Artificial intelligence (AI) stocks have had a great run in 2023 and the early part of 2024. But after a run like this, which AI stocks are worth covering in March?
A good place to look is the stocks of tech leaders that have not yet surpassed their 2021 highs, but will still likely benefit from the AI revolution. As such, these three major tech stocks look like great buys for this month and beyond.
Amazon
Amazon (NASDAQ: AMZN ) The stock is almost back to its 2021 highs, but it’s still 6% below the level of three years ago.
Why is Amazon lagging some of its Magnificent Seven peers? The market appears to be a little worried about Amazon’s competitors. Microsoft Microsoft’s partnership with OpenAI could give Amazon an edge in the AI race, or AI in general could be somewhat disruptive to some of Amazon’s businesses.
But this is really the first innings in the AI races, and it’s not clear that OpenAI’s LLMs will win out and dominate the market — especially with OpenAI’s recently publicized internal turmoil.
Meanwhile, Amazon has many structural advantages in both its cloud and e-commerce and advertising businesses that will help make generative AI profitable, not the opposite.
First, Amazon Web Services (AWS) is still the largest cloud provider out there, and it is somewhat disruptive for organizations to move all their data to another cloud. Therefore, Amazon has the advantage of time and deep customer relationships to develop its compelling AI offerings.
Of course, Amazon is already doing this, not only by developing its own large language models (LLMs) under the Titan brand name, but also by hosting a wide range of third-party LLMs for AWS clients under the AWS Bedrock platform. is also doing Additionally, Amazon offers highly affordable AI for applications that can run on Amazon’s in-house developed chips Trainium and Inferentia.
And Amazon’s non-cloud businesses, from e-commerce to advertising to physical stores and satellite broadband, are all likely to benefit from generative AI. While AI may help smaller competitors catch up to leaders in certain industries, Amazon’s massive physical e-commerce distribution infrastructure is unlikely to be disrupted by AI software algorithms. This is likely to greatly enhance Amazon’s large-scale and data-rich e-commerce business through GenAI, both from a revenue generation and cost perspective.
Investors have recently seen AWS revenue growth stabilize since the broader tech downturn began in 2022, and profits in Amazon’s e-commerce businesses are on the upswing. Those trends are expected to continue, and eventually set new all-time highs for Amazon.
Micron
The memory industry is just starting to emerge from one of its worst downturns yet. Micron (NASDAQ: MU ) Once again approaching its all-time highs since early 2022.
This may sound like a paradox, but the memory industry is very cyclical, with booms and busts. As such, Micron is likely to see massive profit growth as the industry emerges from this downturn, and perhaps even touch new highs on previous demand for AI.
As one of only three producers of leading-edge DRAM memory worldwide, Micron and its peers drastically cut production last year, shifting their devices to leading-edge DDR5 and high-bandwidth memory (HBM). Reproduced, which are very common at the moment. High demand to feed AI applications.
Supply control coupled with demand recovery led by extremely strong demand for AI memory is leading to a massive recovery in DRAM prices and volumes. Research firm Trend force noted a nearly 30% quarter-on-quarter increase in DRAM industry revenue in the fourth quarter 2023, and predicted a 20% increase in DRAM chip prices in the first quarter alone.
Keep in mind, these are quarterly figures, which make for some truly eye-opening growth figures annually. Meanwhile, imbuing every electronic device with AI capabilities, from data center servers to edge computing devices to PCs, will lead to double-digit increases in the DRAM content of each device during this period. Trend force.
Micron was slightly behind competitors in bringing its HBM product to market, but just announced volume manufacturing of its HBM3E product on February 26. The new HBM3E Performance boasts industry-leading performance and power efficiency, and will be a staple for years to come. Nvidia H200 systems that will begin shipping in the second quarter.
With the boom in AI and a newly disciplined memory industry on the supply side, investors should expect a strong upcycle and improved profitability going forward, which will propel Micron to new heights.
Tencent
Chinese stocks are currently unattractive to many investors. But while geopolitical concerns are quite valid, even the best-rated Chinese companies now trade at cheap valuations.
Goes for it. Tencent (OTC: TCEHY), which currently trades at a ridiculous 12.8 times earnings. And the main business is even cheaper. Tencent’s listed and unlisted holdings in investee companies totaled $112 billion as of the third quarter, about a third of Tencent’s total market capitalization. So investors can basically buy Tencent’s core business today at just 8.5 times earnings!
While the Chinese economy is in doubt, Tencent still grew revenue by 10% last quarter, and is a dominant leader in mobile gaming, social media, fintech, and business cloud applications. Additionally, it is becoming an AI leader, launching its first LLM, named Hunyuan, in September.
Tencent’s bargain valuation and cash-generating capabilities give it a low bar to clear for the stock to succeed. For those who are comfortable investing in China or want some Chinese exposure, Tencent looks like the best house on the block.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Billy Doberstein has positions at Amazon, Micron Technology and Microsoft. Its clients may own shares of the said companies. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Tencent. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.
3 Top Artificial Intelligence Stocks to Buy in March was originally published by The Motley Fool.