Find the top artificial intelligence (IA) buying stocks right now is not a simple task. Many AI stocks have surged amid the release of a significantly improved version of ChatGPT in early 2023. Because of this growth, stocks like Nvidia And Palantir experienced disproportionate increases over a short period of time.
These increases could leave investors wondering what to buy now. Fortunately, while it’s difficult to find the “best” AI stocks, we can assume that AI will likely drive stock market gains in the years to come, meaning investors haven’t missed out . Under current conditions, these two stocks are likely to become leaders in AI and bring significant gains to their shareholders.
Amid many stocks’ AI-driven gains, investors seem to have forgotten Qualcomm (NASDAQ:QCOM). Indeed, the leader in smartphone chipsets has suffered from the upgrade cycle to 5G.
In addition, Apple has worked for years to develop a 5G modem chipset capable of running its iPhone. After years of throwing in the towel and extending its contract with Qualcomm, Apple appears ready to end the supply agreement after 2026.
Nonetheless, Qualcomm has advanced AI in its chipsets, starting with the Snapdragon 8 Gen 3, which integrates AI capabilities into smartphones. This and the upcoming Snapdragon 8 Gen 4 could lead to another upgrade cycle.
Additionally, Qualcomm has been preparing for years for the day when smartphone chipsets become a less reliable source of revenue. To this end, it has established businesses in the Internet of Things, automotive and, more recently, ventured into the PC business.
These measures allowed growth to turn positive again, as the $39 billion in revenue generated in fiscal 2024 (ended September 29) increased 9% from last year’s levels. During this period, Qualcomm reduced rising costs and expenses, allowing net profit of $10 billion in the fiscal year to increase by 40% annually.
For now, analysts expect revenue growth to remain in the 9% range for fiscal 2025. However, with the stock selling at a Price/earnings ratio of just 17, investors could overreact to its slower growth rate, especially considering AMDof 109. Moreover, Apple sells at 42 times its earnings, and even its main manufacturer, Semiconductor manufacturing in Taiwanis trading at a P/E ratio of 31. This implies that Qualcomm shares could rise on multiple expansion alone.
Additionally, given that Qualcomm is forecasting a loss of business from Apple, the company has factored this into its estimates for fiscal 2025. Such an assumption likely leads Qualcomm stock to surprise on the upside, meaning investors should benefit as the company continues to grow.
Another tech company that’s underappreciated for its AI is Google’s parent company. Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG). This may seem surprising for a company that has been integrating AI into its applications since 2001.
Yet the emergence of ChatGPT presents the most serious competitive threat to Google Search in years. Additionally, the launch of its own generative AI product, Google Gemini, has not allayed fears that the loss of search business would hamper its lucrative advertising business.
However, investors should not ignore Alphabet’s vast resources and innovation. Currently, it holds a staggering $93 billion in cash. That’s down from $111 billion at the end of 2023, but Google’s parent company is now financing a dividend and has made significant investments in research and development, paving the way for a possible resurgence.
This investment includes not only AI, but also spending on a technology that could supercharge AI, quantum computing. To this end, Alphabet has just released its Willow quantum computing chip.
Quantum computing could redefine the IT industry. Instead of maintaining a zero or one value like a traditional data bit, qubits or quantum bits, process zeros and ones simultaneously, increasing calculation speeds exponentially. Willow is so fast that he performed a calculation in less than five minutes that a traditional computer could not have performed in the entire history of the universe.
Additionally, Willow has made breakthroughs in tackling the error-prone nature of quantum chips. Instead of error rates increasing as the number of qubits increases, Willow can reduce errors as the number of qubits increases. This addresses a major obstacle to the viability of quantum computing technology.
Additionally, despite all the concerns about the company, Alphabet generated $62 billion in free cash flow in the first nine months of 2024 alone. This liquidity gives the company considerable flexibility to continue innovating.
Additionally, Alphabet’s P/E ratio of 25 gives it the lowest earnings multiple of the Magnificent Seven stocks. This valuation is less likely to stay at this level as more investors recognize the company’s ability to move beyond Google search.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Healy holds positions in Advanced Micro Devices and Qualcomm. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet, Apple, Nvidia, Palantir Technologies, Qualcomm and Taiwan Semiconductor Manufacturing. The Mad Motley has a disclosure policy.
