Many corporations are investing heavily in artificial intelligence (AI). The technology is helping people become more productive and access more information. Investors can capitalize on any industry that is drawing more capital for themselves.
Investors have caught on to the AI boom. Corporations can see nice boosts in their stock prices just by mentioning the technology. More companies are being lumped as AI companies to make them look more attractive to potential investors and generate more attention.
Some AI stocks to buy are better than others, and these are some of the top picks to consider.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is emerging as a leader in the AI industry. The company’s solutions are enabling next-generation AI infrastructure. Cloud and data center providers are working with Broadcom to increase their AI capabilities. The company’s solutions require less power to get the same AI output.
The semiconductor giant had been a reliable long-term pick since before the AI boom unfolded. Shares have been up 363% over the past five years, and the dividend yield is still decent. The 1.55% dividend yield is a reflection of the firm’s commitment to dividend growth. Broadcom regularly raises its dividend by at least 10% each year and hikes its quarterly dividend from $4.60 per share to $5.25 per share near the end of 2023. High dividend hikes are a good sign since they come from positions of financial strength.
Based on the dividend growth rate, it shouldn’t surprise investors that Broadcom reported solid financials. First-quarter revenue increased by 34% year-over-year, and the company is planning to reach $50.0 billion in revenue in fiscal 2024. The company’s guidance also suggests that, in the fiscal year 2024, the adjusted EBITDA will be approximately 60% of the total revenue.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been at the center of investors’ attention ever since the AI boom materialized. The corporation has been the AI chip leader and has a comfortable lead.
Despite a 251% gain over the past year, it’s possible to argue that Nvidia is still undervalued. The stock trades at a 39-forward P/E ratio and continues to achieve captivating growth rates. The AI giant grew its revenue and net income by 265% and 769% year-over-year in the fourth quarter of fiscal 2024, respectively.
The recently announced Nvidia Blackwell Platform can build on the successes of its AI chips. Blackwell is a new AI chip that is more efficient than its predecessor. It also requires up to 25x less cost and energy consumption to run real-time generative AI on trillion-parameter large language models.
Many big tech companies and other large corporations already use Blackwell. The high demand for this product and its predecessor suggests Nvidia can continue to rally.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is one of Nvidia’s largest customers. Investing in this technology has helped Microsoft make some of the biggest strides in the industry, excluding chipmakers. Microsoft’s Copilot has already attracted many users and offers a monthly plan for people who want more features.
The tech conglomerate also uses AI to strengthen its cloud platform. Microsoft Azure is the second largest cloud computing platform based on market share, and it makes up about half of Microsoft’s total revenue.
It’s good to see Microsoft Cloud make up a higher percentage of total revenue since it’s a fast-growing segment. Cloud revenue growth exceeds the company’s growth as a whole. As cloud revenue continues to grow and become a larger percentage of total revenue, Microsoft stands to see revenue acceleration in future years.
Microsoft has additional segments like gaming, social media, personal computers and advertising that also generate revenue and can become long-term growth opportunities. Shares are up by 268% over the past five years.
On this date of publication, Marc Guberti held long positions in AVGO, NVDA, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
