Artificial intelligence has attracted plenty of capital from tech giants, fund managers, and various investors. This technology has driven up the S&P 500 and Nasdaq Composite to all-time highs as the top tech companies continue to benefit from AI tailwinds.
While AI stocks seem like they can continue to soar forever, that’s not how the stock market works. Some investors will eventually take some of their profits and trim their positions. Others may become concerned about macroeconomic changes and exit their positions during the slightest bit of volatility.
Even if you don’t like the valuations of some AI stocks, it’s good to monitor their prices. Knowing which stocks you want to buy on a dip can leave you more prepared when the opportunity arrives. These three AI stocks look poised to deliver solid long-term returns for their investors, but any dips can sweeten the deal. Each of these stocks is rated as a Strong Buy among Wall Street analysts.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been the face of the AI boom. The corporation has almost tripled year-to-date and briefly become the world’s most valuable publicly traded company. It wouldn’t be shocking to see Nvidia reclaim that title, especially with its stellar financial results.
Revenue soared by 262% year-over-year in Q1 FY25 while net income was up by 628% year-over-year. Both of those growth rates exceeded the stock’s 1-year gain of 194%. Nvidia closed out the first quarter with a 57.1% net profit margin.
Nvidia is the top AI chipmaker and has a comfortable lead over the competition. The company also has many big tech companies as its customers. Nvidia is still innovating on its Blackwell platform and intends on fueling a new era of AI computing at trillion-parameter scale. Most analysts have rated Nvidia as a buy and believe that it has a 5% upside. The highest price target of $200 implies that shares can gain 57% from current levels.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) has been thrust into the spotlight amid a recently announced stock split and AI tailwinds. The stock has gained 53% year-to-date and is up by more than 500% over the past five years. Broadcom is also a terrific dividend growth stock with a 1.27% yield. The semiconductor firm has maintained an annualized dividend growth rate of 17.49% over the past five years.
The company recently posted strong financials. Revenue increased by 43% year-over-year in Q2 FY24 to reach $12.5 billion. AI chips and VMware contributed to the company’s impressive growth rate. Broadcom also raised its fiscal 2024 revenue guidance to $51 billion.
The average price target suggests Broadcom can gain an additional 14% from current levels. The highest pre-split price of $2,100 indicates that the chipmaker can gain an additional 27%. Analysts have been raising their price targets ever since Broadcom released its earnings report and announced its 10-for-1 stock split.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) isn’t a chipmaker, but it still stands to benefit immensely from artificial intelligence. The company has made many acquisitions and poached top talent from AI firms to establish a lead within the industry.
Artificial intelligence tools require plenty of computational power, and this need is creating more demand for cloud computing services. Microsoft Cloud was an AI beneficiary that grew by 23% year-over-year in Q3 FY24. Microsoft as a whole reported 17% year-over-year revenue growth and 20% year-over-year net income growth.
Microsoft Cloud represents more than half of the total business. While that’s plenty of revenue already, Copilot gives the tech giant additional opportunities. Microsoft recently introduced Copilot for Security which makes it easier for businesses and individuals to stay on top of their cybersecurity. If Microsoft can release similar Copilot product lines across multiple industries, Microsoft can expand into additional areas.
The company already has a strong presence in gaming, social media, advertising, business software, PCs, and other verticals. Copilot gives it the opportunity to expand, and Microsoft Cloud is already producing tangible benefits from the AI boom.
On this date of publication, Marc Guberti held long positions in NVDA, GOOG, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
