Artificial intelligence (AI) has become the hottest investment topic, captivating the minds of experienced investors and novices alike. This is not surprising given that multiple research firms predict the value of the AI market to exceed $1 trillion by 2030.
The AI trend has the potential to generate windfall profits, and investor interest in AI stocks has never been higher. Two stocks, viz. Nvidia (NASDAQ:NVDA) and marvel technology (NASDAQ:MRVL), could prove to be an attractive addition to an AI-focused stock portfolio. Here’s why these stocks are smart choices right now.
1. Nvidia
Semiconductor giant Nvidia, widely seen as a symbol of the ongoing AI revolution, is making history before our eyes.
Nvidia delivered impressive results in its fourth quarter of fiscal 2024 (ending January 28, 2024), with both revenue and profits beating consensus estimates. This is an impressive achievement, especially since the US government’s increased restrictions on chip exports to China could force NVIDIA to cancel his multibillion-dollar chip orders in 2024. NVIDIA also faces competition from other chip players, including: Advanced Micro Devices and intelas well as from major clients developing their own AI chips.
Nevertheless, the technological superiority of Nvidia’s AI chips has allowed it to capture nearly 92% share of the global data center GPU market. The company’s cutting-edge GPUs (A100 and H100 chips) and advanced networking technologies (including InfiniBand solutions used in high-performance AI infrastructure and the recently launched Spectrum-X end-to-end Ethernet-based solution) are ideal for AI (accelerated networks) are widely used in data centers as they migrate their multitrillion-dollar installed base from general-purpose computing to accelerated computing. Additionally, companies across industries are leveraging generative AI technology for a variety of use cases, which could also create a multi-trillion dollar opportunity for Nvidia’s AI-optimized hardware products. . Additionally, demand for Nvidia’s chips far exceeds supply, allowing the company to enjoy significant pricing power, a key factor driving strong data center revenues over the past few quarters. .
In addition to hardware, Nvidia’s CUDA (Compute Unified Device Architecture) programming software stack has helped clients optimally program GPUs for accelerated computing applications. As companies increasingly adopt accelerated computing, they also need support to maintain complex software infrastructures. Nvidia sees this as a huge opportunity for his Nvidia AI Enterprise cloud-native software platform, as both companies do not have large engineering teams.
While Nvidia’s growth potential may look solid, investors are understandably concerned about its sky-high valuation. Nvidia trades at a price-to-earnings multiple of 77, making it an extremely expensive stock. However, this valuation is still cheaper than the company’s three-year average price-to-earnings (P/E) multiple of 95.9x and five-year average P/E multiple of 86.9x. Nvidia has always traded at a solid premium thanks to its cutting-edge products. Still, it has achieved an impressive return of 300% over the past year.
So, given multiple strong tailwinds and a historically lower valuation, it makes sense to start accumulating a position in this stock. Investors can also choose dollar-cost averaging strategies and invest their funds over a long period of time to control risk.
2. Marvel Technology
Shares of fabless semiconductor giant Marvell Technology fell nearly 11.4% in one day after the company announced its latest financial results (FY2024 fourth quarter, ending February 3, 2024) on March 7. AI-driven data center business continues to be a bright spot in the , enterprise networking, and consumer markets.
Marvell has been actively investing in AI-optimized networking products and chips to benefit from the explosive growth of the AI and accelerated computing market. The company offers high-speed optical interconnect products in traditional cloud data centers and AI-optimized data centers (100 Gig per lane, 800 Gig PAM products used to move large amounts of data between chips), accelerators , and recognized solid demand for the switch. Fourth quarter. AI accounted for 10% of the company’s data center revenue in 2024. Marvell expects to deploy even faster optical interconnect products (200 Gig per lane, 1.6T PAM solutions) by the end of 2024.
Marvel also recently announced an extension to its long-standing partnership with the company. taiwan semiconductor manufacturing For developing a technology platform capable of producing 2-nanometer chips for accelerated computing. This agreement will enable the company to play a pivotal role in improving the performance and power efficiency of next-generation AI workloads.
Beyond AI, Marvell’s other business segments also have solid growth potential. Although currently in a cyclical recession, Marvell expects its carrier infrastructure, enterprise networking and consumer segments to gradually recover in the second half of fiscal 2025. Increasing vehicle connectivity and bandwidth requirements are also proving to be key growth drivers for the company’s automotive segment. work.
Initiating a position in this stock in 2024 is a smart move given the growing demand for the company’s AI-optimized networking products and an expected near-term recovery in other end markets. Maybe.
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Manali Pradhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and Marvell Technologies, with a long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, and a long January 2024 $47 call on Intel. We recommend short dollar call options. The Motley Fool has a disclosure policy.
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