AI. That's because the company dominates the AI chip market, holding an 80% share, and this has helped Nvidia increase earnings in the triple digits in recent quarters.
The stock price has followed, climbing nearly 200% in the past year, but there's still room for this player to run over time thanks to its commitment to innovation. Nvidia's graphics processing units (GPUs) power critical AI tasks like the training and inferencing of models, and they are the fastest on the market. The company isn't standing still, though, and aims to update GPUs on an annual basis -- so Nvidia could stay far ahead of rivals for the long term.
The next catalyst for Nvidia is a big one, the launch of its Blackwell architecture and most powerful chip ever later this year. So right now is a great time to get in on this market giant.
2. Amazon
Amazon (AMZN -0.27%) is benefiting from AI in two ways. The e-commerce powerhouse has been using AI to streamline and generally improve its operations -- for example, determining the fastest delivery routes for packages. This can lower costs over time and boost earnings, and it also can keep customers coming back as they'll appreciate the optimized services.
Amazon also is a leader in cloud computing, operating the Amazon Web Services (AWS) business, and here, its AI investments are already bearing fruit. AWS offers customers a variety of tools, from chips to a fully managed service featuring large language models to customize for any AI project. And this has helped AWS recently reach a $100 billion annual revenue run rate.
It's important to remember that Amazon also has a long track record of earnings growth and delivers sales and net income in the billions of dollars. So, Amazon makes a solid buy for its long-term strength and AI potential ahead.
3. Super Micro Computer
Super Micro Computer (SMCI 3.40%) has been around for about 30 years, gradually growing revenue, but the business truly took off thanks to the AI boom. The company makes servers, workstations, and full rack scale solutions needed in AI data centers. This has helped Super Micro's earnings soar in recent years, and the stock price has followed.
Here's why this should continue. Super Micro's strategy of working hand-in-hand with the world's top chipmakers allows it to immediately incorporate their chips into its products as soon as they launch. On top of this the company's product lines including many common parts, making the assembly of a customized product fast.
This speed should keep Super Micro's growth going -- and the company's liquid cooling technology is becoming a key growth driver too. Heat generation in AI data centers is a huge problem, but Super Micro's technology addresses it perfectly.
All of this makes Super Micro an AI winner today, and this success should continue well into the future.
4. Intel
Intel (INTC 1.55%) fell behind in the AI race over the past few years, but the stock could make a great recovery play right now. Especially since the company has reached an important turning point. Intel recently launched a new portfolio of AI products that could help it carve out a decent share in this market -- and demand is so high that there is room for more than one chip maker to excel.
The company launched the Gaudi 3 accelerator, one it says may outperform Nvidia's current GPU when it comes to inference and power efficiency -- and at a lower cost.
Intel also may climb as it makes progress to become the world's second-biggest foundry by 2030. The company has opened its manufacturing network to others, meaning it will produce chips for these customers. This won't result in earnings growth overnight, but over the long haul, the results could be big. And that makes now a good time to bet on Intel's future.
5. Broadcom
Broadcom (AVGO 1.90%) has been in the news lately because it announced a 10-for-1 stock split, set for July. But that isn't the reason to buy this semiconductor and networking giant. The reason to buy the stock has to do with the demand Broadcom is seeing from AI customers as well as growth from its recent acquisition of VMware. Broadcom reported a 43% increase in revenue in the recent quarter to more than $12 billion, and these two elements drove the gains.
The company makes thousands of products that you'll find anywhere from your smartphone to a data center. This has helped Broadcom grow earnings over time, but the great demand from AI these days could spur a new era of growth.
In the quarter, AI revenue soared 280% to $3.1 billion, and Broadcom predicts AI revenue will surpass $11 billion for the year. As Broadcom says, the networking of AI accelerators is difficult, but Broadcom has the technology to make it happen -- so there's reason to be optimistic about growth as the AI market develops. And that's why Broadcom is a buy before and after the upcoming stock split.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
