Artificial intelligence (AI) stocks are currently unpopular in the market. There is too much uncertainty surrounding the war in Iran and skepticism about the benefits of AI spending. This is causing markets to sell off AI stocks, and it may seem like a terrible time to buy. However, I think the opposite is true.
AI technology is not expected to reach maturity for several years. As a result, more spending on AI will be necessary to get there. Although the market is skeptical about what the return on investment for AI will be, that is not stopping AI companies from pursuing multi-year expansion plans. I believe the long-term outlook for AI stocks remains bullish and investors should take advantage of this sell-off as a buying opportunity.
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I have five stocks that I think are smart buys for April, and investors should take advantage of the market’s relative weakness to buy them while they’re cheap.
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NVIDIA(NASDAQ: NVDA) and Broadcom(NASDAQ:AVGO) They are my first two choices. These two provide computing units for the AI. While both compete for market share, each company’s product addresses a different part of AI computing.
Nvidia graphics processing units (GPUs) are do-it-all computing units that can be deployed in many situations. They are not the cheapest option by any means, but they are the most flexible and have the best ecosystem of products around them. Nvidia’s products are the industry standard, and there’s a reason management believes lifetime sales of Blackwell and Rubin chips will total $1 trillion through 2027.
Rather than building another broad-purpose compute unit to challenge Nvidia’s GPUs, Broadcom is partnering directly with AI hyperscalers to design custom AI chips tailored to its customers’ workloads. These computing units would fail miserably if subjected to the wide range of tasks that GPUs perform. Still, when implemented for specific purposes where the inputs are similar, such as AI inference, they offer superior performance when cost is integrated. The market for these chips is booming, and Broadcom expects them to generate more than $100 billion in annual revenue by the end of 2027.
Both Broadcom and Nvidia are producing computing units that are necessary for the development of AI. With most projections pointing to the spending lasting at least until 2030, buying both stocks while they are at least 20% below their all-time highs is a smart move.
Alphabet(NASDAQ:GOOG)(NASDAQ:GOOGL) and microsoft(NASDAQ:MSFT) They are two AI hyperscalers that are spending a ton on computing power. However, both are also seeing a solid return on that spend through their respective cloud computing divisions, Google Cloud and Azure. These two segments saw staggering growth in their most recent quarter, with Azure revenue increasing 39% year over year and Google Cloud increasing 48%.
Both Alphabet and Microsoft are leaders in the AI ​​space and will be a key part of how AI transforms personal and business lives. This makes them market leaders for the foreseeable future, but they do not escape the recent sell-off.
Microsoft is down a staggering 35% from its all-time high, while Alphabet is down more than 20%. None of the investment theses have changed since they last set their all-time highs, so now is a good time to pick them up at a discount.
The last one is a darker stock pick, Nebio (NASDAQ: NBIS). Nebius is similar to Alphabet and Microsoft because it is a cloud computing company. However, it is focused on providing the best AI hardware available and even has a deal with Nvidia to get access to the newest technology before anyone else.
This makes it an incredibly popular platform to use for AI computing, and as a result, it is experiencing explosive growth. By the end of this year, Nebius expects its annual run rate to reach between $7 billion and $9 billion, up from $1.25 billion by the end of 2025. This is rapid expansion and shows that demand for AI computing power is greater now than ever.
Nebius is a great way to invest in that demand, and with the stock falling 30% from its all-time high, now is the perfect time to take advantage of this AI winner.
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Keithen Drury has positions in Alphabet, Broadcom, Microsoft, Nebius Group and Nvidia. The Motley Fool has positions and recommends Alphabet, Microsoft and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
5 Incredible AI Stocks to Buy in April was originally published by The Motley Fool
