Recent conferences have shown that the pace of artificial intelligence (AI) innovation is accelerating. Given this continued progress in the field, AI stocks to buy will perform well going forward.
Over the past month, a series of AI conferences have highlighted innovations in the space. First, Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) made AI announcements at Google’s annual developers conference. It outlined updates to DeepMind and Gemini and unveiled new features leveraging AI like Ask Photos, AI Overviews and Imagen 3.
Other AI leaders are also rapidly innovating as this space heats up. Indeed, OpenAI attempted to upstage Google by releasing its latest model, GPT-4o, before the Google Conference. And, Microsoft (NASDAQ:MSFT) followed up with its Copilot+ PCs announcement on May 20.
All these announcements bode well for investments in the compute and data layers. Semiconductor companies are designing advanced chips to solve AI compute. Meanwhile, other players are solving data problems and building applications on large language models. These AI stocks to buy are already central to AI infrastructure and will play a key role going forward.
Dell Technologies (DELL)
Dell Technologies (NYSE:DELL) has rallied over 90% year-to-date (YTD). Despite the substantial gain, it remains one of the AI stocks to buy, given the exposure to the AI server market. Furthermore, an upgrade cycle of laptops and PCs to AI-powered ones could be a key catalyst.
The primary driver for DELL stock is the growing demand in the AI server market. Alongside Super Micro Computer (NASDAQ:SMCI), it is one of the key players in this market. On that note, Evercore ISI believes it has won a substantial contract to supply Tesla (NASDAQ:TSLA) with AI servers.
Due to the soaring AI server demand, analysts are bullish. Dell Technologies exited Q4 fiscal year 2024 with a $2.9 billion backlog. Based on growing demand, analysts at Bernstein think AI server revenues could exceed $9 billion in fiscal year 2025.
Another catalyst for Dell Technologies will be an upgrade cycle triggered by the launch of AI PCs. Anticipating the opportunity, Dell Technologies has launched a comprehensive portfolio of Copilot+ AI PCs. Furthermore, it will profit as partners like Microsoft introduce their versions of AI PCs.
Regarding valuation, DELL stock is still one of the best AI stocks to buy. At under 19 times forward EPS, there is significant upside.
Micron Technologies (MU)
This memory maker is also soaring on the demand from AI. Micron Technologies (NASDAQ:MU) is famous for its non-volatile flash memory (NAND) and Dynamic Random Access Memory (DRAM) offerings. However, its innovation in high bandwidth memory makes it one of the top AI stocks to buy.
Indeed, HBM has emerged as a key component in AI chipset architectures. In this area, Micron Technologies has emerged as a leader with superior technology. The memory chip producer is applying thermos-compression nonconducting film technology that has improved thickness consistency, packing density and spacing.
Its latest HBM3E memory is seeing significant demand and gaining market share against competitors like SK Hynix and Samsung. Furthermore, due to constrained capacity, pricing will be favorable going forward. Already, Micron Technology has started producing HBM3E chips and management has stated that they will be sold out for 2024 and most of 2025. Moreover, due to the tight prices, they think prices could move higher.
So far, demand is positively impacting results. Results for Q2 of fiscal year 2024 showed revenues rose 58% year-over-year (YOY) to $5.82 billion. Moreover, management raised the Q3 guide to $6.6 billion above the $6 billion consensus. Indeed, the fundamental momentum is in full swing, and MU stock is a top AI stock.
Advanced Micro Devices (AMD)
As the major alternative to Nvidia (NASDAQ:NVDA) in the AI GPU market, Advanced Micro Devices (NASDAQ:AMD) remains one of the top AI stocks to buy. It’s a compelling buying opportunity after a pullback from above $220 to below $180.
So, what’s the bull case for AMD stock? The semiconductor company is seeing soaring demand for its MI300 AI accelerators. Management expects to achieve at least $4 billion in AI accelerator sales in the calendar year 2024.
However, this accounts for just 3% of the market share. According to Bloomberg, the AI training and inference market will grow from $94 billion in 2024 to $640 billion by 2032, representing a 27% compounded annual growth rate. So, analysts expect sustained revenue growth and market share gains from a relatively smaller base compared to Nvidia.
Furthermore, Advanced Micro Devices will profit from the transition to AI PCs. Microsoft recently announced its AI PCs and highlighted the chip maker as one of its partners. This means that its chips for desktops and laptops will experience growing demand.
In summary, AMD stock has two AI opportunities: in the data center and through AI PCs. At 10 times forward sales, it trades at a significant discount to Nvidia’s 20 times and is a buy.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
