A boom in the artificial intelligence (AI) market in early 2023 started just when tech stocks needed it most. Companies were dealing with the aftermath of an economic downturn the year before, which led to Nasdaq-100 Technology Sector to fall by 40% in 2022. However, the launch of OpenAI’s ChatGPT seemed to breathe new life into the industry and reminded investors of the huge growth potential of tech stocks. As a result, the same index has risen by 88% since January 1, 2023.
Tech companies have been venturing into AI, an industry expected to generate nearly $2 trillion in spending by the end of the decade. The generative technology has the potential to boost numerous industries as demand for AI services and the chips that power them soars.
Despite this explosion of growth over the past 18 months, it’s not too late to invest in the market and profit from its long-term development. Here are two AI stocks to buy en masse in July.
1. Intel
Intel (NASDAQ: INTC) has been somewhat overlooked during the rally in AI. While rivals such as Nvidia (NASDAQ: NVDA) And Advanced micro devices (NASDAQ: AMD) have seen their shares rise 745% and 144% since the beginning of last year, Intel’s share price is up a more modest 18%. A series of challenges over the past decade have left Wall Street weary, including the loss of market share in the chip industry and the end of a lucrative partnership with Apple.
However, Intel has announced significant structural changes to its business model over the past year that could change the chipmaker’s fortunes. The company is shifting its focus to two high-growth markets: AI and manufacturing. To that end, Intel this year unveiled its Gaudi 3 AI accelerators, which undercut Nvidia on price and offer comparable performance.
Meanwhile, the company is building chip factories in the U.S. to regain its manufacturing lead and become the country’s leading chipmaker. The move could allow Intel to capitalize on the market’s surging demand for chips as companies like Nvidia and AMD outsource their manufacturing.
Furthermore, the data in the table above shows that Intel’s stock is a bargain compared to its peers. The significantly lower price-to-earnings (P/E) ratio suggests that the stock offers much better value, making it a no-brainer in July.
2. Alphabet
Like Intel, Alphabet‘S (NASDAQ: GOOG) (NASDAQ: GOOGL) shares are trading at a significantly better value than its rivals. The company is in fierce competition with cloud giants Microsoft (NASDAQ: MSFT) And Amazon (NASDAQ: AMZN) because AI has given the entire industry a boost. Alphabet has the third largest market share in cloud computing (after Microsoft and Amazon), but is catching up fast.
Meanwhile, the chart below shows that Alphabet’s stock may offer much better value than its rivals. The Google-owned company’s lower price-to-earnings and price-to-free cash flow ratios suggest that Alphabet could be one of the best-valued stocks in AI.
In the first quarter of 2024, Alphabet’s revenue rose 15% year-over-year to $81 billion, beating analyst expectations by nearly $2 billion. The company benefited from a 14% spike in Google Services revenue and a 28% increase in Google Cloud sales. Alphabet’s cloud revenue growth is especially impressive, as it beat out Microsoft Azure and Amazon Web Services in cloud growth for the quarter, with sales for those platforms rising 21% and 17% year-over-year.
Cloud computing has become a key growth area in AI, as companies increasingly use such services to integrate the technology into their workflows. As a result, Alphabet has invested heavily in expanding its AI offerings over the past year, introducing new tools in Google Cloud, adding generative features to Google Search, and improving its advertising services.
Alphabet brought in $69 billion in free cash flow this year, which only strengthens the case for its stock. The figure suggests the tech giant has the financial wherewithal to keep investing in its business and keep pace with its rivals. That, coupled with its bargain price, makes Alphabet a stock to buy hand over fist this month.
Should You Invest $1,000 in Intel Now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft and Nvidia. The Motley Fool recommends Intel and recommends the following options: long Jan 2025 $45 calls on Intel, long Jan 2026 $395 calls on Microsoft, short Aug 2024 $35 calls on Intel and short Jan 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks You Should Be Buying Massively in July was originally published by The Motley Fool
