In 2024, AI stocks remain crucial as generative AI and machine learning continue to be key drivers of investor interest. Despite market fluctuations, AI stocks have shown resilience, even in these uncertain times. And while many top AI names have seen significant declines from their recent peaks, it’s important to zoom out. The stocks I’m highlighting below are up an incredible amount from their more recent troughs. I think this momentum is likely to continue long-term.
The Federal Reserve’s recent stance has boosted confidence in growth stocks, with interest rates likely to be cut in short order. And as growing business adoption of AI technologies continues to advance, further demand growth and innovation are likely to accelerate over time.
AI has dominated earnings discussions this year, with companies investing billions to integrate AI into their offerings. Here’s why these three AI stocks should still top investors’ watch lists right now.
Nvidia (NVDA)
Nvidia’s (NASDAQ:NVDA) brief “relief rally” ended as the stock fell 7% on Friday, hitting its lowest since May. This drop wiped out earlier gains amid tech sector declines, with the Nasdaq officially entering correction territory due to an economic slowdown and fears of AI overspending.
However, increased AI investment is seen as a catalyst for Nvidia and other AI chipmakers. This is a factor that’s undebatable, and one that’s driven the stock to incredible heights this year, with Nvidia briefly taking the mantle of the world’s largest company.
Wall Street experts continue to drive home the idea that the AI trade remains strong despite a recent pullback. Many view this current dip as one worth buying. Given the long-term growth assigned to AI applications, it should drive incredible demand for high-performance chips. Nvidia’s status as the leading high-performance chip maker should position the company for strong growth long-term. And with most major tech names continuing to order billions of dollars of chips each quarter from Nvidia, this demand does appear to remain sustainable over time.
That’s not to say there aren’t risks. Nvidia’s upcoming earnings face scrutiny amid Taiwan-China tensions and Big Tech volatility. Developing a China-specific chip could mitigate regulatory issues. That said, analysts remain optimistic and confident that Nvidia will remain the dominant force in the AI chip sector. I agree.
ASML Holdings (ASML)
In July, ASML Holdings (NASDAQ:ASML) stock fell despite beating earnings estimates. The company’s stock was weighed down by export restriction fears and a shift from chip stocks to small caps.
On July 31, news that ASML might be excluded from new U.S. export restrictions lifted its stock, as nearly half of its sales come from China. The U.S. reportedly plans to expand the foreign direct product rule but exclude key allies like Japan, the Netherlands and South Korea. However, exports to China from Israel, Taiwan, Singapore and Malaysia will be impacted.
As one of the biggest names in the semiconductor sector, in Q2 ASML reported a 6.2 billion euro net sales, skyrocketing ahead estimates. System sales reached 4.8 billion euro. Installed base management generated 1.48 billion euro, highlighting strong service revenue. Logic and memory sales made up 54% and 46% of system sales, respectively, driven by advanced chip demand.
Additionally, Advanced Micro Devices‘ (NASDAQ:AMD) strong revenue growth and Barclays upgraded rating boosted chip stocks, including ASML. Over time, I think more positive upgrades will be forthcoming due to ASML’s status as a picks-and-shovels way to play the chips space. For those looking to truly play the broader macro trend behind chip development and growth, ASML stock could be the best way to do so.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) surged 264% in Q1. It remains up 220.1% for the year, despite a 21% drop in Q2. The stock has been a clear beneficiary of AI growth. It is seeing an incredible surge tied to impressive demand for the company’s servers and storage solutions business. With the company’s direct liquid cooling technology, few competitors can come close to providing the sort of scale and growth potential of Super Micro.
In its fiscal third quarter, Super Micro earned $855 million ($15.68 per share) on $9.6 billion in revenue, up 95% year-over-year. The company raised its Q4 revenue forecast to $5.1 billion to $5.6 billion and full-year guidance to $14.7 billion to $15.1 billion, exceeding initial estimates. Results for Q4 and the full year are expected around August 13.
On August 3, SMCI stock fell over 4% despite announcing a new Nvidia Omniverse SuperCluster. This enhanced system featuring Supermicro’s Nvidia OVX and generative AI workflows aims to boost AI workload scalability. CEO Charles Liang highlighted that this SuperCluster integrates advanced GPU capabilities for high performance and future innovation.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
