Investing in stocks that are part of the artificial intelligence (AI) race can help you generate sizeable returns over time. It’s essential to identify companies positioned to benefit from an early mover advantage, making stocks such as Nvidia (NASDAQ:NVDA), Super Micro Computer (NASDAQ:SMCI), and Microsoft (NASDAQ:MSFT) enticing investment options right now. Let’s see why.
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Nvidia stock
Valued at US$3 trillion by market cap, Nvidia is among the hottest stocks in the world, returning over 26,000% to shareholders in the past decade. Nvidia is a crucial part of the AI megatrend, as companies are deploying billions of dollars to purchase the chip maker’s graphics processing units, which are required to build and run artificial intelligence applications.
Nvidia’s primary business is the data center segment, which includes AI chips. The data centre business rose 427% year over year in the fiscal first quarter (Q1) of 2025 (ended in April) to US$22.6 billion.
Priced at 45.8 times forward earnings, Nvidia stock is quite expensive. However, Wall Street expects its adjusted earnings per share to expand by 46.3% annually in the next five years.
Out of the 41 analysts covering NVDA stock, 37 recommend “buy,” and four recommend “hold.” The average target price for the tech stock is US$137, indicating an upside potential of over 10% from current levels.
Super Micro Computer stock
Another AI-powered hardware stock is Super Micro Computer, which develops and manufactures high-performance server and storage solutions based on modular and open architecture. These solutions range from complete servers to storage systems, workstations, full racks, networking devices, server management software, and security software.
Super Micro Compauter’s sales rose from US$7.1 billion in fiscal 2023 to US$14.9 billion in fiscal 2024 (which ended in June), while adjusted net income almost doubled to US$22.09 per share from US$11.81 per share. Surging demand for its AI servers drove the solid growth in sales and earnings in the past 12 months.
During the Q4 earnings call, Super Micro’s management explained, “Growth was driven by strong demand for next-generation air-cooled and direct liquid-cooled (DLC) rack-scale AI GPU platforms, representing over 70% of revenues across enterprise and cloud service provider markets where demand remains strong.”
Super Micro forecast sales of US$28 billion in fiscal 2025, up from US$14.94 billion in 2024, as it ended Q4 with a record backlog.
Priced at 18 times forward earnings, SMCI stock is quite cheap and trades at a 40% discount to consensus price targets.
Microsoft stock
Microsoft is the final stock on the list. Valued at US$3.11 trillion by market cap, Microsoft is a tech heavyweight and a major player in several verticals, such as enterprise software, public cloud, gaming, and AI. It has invested over US$10 billion in OpenAI, the parent company of ChatGPT, and is one of the largest shareholders in the AI leader.
Despite its massive size, Microsoft grew sales by 15% year over year in fiscal Q4 of 2024 (which ended in June) and forecasts top-line growth at 13.8% in the current quarter.
Microsoft’s cloud division is a key driver of sales, as it rose by 29% year over year in the June quarter. Given consensus price targets, MSFT stock trades at a 20% discount in August 2024.
