2 Artificial Intelligence (AI) Growth Stocks to Buy and Hold Forever

By | March 17, 2024

Artificial intelligence (AI) has become the hottest investment topic, captivating the minds of seasoned investors and novices alike. This is not surprising, as several research firms expect the AI ​​market to be worth more than $1 trillion by 2030.

With the AI ​​trend having the potential to generate windfalls, investor interest in AI stocks is at an all-time high. Two shares, namely Nvidia (NASDAQ: NVDA) And Marvell technology (NASDAQ:MRVL), could prove to be attractive additions to any AI-focused stock portfolio. This is why these stocks are smart choices now.

1. Nvidia

Semiconductor giant Nvidia is widely known as the poster child of the ongoing AI revolution, making history before our eyes.

Nvidia posted impressive results in the fourth quarter of fiscal 2024 (ending January 28, 2024), with both revenue and profit exceeding consensus estimates. This is an impressive feat, especially since increasing U.S. government restrictions on chip exports to China could force Nvidia to cancel billions of dollars worth of chip orders by 2024. Nvidia also faces competition from other chip players such as Advanced micro devices And Intelas well as from its key customers who are developing their own AI chips.

Despite this, the technological superiority of Nvidia’s AI chips has allowed it to capture a nearly 92% share of the global data center GPU market. The company’s state-of-the-art GPUs (A100 and H100 chips) and advanced networking technologies (including the InfiniBand solutions used in high-performance AI infrastructures and the recently launched Spectrum-X end-to-end Ethernet-based solution for AI optimized networks) are widely used by data centers as they transition their trillions of dollars of installed bases from general purpose computing to accelerated computing. Additionally, companies across industries are also leveraging generative AI technologies for use cases, which could also represent a trillion-dollar opportunity for Nvidia’s AI-optimized hardware offering. Additionally, demand for Nvidia’s chips far exceeds supply, giving the company significant pricing power – a key factor driving solid data center revenue in recent quarters.

In addition to hardware, Nvidia’s CUDA (Compute Unified Device Architecture) programming software stack has helped customers optimally program their GPUs for accelerated computing applications. With the increasing adoption of accelerated computing, companies also need support to maintain the complex software infrastructure. Since the companies don’t have large engineering teams, Nvidia sees this as a big opportunity for its Nvidia AI Enterprise cloud-native software platform.

While Nvidia’s growth potential appears solid, investors are right to be concerned about its sky-high valuation. With a price of 77 times earnings, Nvidia can be considered a very expensive stock. However, this valuation is still cheaper than the company’s three-year average price-to-earnings (P/E) ratio of 95.9 and five-year average price-to-earnings ratio of 86.9. Thanks to its cutting-edge offerings, Nvidia has always traded at a solid premium. Yet it has delivered a mind-boggling 300% return over the past year.

Therefore, given multiple strong tailwinds and a lower-than-historical valuation, it makes sense to build a position in this stock. Investors can also choose a dollar-cost averaging strategy and invest their money over a longer period of time to manage their risk.

2. Marvell technology

Shares of fabled semiconductor player Marvell Technology fell nearly 11.4% in one day after the company announced its latest earnings results (Q4 of fiscal 2024 ending February 3, 2024) on March 7. Despite significant weaknesses in other end markets such as carrier infrastructure, enterprise networks and the consumer market, the AI-driven data center sector remains a bright spot.

Marvell has been aggressively investing in AI-optimized networking products and chips to capitalize on the explosive growth in AI and accelerating computing markets. The company saw solid demand for its high-speed optical interconnect products (100 gig per lane, 800 gig PAM products used to move massive amounts of data between chips), accelerators and switches in traditional cloud data centers and AI-optimized data centers , in the fourth quarter. AI accounted for 10% of the company’s data center revenue in fiscal 2024. Marvell expects to deploy its even faster optical interconnect products (200 gig per lane 1.6T PAM solutions) by the end of 2024.

Marvell also recently announced an extension of its long-standing partnership with Taiwanese semiconductor manufacturing to develop a technology platform that can produce 2 nanometer chips for accelerated computing. This deal will enable the company to play a critical role in improving performance and energy efficiency for next-generation AI workloads.

In addition to AI, there is also solid growth potential in Marvell’s other business segments. Although Marvell is currently in a cyclical downturn, the company expects its carrier infrastructure, enterprise networks and consumer segments to gradually recover in the second half of fiscal 2025. Increasing connectivity and bandwidth requirements in vehicles are also proving to be a key growth driver for the company’s automotive sector. company.

Given the increasing demand for its AI-optimized networking products and the expected near-term recovery in other end markets, initiating a position in this stock could be a smart move in 2024.

Should You Invest $1,000 in Nvidia Now?

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and Marvell Technology and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

2 Artificial Intelligence (AI) Growth Stocks to Buy and Hold Forever was originally published by The Motley Fool

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