The recent dip in the major market indices has included some significant declines in the shares of leading artificial intelligence (AI) companies. Some of these tech stocks had monster runs over the last few years and might have been due for a pullback. Broader market fluctuations have a way of affecting individual stocks (for good and for bad) even if they represent great companies.
While pullbacks are never fun for current shareholders, investors who are looking to buy now to fund retirements that are well in the future were just given a great opportunity to put some money to work. There are several elite AI stocks out there now trading lower valuations. Here are two AI stocks caught up in the broader market volatility worth buying today because they could be rewarding over the long term.
1. Nvidia
Nvidia (NVDA 1.56%) is a no-brainer investment. It has been on the cutting edge of graphics processing unit (GPU) technology for a long time, and today, it controls a high percentage of the GPU market for data centers, where those chips provide the parallel processing muscle needed to train and power AI. With demand for its AI accelerators looking likely to remain strong for years, Nvidia should continue to grow and deliver great returns for investors.
NASDAQ: NVDA
Key Data Points
Because of AI, spending on data centers is accelerating for the first time in many years. Historically, about $250 billion has been spent annually on data center infrastructure. That could increase to $1 trillion annually by 2029, according to a forecast by Dell'Oro Group. But Nvidia CEO Jensen Huang believes these estimates underestimate the long-term opportunity, given the emergence of a new type of single-purpose data center built to support AI -- what Nvidia calls "AI factories."
Every company that has a factory will also have an AI factory, according to Huang, and that assertion makes sense when you think about it. Companies across retail, transportation, and energy are using AI, and the technology will become more deeply rooted in how companies operate.
"There's no question in my mind that out of $120 trillion global industries that a very large part of that [...] will be AI factories," Huang said during a recent conference call with analysts.
Competition may heat up at some point from Advanced Micro Devices or other chip companies that want a piece of Nvidia's AI action -- which has propelled its profit margin to a remarkable 56%. But Nvidia's strengths in innovation and the large base of 5.9 million developers who use its CUDA software tools to get the most out of its GPUs should protect its lead.
With the stock trading at 27 times this year's earnings estimate, Nvidia's long-term growth potential seems underestimated. It doubled its revenue last year, and analysts currently forecast that it will grow its earnings at an average annualized rate of 33% in the coming years.
2. Broadcom
Buying shares of Broadcom (AVGO 4.11%) would complement an investment in Nvidia. Broadcom designs custom AI accelerators for its clients, and it's seeing robust demand for them. These specialized chips serve specific needs in data centers, such as moving data faster in GPU-powered servers. Revenue from Broadcom's AI solutions grew 77% year over year in its fiscal 2025 first quarter, which ended Feb. 2.
NASDAQ: AVGO
Key Data Points
With data center operators (hyperscalers) continuing to invest heavily in infrastructure, Broadcom should continue to see strong growth. It estimates the serviceable addressable market from three prominent hyperscalers alone will be between $60 billion to $90 billion in fiscal 2027, which is significant compared to its trailing-12-month revenue of $54 billion.
Importantly, Broadcom has a long history of investing in opportunities that lead to great returns for shareholders. The stock has returned 1,300% over the last 10 years, so it's encouraging to see management announce plans to increase spending on research and development to keep its AI accelerators at the leading edge.
The negative for Broadcom right now is its diversification across markets. It also provides chips for mobile devices, networking, and industrial markets, and this exposure across the semiconductor landscape means the company's revenue can be cyclical. Its non-AI semiconductor sales were down 9% sequentially last quarter due to seasonal weakness in the wireless market.
Despite these near-term risks, the stock should continue to trade at a premium valuation based on Broadcom's history of excellent returns and opportunities in the data center space. Analysts expect its earnings to grow at an annualized rate of 22% in the coming years. The increasing computerization of the economy will benefit Broadcom investors over the next 20 years.
