Amid recent economic uncertainty, AI stocks like AMD and Applied Materials present solid investment opportunities. AMD, with its CPU growth and AI-focused chips, shows promising financial momentum. Meanwhile, Applied Materials is a key player in semiconductor manufacturing poised for growth as industry demands rise. Both stocks are viewed favorably, but potential volatility and economic challenges remain.
Artificial intelligence has presented a goldmine of opportunities in recent years, and savvy investors might want to keep an eye on certain stocks that could yield significant returns. Sure, many AI stocks have seen their shine dim due to economic uncertainties and questions about spending in the sector, but this could actually spell opportunity for those willing to wait a bit.
As we move toward May, two tickers are catching my attention. One has already found its way into my portfolio, while the other is perched high on my watch list. I won’t keep you guessing—let’s talk numbers and strategies.
First up is Advanced Micro Devices, or AMD. It’s often passed over as it trails behind Nvidia, which dominates the graphics processing unit (GPU) market with an impressive 95% share. But don’t be quick to discard AMD! Its desktop and laptop central processing unit (CPU) sector has been steadily eating into Intel’s market share. Plus, new AI-optimized Ryzen processors are ramping up excitement in the tech community. And not to forget, AMD is diversifying its portfolio; they’re not just in AI but also in gaming and autonomous vehicle chips, which can be just as juicy.
Looking at the numbers, the company experienced a solid 14% boost in revenue and a 25% surge in earnings per share in 2024. That growth seems poised to continue, especially since AMD is currently trading about 60% lower than its peak during the last AI boom. At roughly 22 times forward earnings, it appears to be a bargain considering the road ahead could be paved with growth.
Now, let’s shine the spotlight on Applied Materials, or AMAT—a name that might not ring a bell at family dinners but is crucial in the semiconductor world. This company specializes in the manufacturing and servicing of equipment that builds some of the world’s most advanced chips. As chip designs evolve and become more intricate, the need for newer, specialized equipment surges. They’re tapping into a new $1 billion opportunity involving backside power delivery methods that just make sense for energy efficiency.
Looking forward, the semiconductor industry could be set to double in size by 2032, which is huge for Applied Materials. It’s a profitable outfit with a striking 23% net margin over the past year, not to mention smart capital allocation tactics, including share buybacks. With the stock priced at 16 times forward earnings, it’s begging for some attention, especially for those seeking investment in AI.
Now, let’s not sugarcoat it—investing in these stocks will require some grit. There’s still a heavy cloud of economic uncertainty hovering due to past trade policies, changing interest rates, and lingering recession fears. Plus, AI spending remains a bit of a wild card. So, if you’re thinking of incorporating these AI stocks, be prepared for a bumpy ride ahead.
In summary, the world of AI investments is ripe with potential, particularly with companies like Advanced Micro Devices and Applied Materials. Despite facing some hurdles, both stocks present unique growth opportunities for patient investors. However, the market’s volatility and economic uncertainties should not be overlooked. Those venturing into these territories should be ready for the roller-coaster ride that is investing in AI today.
Original Source: www.fool.com
