Spending on data center infrastructure continues to flow at a rapid rate, and for investors who want to play this trend, these three artificial intelligence (AI) stocks look like no-brainer buys right now.
Nvidia
NASDAQ: NVDA
Key Data Points
Despite increasing competition, Nvidia (NVDA 3.41%) is still the king of AI infrastructure with its graphics processing units (GPUs). Its GPUs are generally viewed as the best options for providing the parallel processing power that's required to train and power AI models. That's not only due to the chips themselves being powerful; the company's popular CUDA software platform was where most foundational AI code was written, and CUDA software is only compatible with Nvidia GPUs. Meanwhile, its proprietary NVLink interconnect platform allows its GPUs to quickly communicate with each other in enormous clusters, essentially turning many chips into a single powerful computing unit. The company also now offers turnkey AI factory solutions, adding to its advantages as organizations rush to keep up in the AI race.
With AI data center spending expected to continue growing, Nvidia is a top stock to own. The company is also not sitting still, as it continues to advance its chip technology while making smart acquisitions to position itself for the future.
Broadcom
NASDAQ: AVGO
Key Data Points
Another huge beneficiary of the AI infrastructure buildout is Broadcom (AVGO 3.83%). As hyperscalers (operators of massive data centers) try to reduce their reliance on Nvidia and find cheaper chip alternatives, they are increasingly turning to Broadcom to help them design their own custom AI chips. Broadcom is a leader in application-specific integrated circuits (ASICs): It provides the technological building blocks and helps its clients design chips that are customized to handle the precise sorts of workloads they are expected to face.
For example, Broadcom helped Alphabet create its highly regarded Tensor Processing Units (TPUs), and other companies have been making use of its services, including ChatGPT developer OpenAI. According to a forecast by Citigroup analysts, Broadcom's AI revenue will increase fivefold in the next two years on the back of its custom AI chips.
Image source: Getty Images.
Micron
NASDAQ: MU
Key Data Points
For GPUs and ASICs to perform optimally, they need high-bandwidth memory to be closely integrated with them so the chips can rapidly store, retrieve, and transfer data. Right now, demand for high-bandwidth memory is off the charts and greatly outstripping supply. Moreover, that special form of DRAM (dynamic random access memory) requires much more wafer capacity than ordinary DRAM, and that is exacerbating the broader DRAM shortage. As a result, DRAM prices are also skyrocketing.
As one of the leading high-bandwidth memory and DRAM makers, Micron Technology (MU 9.55%) is well positioned to benefit from these market dynamics. Its revenue is soaring, and it's seeing huge gross margin expansion and surging profits. While the company is investing in new production capacity to meet the 40% annual increase in high-bandwidth memory demand that it is projecting, those chips will likely remain in short supply, making Micron a no-brainer stock to buy right now.
