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Missed Nvidia? 2 Artificial Intelligence (AI) Stocks to Buy Before Stocks Surge in 2024


Stock Market Darling Stocks Nvidia (Nasdaq: NVDA) Last year it rose nearly 219%, close to a record high.The semiconductor giant is working on advanced GPUs and AI (AI) software has made it the undisputed leader in the artificial intelligence market, which has also translated into significant improvements in its financial performance.

Artificial intelligence is undoubtedly the biggest investment theme in 2024.Many investors may feel they missed out on Nvidia’s rebound, especially since the company currently trades at 33 times forward earnings, which is well above the semiconductor industry’s median industry valuation of 19.4 times. These investors may consider buying at other valuations Relatively reasonable quality AI stocks, such as Microsoft (NASDAQ:MSFT) and Intel (NASDAQ: INTC).

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

Microsoft

Technology giant Microsoft announced stellar results for the second quarter of fiscal 2024, with both revenue and profit exceeding consensus market expectations. Not surprisingly, artificial intelligence has been a major driver for the company.

Microsoft’s Azure cloud computing platform is the main growth engine. Revenue in the second quarter as of December 31, 2023 fell by 30% year-on-year (of which artificial intelligence services grew by 6 percentage points).In contrast, revenue from major competitors, such as AmazonAWS and letterGoogle Cloud has grown 13% and 26% year over year, respectively, in recent quarters. Azure has also been successful in securing larger, longer-term deals, including commitments worth more than $1 billion. This will ensure that the business remains relatively unscathed even during difficult times.

Azure is also quickly becoming the ideal cloud computing platform for AI workloads with its best-in-class performance in large language model training and inference. Microsoft offers customers a diverse selection 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 built a base of 53,000 Azure AI customers, with nearly a third joining the Azure platform in the past 12 months.

Another major growth catalyst for Microsoft is CoPilot, its artificial intelligence assistant embedded in several Microsoft products including the Microsoft 365 productivity suite, GitHub and the Microsoft security platform. The company expects CoPilot’s rapid adoption and monetization to translate into significant improvements in average performance. Revenue per user over the next few years.

In addition to the multiple positive factors of artificial intelligence, Microsoft’s core PC and gaming businesses are also expected to recover in 2024. The company’s productivity and business process segments have also returned to double-digit growth over the past few quarters.

Microsoft currently trades at a price-to-sales (P/S) ratio of 13.3x, which is quite expensive compared to the software industry’s median valuation of 2.2x, given the company’s strength in the AI ​​market and improving IT spending trends. This leading consumer and enterprise software company may prove to be a wise choice in 2024 – even at current higher price levels.

Intel

Shares of semiconductor giant Intel fell nearly 13.4% after it released mixed fourth-quarter 2023 results on January 25. While the company beat consensus revenue and earnings estimates, its first-quarter fiscal 2024 profit guidance came in well short of analysts’ expectations. Intel attributed the weaker outlook to Mobileye’s autonomous driving business, PSG (Programmable Solver) Solutions Group) and Intel’s foundry services business. Despite these setbacks, there’s little upside for the stock.

The PC market looks set to recover in 2024. IDC expects the total PC market to grow 3.4% year-on-year in 2024, driven by the PC refresh cycle to replace the aging commercial PC installed base and upgrade to new PCs with integrated AI, leveraging its market leadership in the client PC market status, Intel is well positioned to take advantage of this trend.

Intel is also making rapid progress in the AI ​​PC market with its Core Ultra client processors (also known as Meteor Lake). These processors are designed to run low-power computing for AI workloads on client PCs. The company has partnered with more than 100 independent software vendors and plans to release more than 300 AI acceleration software functions optimized for AI PCs in 2024.

Additionally, the company’s partnerships with multiple PC manufacturers will also play a key role in driving the adoption of its AI PC systems. Intel expects to ship 40 million AI PC systems in 2024, used in more than 230 designs ranging from ultra-thin PCs to handheld devices. Even without the significant impact of AI PC systems, Intel’s client computing business’s fourth-quarter revenue still increased 33% from the same period last year to $8.8 billion.

Intel also sees its foundry business as a major growth catalyst and is expected to become the second-largest foundry by 2030. While the business is currently focused on traditional wafer packaging, Intel expects its wafer fabrication and advanced chip packaging to generate significant revenue in the coming years. This will be driven by the increasingly rapid adoption of artificial intelligence technology around the world, which requires a secure , Sustainable artificial intelligence optimizes the chip supply chain.Intel’s foundry business has secured commitments from multiple customers and has revealed a total deal value of more than $10 billionIn the fourth quarter, OEM service revenue increased significantly by 63% compared with the same period last year, reaching US$291 million.

Intel’s current price-to-earnings ratio is 3.5 times, much lower than peers such as Nvidia Advanced Micro DevicesSo given strong momentum and reasonable valuation, Intel could be a smart long-term AI buy — even if the stock encounters some near-term volatility.

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John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool; Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Manali Bader The Motley Fool owns 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 Intel calls, long January 2025 $45 Intel calls, and short February 2024 $47 Intel calls. Motley Fool has disclosure policy.

Missed Nvidia? 2 Artificial Intelligence (AI) Stocks to Buy Before Stocks Surge in 2024 Originally published by The Motley Fool



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