Stock market darling stocks Nvidia (NASDAQ:NVDA) It’s up nearly 219% over the past year, hitting near-record highs. The semiconductor giant’s advanced GPUs and superior capabilities in artificial intelligence (AI) software have made it the undisputed leader in the AI market, leading to dramatic improvements in financial performance.
There is no doubt that AI is the biggest investment theme of 2024. Many investors may feel they’ve missed out on this rally, especially since his Nvidia trades at 33x forward price-earnings, well above the semiconductor median. yeah. Industry valuation is 19.4 times. These investors can consider buying shares in other high-quality AI stocks with relatively reasonable valuations. microsoft (MSFT 1.55%) and intel (INTC 1.91%).
Here’s why these two stocks are attractive stocks in 2024.
microsoft
Technology giant Microsoft announced impressive results for the second quarter of 2024, with both revenue and profits beating consensus estimates. Unsurprisingly, AI is a key driver for the company.
Microsoft’s Azure cloud computing platform was a key growth driver, with revenue soaring 30% year over year in the second quarter ending December 31, 2023, including a 6 percentage point increase from AI services. . On the contrary, revenues increased from major competitors such as:as Amazonwith AWS alphabetGoogle Cloud grew 13% and 26% year-over-year, respectively, in recent quarters. Azure has also been successful in winning larger and longer-term deals, including contracts worth more than $1 billion. This ensures that your business remains relatively unscathed during difficult times.
Azure is also becoming the ideal cloud computing platform for AI workloads thanks to its best performance for large-scale language model training and inference. Microsoft offers customers a diverse selection of AI software models (from multiple chip players) and AI hardware, all deeply integrated with Azure infrastructure, data, and tools. The company has already built a base of 53,000 Azure AI customers, nearly a third of whom have joined the Azure platform within the past 12 months.
Another key growth driver for Microsoft is CoPilot, an AI-powered assistant built into multiple Microsoft products, including the Microsoft 365 productivity suite, GitHub, and the Microsoft security platform. The company expects CoPilot’s rapid adoption and monetization to lead to significant increases in average revenue per user over the next few years.
In addition to multiple AI tailwinds, Microsoft’s core PC and gaming business is also expected to recover in 2024. The company’s Productivity and Business Processes division has also returned to its double-digit growth in the past few quarters.
Microsoft’s current price-to-sales (P/S) ratio of 13.3x is significantly higher than the software industry’s median valuation of 2.2x. However, given the company’s strength in the AI market and improving IT spending trends, this leading consumer and enterprise software company could prove to be a smart buy in 2024, even at current price levels. There is a possibility that
intel
Semiconductor giant Intel’s stock price plunged nearly 13.4% after it announced mixed fourth-quarter 2023 financial results on January 25th. Although the company’s sales and profits beat consensus estimates, its revenue outlook for the first quarter of fiscal 2024 was significantly lower than analysts expected. ‘ is the expectation. Intel attributed the weak outlook to temporary headwinds in its Mobileye self-driving business, PSG (Programmable Solutions Group) and Intel Foundry Services businesses. Despite these setbacks, there’s little to be positive about this stock.
The PC market appears to be on track for recovery in 2024. IDC expects the overall PC market to grow 3.4% year-on-year in 2024. This will be facilitated by PC refresh cycles to replace the aging installed base of commercial PCs and upgrade to new PCs with integrated AI. ability. As a market leader in the client PC market, Intel is well positioned to capitalize on this trend.
Intel is also making rapid progress in the AI PC market with its Core Ultra client processors, also known as Meteor Lake. These processors are designed to run low-power computations for AI workloads on client PCs. The company has partnered with over 100 independent software vendors and plans to release over 300 of its AI-accelerated software features optimized for its own AI PCs by 2024. is.
Additionally, the company’s partnerships with multiple PC manufacturers will also play a pivotal role in driving the adoption of AI PC systems. Intel predicts that in 2024 it will ship 40 million AI PC systems, used in more than 230 designs ranging from ultra-slim PCs to handheld game consoles. Despite the lack of significant impact from AI PC systems, fourth-quarter revenue for Intel’s client computing business grew steadily to $8.8 billion, up 33% year-over-year.
Intel also sees its foundry business as a key growth driver and expects to be the No. 2 foundry by 2030. The business is currently focused on traditional chip packaging, but Intel expects wafer manufacturing and advanced chip packaging to generate significant revenue in the coming years. . This will be facilitated by the rapid global adoption of AI technology and will require a secure and sustainable supply chain for AI-optimized chips. Intel’s foundry business has already won contracts from multiple customers and has a pipeline of more than $10 billion in publicly traded deals. Fourth-quarter foundry services revenue posted strong growth to $291 million, up 63% year-over-year.
Intel currently trades at a P/S ratio of 3.5x, which is much lower than peers such as Nvidia and Nvidia. Advanced Micro Devices. So given its strong tailwinds and reasonable valuation, Intel may be a prudent long-term AI buyer, even if the stock is volatile in the short term.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Manali Bade has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
