It’s starting to look a lot like Christmas for tech investors.
After jumping 54% last year, the Nasdaq100 is already up another 4%, keeping pace with the usual suspects. Nvidia (NASDAQ:NVDA) has surged 41% so far, maintaining its blistering pace from 2024, and Metaplatformsanother big gainer last year, is up 33%.
This strong start is the latest evidence that investors are experiencing a new iteration of the dot-com boom when the Nasdaq Composite jumped 582% from early 1995 to its peak in March 2000.
A renowned technology analyst has repeatedly spoken about the new technology boom, saying that “it’s 1995.” This is Dan Ives from Wedbush. At least since last June, Ives has said we’re in another 1995 moment, explaining in a recent article on forever. trajectory of the technology sector.
Is Ives right about the AI boom?
The Internet is one of the most important transformational innovations in history, and in a generation it has reshaped the way we communicate, entertain, work and shop.
It would be a daunting task for any new technology to achieve a similar transformation, but many top CEOs believe that artificial intelligence (AI) could be just as transformative, if not more. Oracle Co-founder and CTO Larry Ellison, who has been in the industry since the early days of the computer, said: “Is generative AI the most important new computing technology of all time? Probably. » You’re here CEO and technology visionary Elon Musk said AI has the potential to be the most disruptive force in history. Microsoft (NASDAQ:MSFT) co-founder Bill Gates called AI the most revolutionary technology in decades
Along with predictions from tech’s biggest luminaries, it’s also clear that analysts can’t keep up with the meteoric growth of companies like Nvidia, which has beaten expectations every quarter since ChatGPT launched.
The current predicament in the tech industry offers further proof that the AI boom is only just beginning. Nvidia’s revenue and profits grew despite a shortage of its products. There is more demand than the company can meet, and hyperscalers, startups and others need its processors to run the powerful models required to Generative AI.
It will be difficult to assess the potential of AI until every company that wants the necessary infrastructure has it, but demand is clearly growing at the moment.
3 Top Stocks to Buy for a New AI Boom
Billionaire investor George Soros said, “When I see a bubble forming, I rush to buy.”
It may be too early to call the rally in AI stocks a bubble, but the most obvious plays are often the best in these situations, as are stay-at-home stocks such as Zoom video communications And Platoon were big winners early in the pandemic.
In this same logic, Nvidia still appears to be a good choice in the AI revolution. The stock’s gains over the past year aren’t riding on air. Its profits have soared because its technology is in high demand and its processors are far ahead of the competition. Although some expect this gap to narrow, there are also signs that competitive dynamics could move in the opposite direction as Nvidia strengthens its competitive advantage. For example, it unveiled new PC AI chips in January, threatening to take market share in a category that Intel led for a long time.
Nvidia also appears well valued, trading at a price-to-earnings (P/E) ratio of just 33 based on this year’s earnings estimates. If the company manages to surpass this target, the stock will surely rise.
Microsoft looks like another easy AI stock to own. Although the company is not as directly exposed to the demand for AI as Nvidia, it appears to be the company best positioned to benefit from AI in a variety of ways. Its partnership with OpenAI has already borne fruit as its AI-based Copilot is featured in programs such as Azure, Office 365, Bing and GitHub. The company said during its recent earnings conference call that AI was responsible for an additional six percentage points of growth, helping it outpace competitors, and it now has 53,000 Azure AI customers.
Microsoft’s early lead also ensures that its highly profitable core product will remain relevant and in demand, helping to block potential competition.
Finally, Super microcomputer (NASDAQ:SMCI) is the third AI title worth buying for a new tech boom. Like Nvidia, Supermicro found itself in the enviable position of creating hardware to run AI-based models like those used by ChatGPT. Supermicro makes server and storage equipment in high demand in the AI revolution, driving its revenue up 103% in its most recent quarter, and the company is currently constrained in supply as it expands. is pushing Nvidia chips, meaning growth could be even stronger.
Like Nvidia, Supermicro is also profitable and trades at a reasonable forward P/E of just 31. These estimates could easily rise if supply improves.
If Ives is right and it’s 1995, there should be many winners in the AI boom. It’s best for investors to focus on stocks that are solidly profitable and already clearly benefiting from AI.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman holds positions in Meta Platforms and Zoom Video Communications. The Motley Fool holds positions and recommends Meta Platforms, Microsoft, Nvidia, Oracle, Peloton Interactive, Tesla and Zoom Video Communications. The Motley Fool recommends Intel and Super Micro Computer and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
This Top Tech Analyst Says It’s 1995 Again: 3 AI Stocks to Buy if He’s Right was originally published by The Motley Fool
