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artificial intelligence (A.I.) has become an important sector of the stock market. Many investors are pouring their money into buying top AI stocks, but they also come with a lot of risks. While the technology is revolutionary, companies are rushing to talk about artificial intelligence efforts. While many investors are gushing over these references, not all AI efforts are successful.
Artificial intelligence powers businesses. However, it is highly unlikely that this technology will be able to solve unprofitable companies or companies that have been underperforming for years. With that in mind, there are still great AI stocks out there. These are some of the top AI stocks to buy right now.
Microsoft (MSFT)
microsoft (NASDAQ:MSFT) is poised to take full advantage of the artificial intelligence boom. The company invested heavily in OpenAI before the technology became mainstream. Microsoft also recently completed another AI investment to increase diversification.
Artificial intelligence isn't the only thing the company is investing in. Microsoft's main growth driver is Microsoft Cloud. This segment registered 24% year-on-year revenue growth in Q2 FY24 and accounted for more than half of the company's total revenue.
Microsoft is also getting into gaming, and its acquisition of Activision Blizzard has further increased its influence. The tech giant should continue to increase its market share in the industry. Advertising, social media, and business software offer further opportunities.
Long-term investors have enjoyed high returns over the years. The stock price has increased 69% over the past year. The company's stock is up 269% over the past five years, and has already started the year strong, up 12% since the beginning of the year.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is a leading company in the artificial intelligence boom. The company's earnings report is enough to move the entire stock market. While strong earnings show the AI ​​boom remains strong, a bad earnings report could cause panic among investors exposed to AI stocks.
Fortunately for investors interested in gaming, Nvidia continues to post solid earnings. According to the latest earnings report, revenue for the fourth quarter of 2024 increased 265% year-over-year and net income increased 491% year-over-year. The growth in sales and net income outpaced the stock price increase of 262% over the past year. The stock price has increased about 2,000% over the past five years.
Nvidia's chips are a key component of many artificial intelligence innovations. This technology requires significant computing power, and Nvidia is the industry's largest chipmaker. The company has other vibrant business segments, including gaming and professional visualization.
Nvidia is well-known in the artificial intelligence space, but you don't have to look for under-the-radar stocks to be a successful investor.
Dell Technologies (DELL)
Dell Technologies (New York Stock Exchange:Dell) share has more than tripled over the past year as the connection to artificial intelligence becomes more evident. The company's 2023 Q4 earnings report suggests this possibility. Although sales decreased compared to the same period last year, diluted earnings per share increased 89% compared to the same period last year.
Orders for Dell's AI-optimized servers increased nearly 40% sequentially, and total backlog nearly doubled. This is the big story behind the 30% rise in revenue.
Another important development was the company's decision to increase its dividend by 20%. This is a number that cannot be fudged because it is cash that leaves the company's coffers and ends up in the hands of shareholders. After the 20% increase, the annual dividend will be $1.78 per share.
Dell's valuation isn't overvalued like other AI server stocks. The company's P/E ratio is 34 times, and the forward P/E ratio is 17.64 times. There is a large margin of safety, and you can get stable cash flow just by owning the stock.
At the date of publication, Marc Guberti held long positions in MSFT and NVDA. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.