Even though the market is hovering around all-time highs, it’s becoming a place where picking individual stocks is increasingly vital. In this kind of environment, returns can differ significantly from one stock to another. It seems that savvy investors might find opportunities to outperform the broader market by focusing on specific high-performing stocks.
So, let’s dive into three standout artificial intelligence (AI) stocks worth considering for the next three years.
Will AI lead to the world’s first millionaire? We recently put together a report on a lesser-known company dubbed an “essential monopoly,” known for supplying critical technology to giants like Nvidia and Intel.
Broadcom (NASDAQ:AVGO) is positioned for impressive growth in the coming years, particularly with the surge in data center construction, which has ramped up demand for network equipment. This is especially true for application-specific integrated circuits (ASICs).
The demand is expected to skyrocket as Alphabet (NASDAQ:GOOG) ramps up spending on AI infrastructure, utilizing Broadcom’s contributions to enhance their AI workloads. In fact, Alphabet has started making its tensor processing units (TPUs) available to customers, and there’s been substantial interest, such as a recent $21 billion order from Anthropic.
Other major players in the tech sphere are also seeking Broadcom’s expertise to design customized chips, presenting vast growth potential.
Alphabet continues to benefit tremendously from advancements in AI technology. The new AI features are boosting Google Search’s revenue, and their Gemini AI model is being recognized as leading in the field. The cloud computing sector, where Alphabet plays a crucial role, saw a whopping 48% revenue increase last quarter.
The company is set to invest heavily in AI infrastructure this year, capitalizing on its advantages. Notably, their TPUs offer a significant cost edge over competitors— costing less than half of what a typical Nvidia graphics processing unit (GPU) does.
Moreover, allowing customers access to these chips in Google Cloud adds another layer of potential revenue growth. Alphabet estimates they can rake in about $13 billion for every 500,000 TPUs deployed. Given its comprehensive AI portfolio—from custom chips to advanced AI models—Alphabet appears to be a stock to hold for the long haul.
However, one of the significant hurdles when expanding AI infrastructure is memory. AI chips require high-bandwidth memory (HBM) for optimal performance, and manufacturing this memory is intricate and demands substantially more resources than standard dynamic random access memory (DRAM). This has led to supply shortages across the DRAM market, causing prices to skyrocket.
In this context, Micron Technology (NASDAQ:MU), one of the top three DRAM manufacturers alongside SK Hynix and Samsung, stands out. The current environment has resulted in notable increases in sales and profit margins for Micron.
Given the surging demand, the supply situation for DRAM is likely to remain tight for years, even with Micron and others increasing production capacity. This favorable situation bodes well for the company.
Before making a decision on Broadcom, it’s worth mentioning that the Motley Fool Stock Advisor recently identified ten other stocks that may offer promising returns in the near future, with Broadcom not among them. They have some valuable recommendations that could lead to impressive financial gains.
For instance, when Netflix was included in their recommendations back in 2004, that investment would have grown significantly over the years. Similarly, Nvidia‘s early recommendations have led to tremendous returns for investors. The Stock Advisor boasts an average return that far surpasses the S&P 500.
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