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

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Artificial intelligence (AI) has become the hottest investment theme, captivating the minds of both seasoned investors and newcomers alike. That’s not surprising, considering several research firms expect the AI ​​market to be worth more than $1 trillion by 2030.

With AI trending to generate windfall returns, investor interest in AI stocks is at an all-time high. Two stocks, viz Nvidia (NASDAQ: NVDA ) And Marvell Technology (NASDAQ: MRVL ), can be a great addition to any AI-focused stock portfolio. Here’s Why These Stocks Are Smart Picks Now

1. Nvidia

Widely regarded as the poster child of the ongoing AI revolution, semiconductor giant Nvidia is making history right before our eyes.

Nvidia posted impressive results for the fourth quarter of fiscal 2024 (ending January 28, 2024), with both revenue and earnings beating consensus estimates. That’s an impressive performance, especially since the U.S. government’s increasing restrictions on chip exports to China could force Nvidia to cancel billions of dollars in chip orders in 2024. Nvidia is also fighting competition from other chip players such as Advanced Micro Devices And Intelas well as from its key clients who are developing their own proprietary AI chips.

Despite this, the technical superiority of Nvidia’s AI chips has enabled it to capture around 92% share of the global data center GPU market. The company’s latest GPUs (A100 and H100 chips) and advanced networking technologies (including InfiniBand solutions used in high-performance AI infrastructure and the recently launched Spectrum-X end-to-end Ethernet-based solution AI-optimized networking) is being widely used by data centers that are transitioning their trillion-dollar installed bases from general-purpose computing to accelerated computing. Additionally, enterprises across industries are also leveraging generative AI technologies across use cases, which could also present a trillion-dollar opportunity for Nvidia’s AI-optimized hardware offerings. In addition, demand for Nvidia’s chips far outstrips supply, which has allowed the company to enjoy significant pricing power — a key factor in its solid data center revenue over the past few quarters. is moving forward.

In addition to hardware, Nvidia’s CUDA (Compute Unified Device Architecture) programming software stack is helping clients optimally program their GPUs for high-speed computing applications. With the increasing adoption of high-speed computing, businesses also need help maintaining complex software infrastructures. Since 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 may seem solid, investors are rightly concerned about its skyrocketing valuation. Trading at 77 times its 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) multiple of 95.9 and five-year average P/E multiple of 86.9. Thanks to its innovative offerings, Nvidia has always traded at a solid premium. Despite this, it has made an astounding 300% return in the past year.

So, with several strong tailwinds and a historically low price, it makes sense to start accumulating a position in this stock. Investors can also opt for a dollar cost averaging strategy and invest their money for longer periods to control their risk.

2. Marvell Technology

Shares of fabless semiconductor player Marvell Technology jumped nearly 11.4% on the day after the company released its latest earnings results (for the fourth quarter of fiscal 2024 ending February 3, 2024) on March 7. fell down , enterprise networking, and consumer markets, the AI-powered data center business remains a bright spot.

Marvell is aggressively investing in AI-enhanced networking products and chips to capitalize on the explosive growth in the AI ​​and high-speed computing markets. The company has expanded its high-speed optical interconnect products (100Gig per lane to 800Gig PAM products used to transfer large amounts of data between chips), accelerators, and traditional cloud data centers and AI-optimized Data centers saw solid demand for switches. 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.

Marvel also recently announced an extension to their long-standing partnership. Taiwan Semiconductor Manufacturing To develop a technology platform capable of producing 2 nanometer chips for high-speed computing. The agreement will enable the company to play a key role in improving performance and power efficiency for next-generation AI workloads.

Besides AI, Marvell’s other business segments also have solid growth potential. Currently in a cyclical downturn, Marvell expects its carrier infrastructure, enterprise networking, and consumer segments to recover gradually in the second half of fiscal 2025. Increasing needs for connectivity and bandwidth in vehicles is also proving to be a key growth driver for the company’s automotive business. business

Considering the growing demand for its AI-optimized networking products and the recovery expected soon in other end markets, starting a position in this stock could be a smart move in 2024.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has 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 Originally published by The Motley Fool.

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