While artificial intelligence may have been all the rage, China’s DeepSeek appears to have stunted the once-explosive trajectory. On Monday, the AI specialist introduced a new model that can apparently compete with the best platforms the U.S. had to offer and at a fraction of the cost. Subsequently, AI stocks — including the mighty Nvidia (NASDAQ:NVDA) — stumbled horribly. Nevertheless, the fallout could be the best thing that has happened to value-focused investors.
To be sure, the immediate optics are hardly appetizing. In just one fell swoop, NVDA stock fell almost 17%. Over the past month, the equity has given up almost 13.5%, reflecting a sudden paradigm shift. Not surprisingly, the threat of Chinese competition slammed AI stocks. Even the cryptocurrency sector — which by itself isn’t directly related to machine intelligence — suffered in sympathy.
However, following the initial shock, the bottom line for innovative enterprises could be integration. As more countries and entities embrace the broader push for autonomy and accelerated productivity, the ecosystem could rise for everyone. An advancement in one part of the world could spark competitive fuel in other regions, leading to enhanced overall progress. In time, this synergy could be net positive.
In the meantime, investors can position themselves in some of the top players in machine intelligence that don’t always get the spotlight. While there’s nothing wrong with bidding up NVDA stock per say, the arena is much larger than any one company. With that, below are compelling AI stocks to consider.
Often lurking in the shadow of tech juggernaut Nvidia, Advanced Micro Devices (NASDAQ:AMD) deserves its fair share of the limelight. On a fundamental level, AMD’s top-tier semiconductors are designed to handle intensive AI and high-performance-computing (HPC) workloads, thus competing directly with Nvidia. Further, Advanced Micro integrates central processing and graphics processing capabilities in a unified architecture, enabling greater efficiencies and functionalities.
On a financial note, a key growth area is AMD’s data center business, specifically the company’s Epyc processors. This platform is gaining traction among data center providers for their high performance and efficiency, which are crucial attributes for AI and machine learning applications. As a result, analysts are targeting fiscal 2024 sales to reach $25.66 billion and fiscal 2025 revenue to hit $32.19 billion.
For context, in 2023, Advanced Micro generated $22.68 billion in sales. Moreover, Wall Street experts anticipate fiscal 2024 earnings per share to hit $3.33, while the following year could see the bottom-line metric explode to $5.13. In 2023, EPS was only $2.65, reflecting tremendous enthusiasm for generative AI.
To be fair, AMD stock isn’t exactly the cheapest enterprise available. However, when stacked against other AI stocks, AMD is quite compelling. Plus, at the moment, shares trade hands at 24.75X forward earnings. For comparison, during the first quarter of last year, AMD traded for nearly 54X forward earnings. Thus, the tech giant is on a relative discount.
While semiconductor processors tend to attract the most attention from investors, AI stocks encompass a broad range of capabilities and innovations. One of these critical areas is power management solutions, which is the core specialty of Monolithic Power Systems (NASDAQ:MPWR). By providing power circuits for systems foiund in cloud computing, telecom infrastructures and many other industrial applications, Monolithic is the glue that holds everything together.
Primarily, Monolithic allows advanced chips to be more power efficient. As the underlying technology consumes valuable energy resources, this efficiency will become even more critical. Politically, it’s simply less tenable for technical innovations to irresponsibly consume non-renewable resources. Doing more with less has already become a requirement in some industrial circles — and Monolithic helps enterprises and agencies reach increasingly challenging performance and consumption benchmarks.
Further, AI isn’t just about massive data centers. Many applications happen at the edge — such as functionalities involving autonomous vehicles, smart cameras and devices tied to the Internet of Things (IoT). Monolithic’s highly efficient power modules are essential for these applications where space is limited.
Best of all, the financial picture is alluring. For fiscal 2024, analysts anticipate revenue to clock in at $2.19 billion, up 20.46% from the prior year’s tally of $1.82 billion. Further, fiscal 2025 sales could hit $2.57 billion, up 17.2% from 2024’s projected top line.
Admittedly, MPWR stock is somewhat pricey at over 39X forward earnings. However, at the midpoint last year, this metric stood at nearly 61X. For patient investors, MPWR ranks among the top AI stocks.
A leading semiconductor company, Marvell Technology (NASDAQ:MRVL) specializes in solutions for data infrastructure. Some of its flagship products include high-speed networking chips, data storage solutions and custom silicon designs tailored for AI and cloud computing. Also, Marvell plays a critical role in enabling the smooth transfer, storage and processing of large datasets — a fundamental component of AI and modern digital systems.
While the company brand might not be a household name, the biggest enterprises depend on it for customized AI chips. Marvell’s clients include juggernauts like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN). These chips are specifically designed for AI workloads, enabling faster data processing and more efficient energy usage. Plus, Marvell’s ability to co-develop AI hardware with its customers offers it a unique advantage when it comes to addressing specific industry needs.
What’s more, the company plays a key role in high-speed networking and advanced storage solutions by providing the underlying essential components. These include Ethernet switches and data center interconnects, ensuring fast, reliable connectivity for training AI models and inference. While not the most exciting business, Marvell provides the nuts and bolts of machine intelligence, making it an indelible member of AI stocks.
To no one’s shock, analysts are expecting big things out of the semiconductor specialist. For the next fiscal year (2026), the Street is targeting revenue of $8.21 billion, almost 43% higher than projected fiscal 2025 sales of $5.75 billion. While the sales multiple of 20X is pricey, MRVL stock could be well worth it given the anticipated growth.
