3 S&P 500 Artificial Intelligence (AI) Stocks You'll Regret Not Buying Now – THE BHARAT EXPRESS NEWS – The Bharat Express News
The S&P500 recently hit a new all-time high, which could give investors some hesitation about entering the market. This is understandable as no one wants to buy at a high level. However, investors should also realize that the market can only reach new heights by continually setting new closing records. While I understand wanting to buy cheaper, missing out on huge bull runs in anticipation of a pullback could hurt returns.
Part of the reason for new all-time highs is investor excitement about artificial intelligence (AI). The big tech companies all have a lot of irons in the AI fire and are a major reason for the index’s new all-time high. Despite the S&P 500 being at a high, these three AI stocks I identified have the potential to rise even more.
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Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the parent company of Google, YouTube and many other brands. While the company’s primary business is advertising, it also offers other businesses such as cloud computing and a growing AI toolkit.
Although it stumbled out of the gate when companies like OpenAI released ChatGPT to the public in late 2022, it’s doing much better now. Recently, Alphabet introduced a generative AI feature in its Google search engine that summarizes the topics you search for. While this isn’t necessarily a new moneymaker for Alphabet, it solidifies itself as a top option against other search engines that have integrated generative AI.
Alphabet is also successful as a company, with revenue growing 156% year over year in the first quarter and earnings per share (EPS) from $1.17 to $1.89. Alphabet also initiated a small dividend to pay investors with the excess cash flow, while adding another $70 billion in stock buyback authorization.
Alphabet remains a top buy in the S&P 500 due to its strong growth and shareholder-friendly capital return programs. Because the stock trades at just 23.4 times forward earnings compared to the S&P 500’s 21.5, it trades at only a slight premium to the broader index, suggesting the stock isn’t trading at its current levels is priced too high.
Metaplatforms (NASDAQ: META) and Alphabet are similar companies that rely primarily on advertising revenue to keep the lights on. They are also similarly priced compared to the market, with Meta trading at 24 times forward earnings.
Meta’s advertising revenue comes from its social media platforms: Facebook, Instagram, Threads, Messenger and WhatsApp. These sites have been cash cows for Meta, and their strength shone in the first quarter. In the first quarter, Meta’s revenue rose 27% year over year, with earnings per share more than doubling to $4.71. These strong results reinforce Meta’s social media platforms as a place where consumers want to be. As a result, advertisers also go there because of the large number of people using it.
While its Reality Labs division, the segment that makes virtual reality headsets and other exploratory technologies, isn’t making a profit, it does have exciting products like the smart glasses it partnered with Ray-Ban for. This is one of the first products to bring generative AI into the hands of consumers in a practical way beyond an internet browser and could be a product that leads to something much more mainstream.
Meta is succeeding in its primary activities, but with other AI products in the works it has many advantages.
Last one is Taiwanese semiconductor (NYSE: TSM), a company that makes everything related to AI possible. Taiwan Semiconductor is a contract chip manufacturer that makes the semiconductors used in the hardware used to create AI models.
Taiwan Semiconductor’s customer base ranges from Nvidia Unpleasant Qualcomm Unpleasant Apple, and it has earned that revenue by consistently having the best technology. Currently these are 3nm (nanometer) chips, but management stated during the first quarter conference call that the 2nm design (available in 2025) is already seeing much higher demand from its customer base.
Management also believes that AI chips will be a major source of growth in the coming years. It expects its AI-related business to grow at a compound annual growth rate of 50% for five years and reach 20% of total revenue by 2028. This performance will help support management’s broader forecast of compound annual revenue growth of 15 to 20%. – a strong projection of a sizeable company.
Taiwan Semiconductor is the most expensive stock of the trio at 25 times earnings, but its importance in rolling out cutting-edge technology cannot be understated, which is why it has performed so well this year.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Meta Platforms and Taiwan Semiconductor Manufacturing. The Motley Fool holds positions in and recommends Alphabet, Apple, Meta Platforms, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
3 S&P 500 Artificial Intelligence (AI) Stocks You’ll Regret Not Buying Now was originally published by The Motley Fool
