The Nasdaq Composite (^IXIC +0.95%) is in correction territory as investors have been dumping growth stocks amid concerns related to tariffs, trade wars, and a potential slowdown in the economy in the months ahead. Buying shares of companies at a time like this can be unnerving, but if you're committed to holding on for the long term, the moves you make today could pay significantly in the future.
There's still lots of potential for companies involved in artificial intelligence (AI) to revolutionize many industries. And while some AI stocks may appear to be trading at inflated valuations these days, there are three stocks which could be no-brainer buys right now: Nvidia (NVDA +2.21%), Amazon (AMZN +2.44%), and Advanced Micro Devices (AMD +6.86%).
1. Nvidia
NASDAQ: NVDA
Key Data Points
Chipmaker Nvidia has become synonymous with AI in recent years as companies rely on its next-gen chips to create advanced AI models. It's coming off a tremendous year with the company reporting sales of $130.5 billion for the fiscal year ending Jan. 26. That's more than double the $60.9 billion it posted in the previous year.
And Nvidia's still expecting plenty of growth ahead, projecting that revenue for the current quarter will come in around $43 billion, which would be up 65% from a year earlier.
While the stock may be one of the most valuable in the world based on its impressive bottom line, it isn't all that pricey. It trades at a forward price-to-earnings (P/E) multiple of 26, which is based on how analysts think the company will perform in the year ahead.
By comparison, the average stock in the Technology Select Sector SPDR Fund (XLK +0.79%) averages a forward P/E of 25. Nvidia is trading at barely any premium over the average tech stock, despite its impressive performance and outlook.
The stock is down around 14% in the past month, so now may be an excellent time to add it to your portfolio. Though there may still be some volatility ahead, it can be a fantastic investment to hang on to for years to come given its leadership position in the AI chip market.
2. Amazon
NASDAQ: AMZN
Key Data Points
Another company that's big on AI is Amazon. The company's online marketplace has revolutionized retail, making it incredibly difficult for brick-and-mortar businesses to remain competitive when the tech giant offers fast delivery, even same-day delivery in many markets. With the use of robots to help drive efficiency and speed up its logistical operations, the company has been firmly entrenched in AI for many years.
But there are many more opportunities on the horizon. The company has an upgraded Alexa+ assistant that utilizes AI, which Amazon is going to charge $19.99 per month to use (it will, however, be available to Prime members for free). It has also invested $8 billion into AI company Anthropic, which makes the Claude AI chatbot. AI is still a huge part of Amazon's growth strategy, and that isn't changing anytime soon.
For a company like Amazon, which reported $33 billion in free cash flow in 2024, it has plenty of money at its disposal, which it can deploy toward opportunities in AI, making it a compelling investment for the long haul. It's a bit more expensive than Nvidia, trading at a forward P/E of 30, but it's still a great buy.
There are many things to love about Amazon stock, as this growth beast is only going to get bigger in the future.
3. Advanced Micro Devices
NASDAQ: AMD
Key Data Points
The third most enticing AI play on this list is Advanced Micro Devices, or AMD. It's a key rival for Nvidia, but AMD's slow rollout of AI chips and question marks about how competitive they'll be has resulted in investors feeling lukewarm about the stock. In the past 12 months, it has lost around half of its value.
It's the cheapest stock on this list, trading at a forward P/E of 22. That's not a bad price for the chipmaker, as its products could offer companies lower-cost alternatives to Nvidia's expensive chips. AMD launched its newest chips toward the latter part of 2024, so it may take a while to see how well they perform.
The company grew its sales by a modest 14% last year to $25.8 billion, but there is potential for tens of billions in revenue growth ahead, if you follow the forecast of Lisa Su, the company's CEO.
AMD may be a riskier play in the short term, as its chips still need to prove to investors they can offer formidable competition to Nvidia's chips, but given the vast need for AI chips as a whole, AMD should be able to generate much more growth in the years ahead.
