It’s starting to look like Christmas for tech investors.
After surging 54% last year. Nasdaq 100 has already risen another 4%, at the same pace as the usual suspects. Nvidia (NVDA 3.58%) It’s up 41% so far, maintaining a blistering pace from 2024. meta platformanother big winner last year, increased by 33%.
The strong start is the latest evidence that investors are experiencing another dot-com boom. Nasdaq Composite It soared 582% from the beginning of 1995 to its peak in March 2000.
One well-known technology analyst repeatedly calls out a new technology boom and touts it as “It’s 1995.” Dan Ives from Wedbush. Since at least June of last year, Ives has said we are already in a 1995 moment, explaining in a recent post on We are on the threshold of an AI-powered internet moment that will change forever. The trajectory of the technology sector.”
Image source: Getty Images.
Is Ives right about the AI boom?
The Internet is one of the most significant innovations in history, reshaping the way we communicate, entertain, work, and shop in one generation.
It will be difficult for new technologies to achieve similar transformations, but many top tech CEOs believe that artificial intelligence (AI) has the potential to be just as transformative, or even more so. oracle “Is generative AI the most important new computing technology ever? Probably,” said co-founder and CTO Larry Ellison, who has been in the industry since the dawn of computing. tesla CEO and technology visionary Elon Musk says AI has the potential to be the most disruptive force in history. microsoft (MSFT 1.55%) Co-founder Bill Gates called AI the most revolutionary technology in decades
In addition to the predictions of some of the biggest names in the tech world, it’s also clear that analysts have not been able to keep up with the rapid growth of companies like Nvidia, which have exceeded expectations every quarter since ChatGPT launched.
The technology industry’s current woes are further evidence that the AI boom is only just beginning. Nvidia’s sales and profits soared despite product shortages. There’s more demand than the company can meet, with hyperscalers, startups and others needing the company’s processors to run the powerful models needed for generative AI.
It will be difficult to judge the potential of AI until every company that needs the necessary infrastructure adopts it, but it is clear that demand is surging now.
Top 3 stocks to buy for the new AI boom
Billionaire investor George Soros famously advised, “When you see a bubble forming, you rush to buy.”
It may be premature to call the rise in AI stocks a bubble, but in these situations, the most obvious course of action is often the best course of action. Zoom video communication and peloton It was a big winner during the early stages of the pandemic.
By the same logic, Nvidia still appears to be a good choice in the AI revolution. The stock rally over the past year wasn’t built on air. Profits have soared because the company’s technology is in high demand and its processors are far superior to its competitors. While some expect this gap to narrow, there are also signs that competitive dynamics could move in the opposite direction as NVIDIA pursues competitive advantage. For example, the company unveiled a new AI PC chip in January that threatens to steal market share in the following categories: intel I have been leading for a long time.
Nvidia stock also looks good, with a price-to-earnings ratio (P/E) of just 33 times this year’s earnings estimates. If the company can exceed its goals, the stock price will certainly rise.
Microsoft also looks like an easy AI stock to own. Although the company is not as directly exposed to AI demand as Nvidia, it appears to be the company best positioned to benefit from AI in a variety of ways. The partnership with OpenAI is already paying off big time, as his AI-based Copilot is built into programs like Azure, Office 365, Bing, GitHub, and more. The company said in its recent earnings call that AI helped it deliver an additional 6 percentage points of growth, outpacing its competitors, and now has 53,000 Azure AI customers.
Microsoft’s early lead also helps keep its profitable core products relevant and in demand, and thwarts potential competition.
finally, super microcomputer (SMCI 6.06%) is the third AI stock worth buying for the new tech boom. Like Nvidia, Supermicro is in the enviable position of creating hardware that helps run AI-based models like the one used by ChatGPT. Supermicro, which makes server and storage equipment in high demand in the AI revolution, saw revenue increase 103% in its most recent quarter. The company is currently dependent on Nvidia chips, which is supply constrained, and growth could be even stronger.
Like Nvidia, Supermicro is also highly profitable, trading at a reasonable forward P/E of just 31. These expectations could easily rise if supply improves.
If Ives is right and it’s 1995, there will be plenty of winners from the AI boom. Investors are best to focus on stocks that have a proven track record of returns and are already clearly benefiting from AI.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Jeremy Bowman holds positions with Meta Platform and Zoom Video Communications. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, Nvidia, Oracle, Peloton Interactive, Tesla, and Zoom Video Communications. The Motley Fool recommends Intel and Super Micro Computers and recommends the following options: A long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, and a short February 2024 $47 call on Intel. The Motley Fool has a disclosure policy.
