Artificial intelligence has attracted plenty of attention as new tools challenge our abilities. AI tools allow businesses to make better product recommendations and enhance productivity. Then, consumers can use AI to create customized learning plans, access information sooner, and save time.
In fact, forward-thinking investors can capitalize on the technology. Some artificial intelligence stocks have doubled in value over the past year and will likely continue to reward shareholders in 2024.
One of the great highlights for companies in this sector is their profitability. It’s rare to find an industry with many high growth stocks that aren’t burning through cash to gain market share. Therefore, investors looking for promising AI stocks for 2024 may want to consider these top picks.
It’s hard to go wrong with Microsoft (NASDAQ:MSFT). The stock is a core component of several index funds like the S&P 500 and the Nasdaq 100. Shares have gained more than 50% year to date (YTD) and are up by 272% over the past five years.
Also, Microsoft has beaten the market repeatedly and is likely to continue this trend. The company’s big investment into OpenAI places it in a prime position to benefit from the rise of AI. Additionally, MSFT is diversifying its AI presence by working on its own smaller AI models.
Further, the company uses AI to power cloud-computing Azure, a key revenue and earnings driver. The platform remains a key component in the company’s 13% year-over-year (YOY) revenue growth in the first quarter of fiscal 2024. Additionally, net income jumped by 27% YOY.
And Microsoft isn’t just using artificial intelligence for its cloud solutions. The company also recently unveiled Copilot, an AI assistant that integrates with various Microsoft Office products.
MSFT continues working on various AI solutions that can increase product retention and open up new business segments, reinforcing its title as a tech giant.
Supermicro (NASDAQ:SMCI) creates servers that can handle the intense workload of AI. The firm has a healthy partnership with Nvidia (NASDAQ:NVDA) which recently expanded to include Nvidia’s upcoming GPU. The company also has partnerships with other chipmakers like AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC).
Supermicro’s data center and server solutions have driven significant demand. In a press release for Q1 2024 earnings, leadership stated that Supermicro has experienced “continued record demand for AI-related systems at rack scale.”
Also, the company grew revenue by 14% YOY in that quarter, an unexpected figure from a small growth stock in the AI space. SMCI’s guidance for Q2 paints a better picture of the opportunity. The company expects to generate $2.7 billion to $2.9 billion. That translates into revenue growth rate ranging from 50% to 61% YOY.
Therefore, with that growth rate on the horizon, it’s easier to see why Supermicro stock has gained 251% YTD and is up by 2,000% over the past five years. A $16 billion market cap, 27 P/E ratio, and tremendous runway suggest more gains are ahead.
Broadcom (NASDAQ:AVGO)seems to have something for everyone. Shares have doubled YTD and are up by 351% over the past five years. The stock has been hitting all-time highs based on the finalized VMware acquisition and a chorus of praises from analysts, including a $1,250 price target.
Also, AVGO comes with a juicy 1.90% dividend yield and an astonishing history of dividend growth. While many dividend-paying corporations raise yearly dividends by low-single-digits, Broadcom regularly raises by over 10% each year. Recently, the firm hiked its quarterly dividend from $4.60 per share to $5.25 per share, marking a 14% YOY increase.
Despite a massive rally in the works, AVGO can potentially march higher. The stock recently formed a golden cross which is a bullish technical indicator. Truly, technicals and fundamentals are on the semiconductor giant’s side. Also, the VMware acquisition gives it exposure to cloud computing and cybersecurity which can propel revenue and earnings growth in future quarters.
Broadcom trades at a 23 forward P/E ratio which seems reasonable for a company with its growth opportunities. And AVGO’s market cap is closing in on $500 billion. Thus, the stock can realistically eclipse a $1 trillion market cap in the next 1-3 years.
On this date of publication, Marc Guberti held long positions in MSFT, SMCI, and AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.