In the current market scenario, the one sector that promises significant returns in the coming years is the tech sector. Driven by artificial intelligence (AI), the tech sector has been thriving, and tech stocks have been hitting new highs over the past few months. There is immense potential in the industry, and according to Goldman Sachs (NYSE:GS), AI-related investments will reach $200 billion globally by 2025. As the adoption of AI increases and it penetrates multiple industries, we will see companies report impressive numbers, and now is the time to watch out for AI stocks to buy.
The companies not adopting or investing in AI could end up losing a lot of business. The success of Nvidia (NASDAQ:NVDA) is proof of the impact of AI in our world, and it is currently crowned the winner in the AI race. However, there is still a long way to go, and several companies are investing in AI to make the most of the hype. If you missed out on the chance to buy NVDA stock, here are seven AI stocks to buy if you want to make the most of the AI frenzy.
AI Stocks to Buy: Microsoft (MSFT)
The biggest beneficiary of the AI revolution, Microsoft (NASDAQ:MSFT) enjoys an early-mover advantage of having invested in OpenAI and integrated AI into its products and services. It has a comprehensive approach to integrating AI in all the services, allowing for higher revenue and growth in the years ahead.
The company has already achieved success with the cloud and is aiming to monetize through Microsoft Copilot. It has a subscription model, and the company has seen a massive rise in the number of subscribers, with over 1 million in October 2023. That will give a revenue boost to the company.
I am certain its quarterly results will be impressive, and if you want to own only one tech stock, it has to be Microsoft. Up 14% year-to-date (YTD), MSFT stock will steadily keep moving higher, and the results could lead to a rally. The stock also pays a dividend and has a modest yield of 0.70%.
Oracle (ORCL)
Oracle (NYSE:ORCL) has been making big moves lately and is on an aggressive expansion spree. It is building 100 data centers and launched the Oracle Cloud Infrastructure platform to offer cloud services to other companies. The company has recently signed a deal with Palantir (NYSE:PLTR) to combine their AI prowess.
The deal can be game-changing and improve the growth prospects of both companies. It also signed a contract with Nvidia, where both companies will market cloud offerings, AI chips and software. These deals show Oracle’s strength to win the market. It has also reported impressive third-quarter results with a 7% year-over-year (YOY) revenue growth.
Oracle also saw a 29% YOY jump in the order backlog. Trading at $123 today, the stock is up 18% YTD and 31% in the year. An established industry player, Oracle has all it takes to succeed in the thriving AI space.
Taiwan Semiconductor Manufacturing (TSM)
One of the hottest tech companies right now, Taiwan Semiconductor Manufacturing (NYSE:TSM) plays a crucial role in expanding the AI industry. It is also a very important industry player for Nvidia since TSM makes most of the chips designed by Nvidia and the chips required to run AI technologies.
The company recently won $6.6 billion in government funding for chip production. That is aimed at increasing the company’s manufacturing capacity in the U.S. The company will expand its investment in Arizona by $25 billion to $65 billion and is set to add a third plant in the state by 2030.
TSMC’s future looks bright, and the stock is already up 44% YTD. The company also reported the fastest monthly revenue growth since 2022, with sales hitting $6.1 billion in one month, up 34% YOY.
Super Micro Computer (SMCI)
Soaring higher than Nvidia, Super Micro Computer (NASDAQ:SMCI) is up 235% YTD and 785% on the year. Trading for $937 today, the stock might look expensive, but it is worth your money. Directly related to Nvidia, SMCI will grow whenever Nvidia does. It integrates its motherboard designs with Nvidia processors and is one of the best out there right now.
While SMCI is heavily dependent on Nvidia, I believe it has one of the best liquid cooling products in the industry and it gets early access to Nvidia’s chips. AI servers require the right cooling servers and that is where Super Micro Computer is set to benefit. It is looking at expanding production, which will help improve the financials.
It reported impressive financials in the fourth quarter, with net sales hitting $3.66 billion and EPS up 62%, hitting $5.10 per share. Analysts have a high price target for the stock, and the company has to live up to the expectations.
AI Stocks to Buy: Alphabet (GOOGL, GOOG)
While Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) isn’t making as much noise in the AI industry as its counterparts, it is still gaining momentum. The company is working on an affordable AI chip and still has a strong hold on Google Search and Google Cloud. These are the two highest revenue-generating segments for the company and contribute to the business growth.
One big reason to invest in Alphabet is its sheer potential to innovate. It is working on the new Arm-based AI CPU, which could be a game changer for the business. Alphabet is a highly stable company with a rich history, and its solid market share makes it one of the best tech stocks to own.
The stock is up 15% YTD and is trading for $160 right now. It looks highly undervalued to me, and analysts say it could hit $185 very soon. Oppenheimer analysts set a price target of $185 for the stock.
Advanced Micro Devices (AMD)
The biggest competitor of Nvidia, Advanced Micro Devices (NASDAQ:AMD), is slowly growing its AI products. It launched a series of microchips designed for AI applications and is ready to take on Nvidia.
The company launched the MI300X microchip, which will be used for servers and data centers. Some of the top tech companies, including Microsoft, have been buying these chips. AMD stock is up 18% YTD and exchanging hands for $170. It is up 80% in the year and could hit $200 very soon.
If you think Nvidia is too expensive, now is the time to grab AMD before it skyrockets. Considered an industry underdog, the market is highly optimistic about the future of AMD. It is looking for sales of $5.4 billion in the first quarter, and I believe it will report strong fundamentals. AMD has a history of excelling in the industry, and any dip in the stock is a chance to buy.
Palantir Technologies (PLTR)
Palantir Technologies has been crushing the market with its AI prowess. Up 35% YTD, the stock is exchanging hands for $22 and is on a rally. The stock has soared since February after the company reported impressive numbers driven by the artificial intelligence platform (AIP) boot camps.
The company is making the most of the rising demand for cloud and has integrated AI into its products. It signed 103 deals worth at least $1 million in the fourth quarter and has a backlog of boot camps. Palantir saw a 70% YOY increase in commercial revenue in the quarter and a 55% rise in consumer count.
As mentioned above, Palantir’s partnership with Oracle is set to benefit the business, as its applications will be available through Oracle’s cloud infrastructure. I wrote about Palantir earlier and believe it has the potential to double your money. Considering the high demand for AI in the industry, Palantir is set to have an exceptional 2024.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
