When adding growth stocks to your portfolio, it's wise to choose companies that are active in sectors building the future. Markets such as artificial intelligence (AI), cloud computing, and virtual/augmented reality (VR/AR) are expected to strongly influence countless devices going forward.
As a result, investing in companies helping develop these technologies is an excellent way to ensure your investment continues expanding for years. Advanced Micro Devices (AMD 0.09%), Nvidia (NVDA -0.79%), and Microsoft (MSFT 0.11%) are currently crucial to the development of several growing markets, making their stocks compelling buys.
Here are three hypergrowth stocks to buy in 2023 and beyond.
1. Advanced Micro Devices
As a leading chipmaker, AMD has an immensely far reach in tech. The company has carved out solid positions in multiple high-growth markets by providing its hardware to titans of the industry. In fact, AMD has achieved an 83% market share in game console processors by being the exclusive supplier of chips to Sony's PlayStation 5 and Microsoft's Xbox Series X|S.
The lucrative partnerships were the main driver of growth in AMD's gaming segment in fiscal 2022, with revenue rising 21% year over year despite steep declines in the PC market.
Moreover, AMD has an expanding role in data centers, which are used to power online platforms in markets such as cloud and AI. The company's chips are currently powering cloud giants Microsoft's Azure, Alphabet's Google Cloud, and Oracle, with more likely on the way. AMD's success in the industry boosted its data center segment last year, with revenue increasing by 64%.
AMD's potential is seemingly endless, thanks to the varied applications available for its chips. The company's forward price/earnings-to-growth ratio (PEG) has decreased roughly 85% in the last year and sits at an attractive 0.08, suggesting this hypergrowth stock is undervalued and a screaming buy.
2. Nvidia
Like AMD, Nvidia is a compelling stock because of the growing dominance of its chips, which have become the go-to for AI software development. The semiconductor company's stock has skyrocketed 85% year to date, mainly fueled by its strong position in the booming industry.
November 2022 brought the launch of OpenAI's ChatGPT, an advanced chatbot that kicked off an AI race among the biggest names in tech. And Nvidia's role as the primary supplier of graphics processing units (GPUs) to ChatGPT has made it crucial to the platform's future success.
According to research from TrendForce, ChatGPT utilized 20,000 GPUs in 2020 and is expected to boost that figure to 30,000 as it readies for commercialization. Nvidia is already considerably profiting from the AI service's growth, with most of its earnings now coming from the sector. However, ChatGPT's success has birthed massive competition from companies that could also turn to Nvidia for GPU power. With demand for GPUs likely to skyrocket, Nvidia investors are in an increasingly favorable position.
On April 19, Piper Sandler analyst Harsh Kumar emphasized his overweight rating on Nvidia's stock, forecasting a price target of $300 -- accounting for an 11% rise in its shares. Kumar cited Nvidia's robust suite of AI software tools and its CUDA computing platform, which works exclusively with the company's chips, for its expected stock growth.
Alongside a forward PEG of 0.37, Nvidia's stock is a great buy in 2023 and beyond.
3. Microsoft
Speaking of companies building the future, Microsoft is one of the most varied businesses around, with lucrative positions in many high-growth markets. Meanwhile, its dominance in software with potent brands like Office, Windows, Xbox, and Azure has given it the financial resources and power to be an early investor in critical technologies.
The company's stock has risen 19% since Jan. 1, largely thanks to the $1 billion it invested in OpenAI back in 2019. The partnership has seen Microsoft invest a further $10 billion since the release of ChatGPT and led the company to integrate OpenAI's technology in several of its services. Microsoft's Office offerings like Word and Excel have so far been enhanced with the start-up's software, with its search engine Bing and cloud platform Azure also getting the AI treatment.
Microsoft shares have climbed 200% in the last five years and roughly 800% in the previous decade. The tech giant has a history of offering investors consistent gains, which is unlikely to change soon with its growing position in artificial intelligence and a significant cloud market share with Azure. As a result, Microsoft is a no-brainer hypergrowth stock right now.
