If You Like Nvidia, Then You Will Love These 2 Hot AI Stocks

There are more players in AI beyond Nvidia. While Nvidia has caught the attention of investors, these players are catching up in the race.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

Social Media Profiles

Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published August 23, 2024 8:15 pm EDT

Nvidia (NASDAQ: NVDA) has been an eye candy of investors, making its loyal shareholders millionaires in less than a decade. If you invested US$10,000 in the stock in August 2014, your investment would now be worth US$2.9 million. Even if you joined the artificial intelligence (AI) boom in early January 2023, your US$10,000 would be worth US$86,800 in less than two years.

Behind Nvidia’s enormous growth is graphics processing units (GPUs) that remain unbeatable. Anyone in the world looking to harness AI power purchased Nvidia’s GPUs. Even today, they offer unmatched performance. However, the semiconductor industry is catching up to the artificial intelligence boom and taking a share of this pie.

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies — Source: Getty Images

Two hot AI stocks you will love

If you love Nvidia for its performance and market leadership in the chip space, you will definitely love these two hot AI stocks.

Broadcom stock

If you have been following semiconductor stocks, you know Broadcom (NASDAQ: AVGO) for its leadership in communication chips. The company grew exponentially through its massive acquisitions in the tech space. It has acquired all big names like CA Technologies and Symantec, and the latest one is VMware as it looks to expand its software offerings. From being a communications semiconductor company in 2016, it is today a technology company.

Broadcom offers a complete 5G infrastructure, from broadband to server storage, networking, and wireless equipment. And it is now developing an AI infrastructure. At the core of its AI offering is ASIC (application-specific integrated circuits) optimized for specific workloads. While GPUs have the advantage of high-performance computing in general, ASICs are better for specific workloads. Every processor has its pros and cons. And companies investing heavily in AI infrastructure are optimizing their hardware for the best results. Broadcom is building custom AI ASICs with Meta Platforms and Alphabet’s Google.

You can also diversify your AI portfolio to different elements of the AI ecosystem to make the most of one trend.

If you invested US$10,000 in Broadcom in November 2022, your investment would be worth US$31,057. Plus, you would get US$395 in annual dividends. This is because Broadcom entered the AI boom a little later. If you look at the 10-year performance, when the stock enjoyed the 5G rally, a US$10,000 investment in August 2014 is worth US$2.2 million today.

While Nvidia’s growth was highly volatile, Broadcom’s growth was less bumpy.

Microsoft

AI is not just about hardware but more about software. While Nvidia leads in the AI hardware space, Microsoft (NASDAQ: MSFT) leads in the AI software space with its Bing and co-pilot offering. Microsoft is the largest shareholder of OpenAI, the company that developed ChatGPT. The tech giant has invested US$10 billion in OpenAI and is developing various AI applications.

OpenAI is just one part of Microsoft’s AI ambition. It is incorporating AI into its offerings and helping companies use AI. For instance, its Bing search engine enhances the search experience. What makes me confident about Microsoft is it was the first to understand the potential of the cloud in 2014 and go full-blown into it. Today, its cloud business revenue dwarfs the revenue of Microsoft Office.

If you invested US$10,000 in Microsoft in January 2023, your investment would be worth US$17,392, excluding dividends. This is because the potential of AI applications has not yet been unleashed. As the AI ecosystem builds up, software will overtake hardware growth. If you look at the 10-year performance, when the stock enjoyed the cloud rally, a US$10,000 investment in August 2014 is worth US$92,344 today.