Many companies are turning to artificial intelligence (AI stocks are clearly the best.) to improve their products and increase revenue. While this innovative technology’s results depend on how companies harness these tools, a few of these
Artificial intelligence requires advanced semiconductor chips to run correctly and avoid any issues. The rising demand for artificial intelligence means more AI-specialized chips.
The chipmakers are key winners in the AI boom, but they are other winners too. Along the way, these companies may experience dips, a normal occurrence with any stock. Investors stand to benefit from capitalizing on dips to build their positions in these top AI stocks.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) has been one of the biggest winners in the stock market, with shares up by over 270% year-to-date (YTD). A 1,300% gain over five years may make investors think the stock is overvalued. However, it still holds a respectable 29 P/E ratio given the company’s opportunities.
Super Micro Computer provides high-performance service and storage solutions that can serve high-intensity workloads. The company’s experience and resources have positioned it to capitalize on an incredible opportunity.
Artificial intelligence tools require a high amount of bandwidth which Super Micro Computer can on. The company has the most extensive GPU system product lines and achieved record demand for AI-related systems. The company has further expanded its offerings with its Liquid Cooled AI development platform.
Revenue and earnings growth were a bit slow in Q3 FY23, but the company has exceeded 50% year-over-year (YOY) revenue growth and more than tripled its net income in the three prior quarters. While being relatively slow, net income still went up by 11.53% in Q3. The resounding demand for artificial intelligence can lead to significant revenue and earnings growth moving forward.
Broadcom (NASDAQ:AVGO) produces semiconductor chips, a resource that will gain more demand with the rise of artificial intelligence. The company has similar opportunities as Nvidia (NASDAQ:NVDA), but the stocks have significantly different valuations.
While Nvidia has a 61.35 forward P/E ratio, Broadcom only has a forward P/E ratio slightly above 20. Broadcom generates more revenue and net income than Nvidia. Broadcom also has a higher dividend yield and better profit margins.
Despite Broadcom’s fundamental advantages, the stock has ‘only’ gained 61% YTD compared to Nvidia’s 217% YTD gain. Broadcom stock would have to triple in value to have a forward P/E ratio that resembles Nvidia’s.
The company’s pending acquisition of VMware (NYSE:VMW) will also give them the ability to expand into cloud computing. This stock has always been a long-term winner, rewarding investors with a 300% gain over the past five years.
Oracle (NYSE:ORCL) shares have more than doubled over the past five years and are up almost 40% YTD. The stock has a 37.57 P/E ratio and a dividend yield above 1.30%. The software company has an AI infrastructure for its cloud services that will give customers more reasons to stick around.
The corporation helps its customers capitalize on the latest innovations in artificial intelligence. Oracle’s strides in AI helped the company notch 18% YOY revenue growth for Fiscal Year 2023. Cloud revenue experienced the highest growth rate. Q4 cloud revenue jumped by 54% YOY and accounted for 31.9% of the company’s total revenue in Q4.
Oracle CEO, Safra Catz, expressed excitement about the company’s cloud businesses and has a good outlook for Fiscal Year 2024. He is confident the company will have a strong year in FY24 thanks in part to an accelerating infrastructure growth rate. The company has a robust cloud business that stands to benefit from artificial intelligence.
On this date of publication, Marc Guberti held long positions in SMCI and AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.