Artificial intelligence stocks are highly valued in today’s stock market principally because AI plays like Nvidia (NASDAQ:NVDA) are becoming the principal growth drivers of the Fourth Industrial Revolution. These AI stocks are also one of the main reasons the stock market returned 10.2% in the first quarter, its best performance since 2019.
Rising interest rates and slower earnings are bad for the economy, but AI’s progress has helped keep investors excited. NVDA in particular, with its record revenue of $26.04 billion for the fiscal first quarter, is responsible for much of the hype surrounding AI stocks.
However, Nvidia, the second-largest company now following Apple (NASDAQ:AAPL) after passing $3 trillion in market cap for the first time, is a tad bit expensive for most investors looking into AI stocks. Trading at 70.74x price-to-earnings, it ranks worse than 632 companies in the chip space. However, the size of the market is too good to pass up. Statista predicts the AI market will reach $184 billion in 2024 and continue to grow at a rate of about 28%, reaching $826.7 billion by 2030.
Amid this, it’s best to invest in well-known U.S. AI companies right now, which analysts call a “strong buy.” Spending money on AI will not hurt these companies’ main business, and the trade war with China will not affect them either, complimenting their double-digit upsides.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) and Hitachi (OTCMKTS:HTHIY) recently signed a major deal to use creative AI to speed up business and social innovation.
On the product front, Microsoft Teams’ June 2024 release brings further language support for Intelligent Recap, booking desks, and Copilot+. Along with new slash words, exclusive emojis and reactions, the upgrade also delays the conclusion of Live Events.
Also, Power BI now has semantic model performance data from Azure Log Analytics’ “ExecutionMetrics” event. Not to mention, Power BI can now connect SharePoint live data with OneDrive.
Additionally, Microsoft and G42, the United Arab Emirates AI technology holding company, have joined forces to give $1 billion to help build a complete digital environment in Kenya. In the same way, Microsoft also funds a lot of AI projects in Sweden.
Beyond AI, Microsoft is a tech giant. Due to Nvidia’s hype, markets are neglecting MSFT’s potential. Analysts expect this ‘strong buy’ AI stock to rise over 16%, and with its recent earnings beat, powered by Azure revenue rising 31% and Microsoft’s gaming revenue rising 51% year-over-year in Q3 FY24, few can argue with this prognosis.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is in rarified air among AI stocks. Among the 42 analysts rating the stock, all recommend buying, with no holds or sells, projecting a consensus upside of 20%.
Part of the excitement surrounding AMZN’s future stems from moves such as investing $100 million in the AWS Generative AI Innovation Center. This service connects consumers with Amazon Web Services (AWS) AI and machine learning professionals to speed up generative AI app development. These will assist Highspot, Lonely Planet, Ryanair (NASDAQ:RYAAY) and Twilio (NYSE:TWLO) develop AI solutions.
In addition, AMZN is investing $4 billion in AI firm Anthropic. Due to this relationship, Anthropic’s AI models, including the Claude family, will utilize AWS as their primary cloud provider. Amazon Bedrock, AWS’s completely managed solution, offers sophisticated AI models for numerous commercial needs.
In addition, Amazon now offers creative AI tools to help sellers create product descriptions and other sales copy.
What’s more, Amazon has released Amazon Q, an AI assistant that can learn autonomously and aid developers and business users. Amazon Q Developer streamlines regular tasks so developers may concentrate on coding. Amazon Q Business enables employees to make data-driven decisions, and Amazon Q Apps helps non-coders create innovative AI applications.
Advanced Micro Devices (AMD)
AMD’s (NASDAQ:AMD) standalone GPU market share grew from 17% in Q3 2023 to 19% in Q4 2023, and its GPU sales increased by 117% compared to Nvidia’s 22.3%. Given the company’s potential upside of more than 13%, it is understandable why 29 out of 35 analysts recommend buying AMD stock.
In addition to the strong GPU numbers, AMD CEO Lisa Su also revealed orders for MI300 AI accelerators worth $3.5 billion.
At Computex 2024, AMD unveiled the Ryzen AI 300 Series CPUs, which include cutting-edge neural processing units, which will help AMD gain further ground on NVDA. The faster “Zen 5” architecture desktop CPUs from the Ryzen 9000 Series were also on display.
The proof of the pudding is in the eating, and Microsoft, HP (NYSE:HPQ), Lenovo (OTCMKTS:LNVGY) and Asus (OTCMKTS:ASUTZ) use AMD’s new AI processors and accelerators. For example, Microsoft’s Azure AI uses AMD’s Instinct MI300X processors.
Moving towards the financials, AMD reported $5.5 billion in revenue, up 2%, a 47% sales margin, and $123 million net income in Q1’24 due to the rapid deployment of MI300 AI accelerators and the widespread use of AMD Ryzen and EPYC. Due to the robust demand for server CPUs and data center GPUs and $4 billion in projected 2024 AI chip sales, AMD is one of the best AI stocks to buy.
On the date of publication, Faizan Farooque did not have (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.