2 great artificial intelligence (AI) stocks to buy now

By | March 12, 2024

The US stock market was exceptionally strong, with the benchmark S&P500 The index will reach multiple record highs in early 2024. Continued optimism about artificial intelligence (AI) technologies continues to lift tech stocks – a trend playing a key role in this stock rally.

However, many of these stocks could see some decline due to profit-taking at the end of earnings season. This pullback could provide an attractive opportunity for long-term investors to increase their stakes in high-quality and fundamentally strong AI stocks such as Super microcomputer (NASDAQ:SMCI) And Broadcom (NASDAQ:AVGO).

Here’s why these stocks are smart buys right now.

Super microcomputer

Demand for AI infrastructure, from data centers and enterprises, has grown at an unprecedented pace. Mordor Intelligence has predicted that the global AI infrastructure market will grow from $68.5 billion in 2024 to $171.2 billion in 2029. Super Micro Computer, a leading provider of high-performance server and storage systems, is well positioned to capitalize on this massive take advantage of market opportunities. That’s because the company is the third largest server provider in the world, with an estimated 5% market share.

Super Micro Computer has positioned itself as a prominent player in providing advanced AI infrastructure (server, storage, networking, security and software) to enterprises across industries and industries. By offering hardware-software integrated platforms, the company makes it easier for customers to deploy and run AI applications.

Not surprisingly, the company’s deep learning and Large Language Model (LLM) optimized systems are based on it NvidiaThe company’s extremely popular H100 chips are already in high demand. Super Micro Computer is also gearing up to more than double the size of its AI portfolio by building solutions based on other advanced AI chips such as Nvidia’s Grace Hopper Superchip, Advanced micro devices‘ MI300A/MI300X chips, and Intel‘s Gaudi 2 and Gaudi 3 chips. In addition, Super Micro Computer also offers liquid cooling technology for data centers and enterprises to help improve the reliability, energy efficiency and performance of the power-hungry AI platforms.

Super Micro Computer also uses building block architecture for server design and product/operations automation systems to deliver customized and upgraded operations much faster than the competition. This design and manufacturing flexibility also allows the company to serve a diverse customer base across different sizes and industries.

All these initiatives have translated into robust financial and stock price performance for the company. Revenue has more than doubled year over year, while net income in the most recent quarter (second quarter of fiscal 2024 ending December 31, 2023) increased 68% year over year. The company’s stock price shot up nearly 1,077% over the past year.

Despite the breathtaking rally, given the huge opportunity in AI, Supermicro’s stock could continue to grow even higher in the coming months.

Broadcom

Shares of semiconductor player Broadcom rose nearly 4.2% in one day after the company announced its latest earnings results (Q1 2024 ending February 4) on March 7. The stock has gained nearly 125% over the past year and nearly 26% so far in 2024. Much of this rally can be attributed to the increasing use of the company’s advanced networking chips and custom AI accelerators by hyperscale customers and large enterprises in their AI data centers.

Broadcom performed strongly in the first quarter, with revenue and profit exceeding consensus expectations. The company expects to end fiscal 2024 (ending October 31) with revenues of $50 billion, up 40% year over year. As AI networking chips are increasingly used to move data and communicate across AI infrastructure, the end market for Broadcom will continue to grow in the coming years. Not surprisingly, the company has increased its annual growth estimate for network revenue from 30% to 35% for fiscal 2024.

Broadcom is also making rapid progress in upselling the VMware Cloud Foundation (VCF) software stack to existing customers already using the vSphere virtualization tools. VCF integrates compute, storage and networking and provides an on-premises self-service cloud platform that can act as an alternative to the public cloud.

Because VCF allows companies to maintain privacy and full control over their data to run AI workloads, it is expected to see robust demand in the coming years. Broadcom expects software revenue to reach $20 billion in fiscal 2024.

Broadcom has a 4.8% share of the global semiconductor market. However, given its prowess in advanced networking chips – a key part of data center AI infrastructure – the company’s stock seems like a smart buy, even at current high price levels.

Should You Invest $1,000 in Super Micro Computer Now?

Consider the following before buying shares in Super Micro Computer:

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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 and Nvidia. The Motley Fool recommends Broadcom, Intel, and Super Micro Computer and recommends the following options: long January 2023 $57.50 calling on Intel, long January 2025 $45 calling on Intel, and short May 2024 $47 calling on Intel. The Motley Fool has a disclosure policy.

2 Great Artificial Intelligence (AI) Stocks to Buy Right Now was originally published by The Motley Fool

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