The boom in AI stocks is still strong and is rewarding investors who got into it in early 2023. Nvidia (NASDAQ:NVDA) released blockbuster earnings yet again and signaled that the space is still promising for investors.
Some investors are enthusiastic about AI stocks and are loading up. However, other investors may want to dip their toes in the water before committing large amounts of capital to companies within the industry.
If you only have room in your portfolio for one, choose from among these AI stocks.
Nvidia has outperformed most stocks and is at the forefront of the artificial intelligence boom. The company produces chips that companies need for AI tools. Nvidia also benefits from the heightened demand for data centers.
Artificial intelligence has translated into 206% year-over-year revenue growth for Nvidia. Revenue also grew by 34% from the previous quarter. Data center revenue growth eclipsed both percentages and continues to propel the company’s financials.
Net income jumped by an even more impressive 1,259% year-over-year. This type of growth makes it easier to justify a 117 P/E ratio. The company has a more reasonable 32-forward P/E ratio and a 1.07 PEG ratio.
Nvidia’s valuation is drastically going down, and growth has continued onward. Artificial intelligence has been a significant growth driver but the company also generates solid revenue growth from other areas.
Its Gaming segment increased revenue by 81% year-over-year. Revenue from the Professional Visualization segment soared by 108% year-over-year. The Automotive segment was the only slow mover with 4% year-over-year revenue growth. This low growth rate isn’t a big deal since it only generated $261 million out of the company’s $18.1 billion in revenue for the quarter.
Broadcom (NASDAQ:AVGO) is another chip maker that has benefitted immensely from the shift to artificial intelligence. Shares are up by 76% year-to-date and have more than quadrupled over the past five years.
The significant appreciation has lowered the stock’s dividend yield to 1.90%. However, the company is known for hiking its dividend by double-digit percentages each year. It’s an enticing dividend growth stock for long-term investors, but price growth is the stronger focus. The quarterly dividend per share currently sits at $4.60.
Broadcom doesn’t grow like Nvidia but makes up for it with a lower valuation. Shares trade at a 30 P/E ratio. Revenue and earnings growth both slowed down in the previous quarter but were still up by mid-to-high single-digits year-over-year. Broadcom bought back $2.167 billion worth of shares in that quarter.
Supermicro (NASDAQ:SMCI) offers the bedrock for artificial intelligence tools.
The company’s server and storage solutions have high bandwidth and can support many AI capabilities. The company’s software and service helps companies looking for solutions for cloud computing, 5G, data centers, and other verticals.
SMCI grew its revenue by 14% year-over-year in the first quarter of the 2024 fiscal year. Net income took a step back in this quarter but normally exhibits high year-over-year growth. The company has a quick ratio above 2.0 and can comfortably cover its current liabilities.
Supermicro has the potential to be an attractive long-term winner, and you don’t have to tell that to shareholders who have held on for over a year. The stock has gained 240% year-to-date and is up by almost 2,000% over the past five years.
Supermicro has a $15 billion market cap and a 25 P/E ratio. The stock can end up with a higher valuation as artificial intelligence demand drives higher revenue growth.
On this date of publication, Marc Guberti held long positions in NVDA, AVGO, and SMCI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.