3 Stocks to Buy for Their Proximity to Nvidia

Stocks to buy

Finding artificial intelligence stocks to buy is as easy or difficult as you want to make it. For example, you could throw your entire savings at Nvidia (NASDAQ:NVDA) and probably do OK over the long run. But, if you want to capture Nvidia’s upside without the steep price tag, look to stocks that will benefit from Nvidia’s success.

Nvidia’s wide reach means that it’s involved in many peripheral industries. At the same time, Nvidia doesn’t stand alone. The company depends on various subcontractors and manufacturers to facilitate its product lines. Finding companies within those subindustries can help you diversify your existing Nvidia-centric portfolio and capture wider industry trends. At the same time, stocks that will benefit from Nvidia’s success are often much cheaper than Nvidia itself – meaning a value for bargain hunters. 

Fabrinet (FN)

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Fabrinet (NYSE:FN) specializes in the standardized manufacturing of electronic and technical subcomponents. The subcomponents are then sold to companies like Nvidia as part of their final assembly. Picture how car companies outsource components like doors before assembling complete vehicles in their facilities. That’s basically how Fabrinet fits into Nvidia’s ecosystem. 

In Fabrinet’s case, they focus on manufacturing optical communication components and advanced lasers for companies like Nvidia and Cisco (NASDAQ:CSCO).

Beyond Nvidia, industry experts foresee how the booming semiconductor sectors and enthusiasm for AI can propel Fabrinet to new heights. Following a robust earnings report, analysts have raised the consensus price target for Fabrinet to $165. That increase is primarily due to the promising opportunities tied to artificial intelligence. FN’s stock surged by nearly 40% following this collective upgrade, although it still trades below the established price target.

It’s worth noting that Nvidia accounts for 13% of Fabrinet’s revenue. But other AI-focused data communications companies are increasingly drawn to the company. But, importantly, Fabrinet’s success doesn’t solely hinge on Nvidia. It stands to benefit from the broader AI trend, regardless of which companies ultimately emerge as victors.

Onto Innovation (ONTO)

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Onto Innovation (NYSE:ONTO) is a semiconductor support company set to benefit from Nvidia’s success. Furthermore, its role is indispensable to the broader industry. This support provider remains at the forefront of the AI-driven wave. Its year-to-date surge of 75% marks the beginning of this hardware company’s journey.

In August, the company announced a $100 million deal centered around its Dragonfly inspection system. This hardware is critical in identifying flaws and defects in third-party semiconductors, an essential operational concern for companies like Nvidia.

Onto Innovation has firmly established itself within the semiconductor supply chain. Semiconductor inspection requirements are rigid and position Onto as a key player in the sector. The services offered by Onto cater to a diverse clientele, given the integral role that chips now play in most electronic systems.

AI demand continues to rise. At the same time, the existing GPU and technology stack market, currently valued at $3.16 billion, will expand to $25.5 billion by 2030. As companies compete to lead the charge in the semiconductor “space race,” Onto Innovation stands in a prime position to capitalize on this trend, regardless of the ultimate victor in this dynamic industry.

Recursion Pharmaceuticals (RXRX)

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Recursion Pharmaceuticals (NASDAQ:RXRX) stock popped in July, fueled by a game-changing development—a direct investment of $50 million from Nvidia. But, since that month’s peak, RXRX’s stock has experienced a sharp decline. Today, it trades at nearly a third of its previous price. But there’s been no headwind to Nvidia’s enthusiasm about RXRX.

RXRX harnesses the power of AI to swiftly and accurately identify cross-gene relationships and interactions within its extensive and ever-expanding genetic dataset. The notable advantage of their platform’s technology lies in its ability to dramatically reduce drug discovery timelines by running generative AI processes. Drug discovery typically entails the lengthy and intricate process of identifying which combinations of compounds are therapeutically effective when interacting with genes. 

Manual management of drug discovery, involving sifting through millions of data points, can be akin to searching for a needle in a haystack. RXRX’s distinctive and viable AI platform has the potential to be revolutionary in the field of therapeutics. The involvement of a company like Nvidia should certainly arouse interest, and RXRX stands to gain from Nvidia’s direct involvement.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.

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