Weakness has become an opportunity for best-of-breed AI stocks.
For one, the rotation out of tech in favor of small-cap stocks, while painful, is temporary. Two, some of the top tech stocks — Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL) and Advanced Micro Devices (NASDAQ:AMD) — are excessively oversold and starting to rebound. Three, there’s still plenty of growth ahead for tech stocks, especially with artificial intelligence (AI) spending going through the roof.
The U.S. military, for example, is spending billions on AI to help make life-or-death recommendations in conflict. The Department of Defense is even testing the use of AI with autonomous systems and weapons, including F-16 jets.
Companies like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) are also set to spend well over a trillion dollars on AI, according to Goldman Sachs (NYSE:GS).
As noted by Investopedia.com, “Microsoft, Alphabet, Meta (NASDAQ:META), and Amazon have all told investors they expect increased spending on AI infrastructure, specifically data centers, to secure their long-term position in the AI space and meet the computing demands of the technology.”
That being said, use recent weakness in best-of-breed AI stocks as an opportunity.
Nvidia (NVDA)
One of the top AI stocks to buy on weakness is Nvidia.
After slipping from about $140 to a recent low of $113.06, NVDA caught support and is just starting to pivot higher again. It’s also over-extended on RSI, MACD and Williams’ %R, and is still a strong buy. Helping, NVDA is one of the key suppliers of chips used for AI, which will keep it in the driver’s seat for some time.
Fueling upside, analysts at Citi (NYSE:C) just reiterated its Buy rating on Nvidia with a $150 price target. Loop Capital also raised its price target to $175 with a Buy rating.
Another 37 analysts also rate NVDA a Buy, with an average price target of $142.74. The highest price target among them is $200. We’ll also get a better idea of how well NVDA has been doing when the company posts second-quarter earnings on Aug. 28.
Advanced Micro Devices (AMD)
Another one of the top AI stocks to buy on weakness is Advanced Micro Devices.
After dropping from about $190 to $140, AMD also appears to have caught strong support. It’s also excessively oversold on RSI, MACD and Williams’ %R and could easily push higher — especially if it can blow second-quarter earnings out of the water tomorrow.
Analysts at Stifel also like AMD ahead of earnings, with a Buy rating and a $200 price target. The firm notes that AMD has “established itself as a strong Number Two supplier of GPU-based AI compute,” as quoted by TipRanks.
With earnings, the Street is looking for revenue of $5.74 billion, which would be about 7% year-over-year growth. They’re also looking for a net income of about $343 million, or 21 cents a share, year over year. Plus, according to Bernstein analysts, the key focus with earnings will be AMD’s AI story and its AI revenue outlook.
Global X Artificial Intelligence & Technology ETF (AIQ)
Or, if you’d rather diversity at a lower cost, there’s the Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ).
Oversold at its 100-day moving average, it’s also over-extended on RSI, MACD and Williams’ %R. With an expense ratio of 0.68%, the ETF holds 84 AI-related stocks, including Nvidia, Qualcomm (NASDAQ:QCOM), Apple, Alphabet and Broadcom (NASDAQ:AVGO). Also, with the AI story still hot, I’d like to see the AIQ ETF double over the next several months.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. 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 held a long position in GOOG and AMZN.
