A recent sell-off has opened up some rare buying opportunites.
Artificial intelligence (AI) investing should still be at the forefront of investors’ minds. Although some may worry about the hyperscalers overspending on data centers for use in AI, the reality is that the demand is there. This leads to some huge investment opportunities in the AI sphere, and there are plenty of ways to profit from this trend.
I’ve got five AI stocks that look like great buys in February, and investors should be racing to load up on them before the market sends them far higher.
Image source: Getty Images.
Nvidia and Broadcom
There are several huge beneficiaries of all of this AI spending, but Nvidia (NVDA 2.21%) and Broadcom (AVGO 1.87%) are at the top of the list. Both companies make computing equipment that is heavily used in AI data centers, and with the huge amount of spending occurring in that area, they will see strong growth as a result.
Today’s Change
(-2.21%) $-4.13
Current Price
$182.81
Key Data Points
Market Cap
$4.4T
Day’s Range
$181.59 – $187.55
52wk Range
$86.62 – $212.19
Volume
5.4M
Avg Vol
180M
Gross Margin
70.05%
Dividend Yield
0.02%
Nvidia makes graphics processing units (GPUs), which are the industry standard for AI computing. Nvidia’s entire technology stack outperforms any other option available, making it the go-to vendor in this segment.
Broadcom is partnering directly with AI hyperscalers to design custom AI chips that are tailored to the workflows they will see.
Both Nvidia’s GPUs and Broadcom’s custom chips have their specific use cases in AI, and each will continue to be a part of the computing muscle that powers AI workloads. With each company being a major beneficiary of the spending by the AI hyperscalers, they’re set to perform quite well over the next few years.
Taiwan Semiconductor
Another beneficiary of this spending is Taiwan Semiconductor (TSM 0.51%). Taiwan Semiconductor fabricates most of the logic chips for Nvidia and Broadcom, but it’s also the supplier for many other key tech companies. Without TSMC’s foundry capabilities, none of the AI technology we see today would be possible. Furthermore, the rising tide of AI spending lifts all boats, and with TSMC being a chip supplier to nearly every major AI component out there, it’s slated to do quite well during the next few years.
Taiwan Semiconductor Manufacturing
Today’s Change
(-0.51%) $-1.87
Current Price
$366.23
Key Data Points
Market Cap
$1.9T
Day’s Range
$360.86 – $371.10
52wk Range
$134.25 – $380.00
Volume
607K
Avg Vol
13M
Gross Margin
59.02%
Dividend Yield
0.84%
Additionally, TSMC’s new 2-nanometer chip technology promises reduced power consumption, which helps alleviate the energy crisis as all these AI data centers start coming online. As long as there is AI spending, Taiwan Semiconductor will continue to be a top option in the space.
Alphabet and Microsoft
Both Alphabet (GOOG 1.10%) (GOOGL 1.08%) and Microsoft (MSFT 0.16%) saw their shares fall in reaction to their latest earnings results. However, sell-offs of these stocks aren’t really warranted. Each is a key player in the cloud computing industry, which is why they are spending so much to build out their AI footprints.
Although equipment providers like Nvidia and Broadcom may have a more difficult time selling their hardware once an adequate amount of AI computing capacity has been built, the cloud computing providers will have a near-endless stream of demand and revenue. By renting out their computing capacity to others, they can profit from several generative AI companies creating huge, new businesses in the AI gold rush. However, instead of having to spend money putting up new data centers, they can maintain their old ones, which is far cheaper.
Today’s Change
(-0.16%) $-0.64
Current Price
$401.20
Key Data Points
Market Cap
$3.0T
Day’s Range
$398.08 – $405.49
52wk Range
$344.79 – $555.45
Volume
1.8M
Avg Vol
31M
Gross Margin
68.59%
Dividend Yield
0.85%
Furthermore, both cloud computing providers are seeing soaring demand, which shows that AI capital investment spending is warranted. Microsoft Azure revenue rose 39% during its latest quarter, while Google Cloud blew away all expectations and revenue rose 48%. The reality is, the growth rates justify all this spending, and Alphabet and Microsoft are two of the best in the tech universe.
I think the recent price pullbacks are a gift to investors, and each can make for a great cornerstone investment in your portfolio.
Keithen Drury has positions in Alphabet, Broadcom, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.