The rise of edge AI doesn’t diminish the demand for cloud-based AI. If anything, it amplifies it. Apple’s (NASDAQ:AAPL) integration of a private cloud for complex tasks beyond device capabilities suggests continued growth in AI data centers.
The so-called Magnificent Seven tech giants have driven several notable advancements in artificial intelligence, evolving with new generative AI models for text-to-video and edge computing. Each firm competes fiercely in the AI arena, poised for future breakthroughs in artificial general intelligence.
However, caution is advised. Some AI stocks may have surged beyond their fundamentals, prompting a prudent approach to reduce exposure. With that said, here are three tech stocks to buy that are the best of the bunch.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) emerged as a top performer among the Magnificent 7 stocks over the past year, with its market cap surging by 90% to $1.29 trillion. Despite excluding Reality Labs for VR/AR content, Meta’s core business remained robust. Integration of AI into the company’s social media and advertising segments has significantly enhanced its ecosystem.
META stock is now up 45% on a year-to-date basis and more than 50% over the past six months. Strong Q1 2024 results and its strategic yet effective cost-cutting measures contribute to growth. Although the company will likely continue to post losses in its metaverse ventures, Meta will focus on capitalizing on its social media and digital ads segments.
Although the company is more focused on shareholder incentives like dividends and a new $50 billion share buyback, Meta remains a pivotal growth stock to consider in the AI-driven internet-focused future.
Alphabet (GOOG, GOOGL)
As Google’s parent company, Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) is among the most stable hyper-growth stocks out there. The company’s strong financial performance in 2023 was highlighted by soaring revenue and profitability, leading to a higher stock price. The company reported its highest quarterly net income ever in Q1 2024, surpassing Apple as the most profitable mega-cap stock in the market.
Data from Stocklytics.com shows Alphabet earned $3,042 per second in Q1 2024, outpacing Apple by $2. This growth trajectory over the past 18 months propelled Alphabet to a record net income of $23.66 billion for Q1 2024, a nearly 60% increase year-over-year.
Despite varying opinions, Alphabet remains a key player in the AI revolution, with innovations like Gemini and DeepMind’s Veo that rival OpenAI’s advancements. The competition between ChatGPT and Gemini is expected to continue, while Veo and Sora compete in text-to-video technology. Although OpenAI currently leads in this space, the AI landscape can shift. Buying GOOG stock now appears to be a more practical choice among other Magnificent Seven stocks.
Nvidia (NVDA)
As the dominant force in the AI sector, Nvidia (NASDAQ:NVDA) provides investors with exceptional growth few companies can provide. The company’s Q1 FY25 results saw revenue surge 262% to $26 billion, and net income rose 628% to $14.9 billion. This allowed Nvidia to maintain robust net profit margins above 50%.
Demand for Nvidia’s AI chips from tech giants continues to drive its exponential growth, promising further gains for long-term investors. NVDA stock nearly tripled year-to-date and soared more than 3,300% over five years, recently undergoing a 10-for-1 stock split.
Nvidia’s valuation reflects its robust growth and strong demand for its H100 and Blackwell chips. Anticipation is high for the upcoming H200 processors, expected to further boost demand. With strong financials and a strong buy rating from 40 analysts, Nvidia stands poised for continued success.
On the date of publication, Chris MacDonald 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.
