Finance

2 Artificial Intelligence (AI) Stocks That Could Go Parabolic


The artificial intelligence (AI) boom has proven to be a huge catalyst for many companies over the past year or so, starting with companies like Nvidia, Palantir Technologyand others who benefit from the adoption of this technology.

For example, Nvidia’s stock price has risen 92% in 2024 due to the amazing growth in artificial intelligence chip sales; at the same time, Palantir’s stock price rose sharply after the release of its latest quarterly results, and its stock price has risen by more than 42% this year.And now, it looks like Broadcom (NASDAQ:AVGO) and Micron Technology (NASDAQ:MU) will also jump on the bandwagon and watch its stock price go parabolic.

A parabolic move is when a company’s stock price rises sharply over a short period of time, just like the right side of the parabola. Broadcom and Micron have both seen significant share price gains of late thanks to advances in artificial intelligence. What’s more, it wouldn’t be surprising to see them sustain their recent popularity trends and continue their parabolic growth.

1.Broadcom

Broadcom stock recently received a shot in the arm after an investor event titled “Enabling Artificial Intelligence in Infrastructure.” At the event, Broadcom revealed that it now has three customers for its custom artificial intelligence chips.As a comparison, its Earnings Conference Call Earlier this month, Broadcom management said there was “strong demand for our customized artificial intelligence accelerators from two of our hyperscale customers.”

Broadcom’s customized AI processors have been used by the following companies meta platform and letterand speculation suggests that the new additions could be Amazon, appleIt is worth noting that Broadcom’s AI chip sales were already growing rapidly before this new customer came on board, with the chipmaker’s AI revenue quadrupling last quarter year-on-year to $2.3 billion.

What’s more, even before new customers come on board, Broadcom expects AI revenue to exceed $10 billion in fiscal 2024. Now that the company expects to increase production of artificial intelligence chips for its new customers this year, there’s a good chance it will beat its forecast.

The company initially expected artificial intelligence to account for a quarter of its total revenue this year, up from 15% in the previous fiscal year. However, artificial intelligence seems to be giving Broadcom a bigger boost. What’s more, the company’s solid underlying application-specific integrated circuit (ASIC) market share means it can win big from growing demand for customized AI accelerators in the long run.

All of which explains why analyst sentiment toward Broadcom is improving after the company’s latest events. Investment bank TD Cowen raised its price target on Broadcom to $1,500 from $1,400 and also upgraded its rating on the stock to outperform from market perform.

Broadcom stock trades at 28x forward return,conform to Nasdaq 100With a forward price-to-earnings ratio, now looks like a good time to buy the stock. Broadcom appears poised to beat Wall Street’s growth expectations thanks to its new AI customers, which could encourage the market to reward it with a higher P/E ratio and potentially send the stock on a parabolic run.

2. Micron Technology

Shares of Micron Technology rose 14% after the release of second-quarter fiscal 2024 earnings (the quarter ended February 29, 2024) on March 20. Artificial intelligence has played a central role in Micron’s stock surge as demand for memory chips continues to grow. Developments in artificial intelligence servers, personal computers (PCs) and smartphones have led to significant year-over-year growth in the company’s revenue and profits.

The chipmaker’s revenue rose 58% year over year to $5.82 billion. Adjusted profit per share fell to $0.42 per share from a loss of $1.91 per share in the same period last year. Analysts expected a loss of $0.25 per share. Revenue $5.35 billion. The good news is that Micron’s growth will accelerate this quarter. Its revenue guidance of $6.6 billion is expected to increase 76% year over year.

As already mentioned, Micron is poised to take advantage of the growing popularity of memory chips in multiple areas. For example, in artificial intelligence servers, Nvidia is deploying the company’s high-bandwidth memory (HBM). The graphics specialist recently announced its next-generation Blackwell AI GPUs (graphics processing units), with Micron noting that these chips offer a 33% increase in HBM.

At the same time, Micron said that compared to ordinary PCs, AI-enabled PCs can be equipped with 40% to 80% more DRAM content. On the other hand, Micron expects that AI-enabled smartphones “can be equipped with 50% to 100% more DRAM content compared to ordinary PCs.” Today’s non-AI flagship phone. ” All this shows that the memory market has a bright future due to AI, and Micron is also benefiting from it.

Not surprisingly, analysts expect the company’s earnings growth to accelerate significantly in fiscal 2024 and beyond.

MU EPS Estimate Chart for the Current Fiscal Year

MU EPS Estimate Chart for the Current Fiscal Year

Micron Technology reported a loss of $4.45 per share for fiscal 2023, and the chart above suggests that its earnings growth will increase significantly in the future. Micron Technology’s impressive earnings growth could also translate into strong stock price upside. Even better, given the company’s growth rate, a parabolic rise in the stock price cannot be ruled out, which could encourage the market to give it a premium valuation.

Here’s why investors would be wise to buy this stock now. Its price-to-sales ratio of 6.6 is at a discount to the Nasdaq 100 Technology Sector Index’s multiple of 7.4, meaning it’s cheap right now.

Should you invest $1,000 in Broadcom right now?

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John Mackey, the former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, sister of Meta Platforms CEO Mark Zuckerberg, Facebook’s former director of market development and spokesperson, is also a board member. Suzanne Frey is a senior executive at Alphabet and a board member of The Motley Fool. harsh johan There are no positions for the above stocks. The Motley Fool owns and recommends Alphabet, Amazon, Apple, Meta Platforms, Nvidia and Palantir Technologies. The Motley Fool recommends Broadcom. Motley Fool has disclosure policy.

2 Artificial Intelligence (AI) Stocks That Could Go Parabolic Originally published by The Motley Fool



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