Did you miss the opportunity to buy Nvidia? 2 Artificial Intelligence (AI) Stocks to Buy Before They Rise in 2024

Did you miss the opportunity to buy Nvidia?  2 Artificial Intelligence (AI) Stocks to Buy Before They Rise in 2024

Stock market shares, my dear Nvidia (Nasdaq: NVDA) It gained nearly 219% in the past year and reached almost record levels. The semiconductor giant’s prowess in advanced graphics processing units and artificial intelligence (AI) software has made it the undisputed leader in the AI ​​market, which has led to a significant improvement in its financial performance.

AI is undoubtedly the biggest investment theme of 2024. Many investors may feel they missed Nvidia’s rally, especially since the company now trades at a forward price-earnings ratio of 33 times – well above the semiconductor average. Industry valuation 19.4 times. These investors could consider buying shares in other high-quality AI stocks at relatively reasonable valuations, e.g Microsoft (MSFT 1.55%) And Intel Corporation (you are K 1.91%).

That’s why these two stocks are attractive picks in 2024.

Microsoft

Technology giant Microsoft reported excellent results for the second quarter of fiscal year 2024, with revenue and profits exceeding consensus estimates. Not surprisingly, artificial intelligence has been a major driving force for the company.

Microsoft’s Azure cloud computing platform is a key growth driver, with revenue rising 30% year over year (including a six percentage point increase from AI services) in the second quarter ended December 31, 2023. Conversely, revenue Of the main competitors such as AmazonAWS and the alphabetGoogle Cloud has grown year-over-year by 13% and 26%, respectively, in recent quarters. Azure was also able to secure larger, longer-term deals, including commitments worth more than $1 billion. This will ensure that the business remains relatively unscathed even in difficult times.

Azure has quickly become an ideal cloud computing platform for AI workloads, thanks to its outstanding performance in training and inference on large language models. Microsoft offers customers a variety of AI software models and AI hardware (from multiple chip players) to choose from, all deeply integrated with Azure infrastructure, data, and tools. The company has already built a base of 53,000 Azure AI customers, nearly a third of whom joined the Azure platform in the past 12 months.

Another major growth catalyst for Microsoft is the AI-powered CoPilot assistant, which is built into several Microsoft products such as the Microsoft 365 productivity suite, GitHub, and the Microsoft security platform. The company expects the rapid adoption and monetization of CoPilot to significantly improve average revenue per user in the coming years.

Besides multiple AI tailwinds, Microsoft’s core PC and gaming businesses are also set to recover in 2024. The company’s productivity and business operations division has also returned to double-digit growth in the past few quarters.

Microsoft currently trades at a price-to-sales (P/S) ratio of 13.3 times, which is very expensive compared to the average software industry valuation of 2.2 times. However, given the company’s strength in the AI ​​market and improving IT spending trends, this leading consumer and enterprise software company could prove to be a smart buy in 2024 – even at current high price levels.

Intel Corporation

Semiconductor giant Intel saw its shares fall nearly 13.4% after posting mixed results for the fourth quarter of 2023 on January 25. While the company’s revenues and profits exceeded consensus estimates, its earnings guidance for the first quarter of fiscal year 2024 was well below analysts’ expectations. Expectations. Intel attributed the weak outlook to temporary headwinds in its Mobileye autonomous driving business, PSG (programmable solutions group), and Intel Foundry Services business. Despite these setbacks, there are a few positives to this stock.

The PC market appears to be recovering in 2024. IDC expects the total PC market to grow 3.4% year over year in 2024 – driven by a refresh cycle of PCs replacing the aging installed base of business PCs and upgrading to new PCs with With integrated artificial intelligence technology. Capabilities. With its market-leading position in the consumer PC market, Intel is well positioned to capitalize on this trend.

Intel is also making rapid inroads into the AI-enabled PC market with its Core Ultra client processors – also known as Meteor Lake. These processors are designed to run low-power computations for AI workloads on client computers. The company has partnered with more than 100 independent software vendors and plans to release more than 300 AI-accelerated software features optimized for AI-powered PCs through 2024.

Moreover, the company’s partnerships with several PC manufacturers will also play a pivotal role in driving the adoption of AI-powered PC systems. Intel expects to ship 40 million AI-powered PCs in 2024, for use in more than 230 designs ranging from ultra-thin PCs to portable gaming consoles. Even without the significant impact of AI-powered PC systems, Intel’s customer computing business saw a healthy 33% jump in revenue year-over-year to $8.8 billion in the fourth quarter.

Intel also sees its foundry business as a major growth driver, and expects to become the second-largest foundry by 2030. Although the business is currently focused on traditional chip packaging, Intel expects chip manufacturing and advanced chip packaging to generate significant revenues in years Coming. . This will be driven by the increasingly rapid global adoption of AI technologies, which requires a secure and sustainable supply chain of AI-optimized chips. Intel’s foundry business has already secured commitments from several customers and has a total disclosed deal value of more than $10 billion. In the fourth quarter, Foundry Services posted a strong 63% year-over-year revenue jump to $291 million.

Intel currently trades at a P/E ratio of 3.5 times, which is much lower than peers like Nvidia and Nvidia. Advanced micro devices. Hence, given the strong tailwinds and reasonable valuation, Intel could be a smart long-term AI buy – even if the stock faces some short-term volatility.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Manali Bhade has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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