3 Top Artificial Intelligence (AI) Stocks Poised for a Bull Run

The rapid expansion of artificial intelligence (AI) has lit a fire under many tech stocks. The biggest winners so far are fundamental companies like Nvidia (NASDAQ: NVDA) And Microsoft. Nvidia supplies the high-end data center GPUs for processing complex AI tasks, while Microsoft has a major stake in ChatGPT’s maker OpenAI.

Over the past five years, Nvidia’s stock rose 2,590% as companies tried to upgrade their servers with new GPUs. Shares of Microsoft have more than tripled as it integrated more OpenAI tools into its growing cloud ecosystem.

Both AI stocks are still reliable long-term investments, but investors shouldn’t gloss over the less obvious AI stocks that may continue to rise in the coming years. Let’s take a closer look at three of those companies: Oracle (NYSE: ORCL), Broadcom (NASDAQ:AVGO)And Arm positions (NASDAQ:ARM).

1. Oracle

Oracle is one of the largest database software companies in the world. That’s a mature market, but it has unleashed a number of new growth engines over the past decade by transforming on-premise software into cloud-based services. It also expanded its cloud ecosystem with more enterprise resource planning (ERP) services and strengthened its cloud infrastructure platform.

Oracle is benefiting from the growth of the AI ​​market in two ways: its database software collects much of the data that needs to be processed by AI applications, and its cloud infrastructure platform supports the growing storage and computing needs of those demanding applications. The company already generated 42% of its revenue from its cloud-based software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) platforms in the last quarter. It expects IaaS revenues, which already rose 50% in fiscal 2024 as the AI ​​market grew, to rise again in fiscal 2025.

From fiscal 2024 to fiscal 2027 (which ends in May 2027), analysts expect Oracle’s revenue to grow at a compound annual growth rate (CAGR) of 12%, while earnings per share (EPS) will rise at a CAGR of 21%. The stock may not seem like a bargain at 31 times next year’s earnings, but its continued expansion should support that higher valuation.

2. Broadcom

Broadcom is a diversified semiconductor and infrastructure software giant that has evolved and expanded through major acquisitions. Its semiconductor business produces chips for the mobile, data center, networking, wireless, storage and industrial markets, while its newer infrastructure business has grown rapidly over the past six years with the 2018 acquisition of CA Technologies, Symantec’s enterprise security division in 2019, and cloud software giant VMware last November.

Broadcom’s sales of networking, optical and custom accelerator chips have soared over the past year as data centers upgrade their infrastructure to support new AI applications. It expects AI chip revenue to roughly triple to $12 billion in fiscal 2024 (which ends in October), or nearly a quarter of annual revenue. That growth, along with VMware’s integration and acceleration, should offset slower sales of non-AI chips.

From fiscal 2024 to fiscal 2027, analysts expect Broadcom’s revenue to grow at a CAGR of 24%, while earnings per share will rise at a CAGR of 18%. The stock may not seem cheap at 43 times next year’s earnings, but that valuation is inflated by one-time costs related to the recent acquisitions. On an adjusted basis, it seems more reasonably valued at 27 times forward earnings – and it could continue to climb higher as its AI business expands.

3. Gun ownership

Arm is a British chip designer that was acquired by Soft Sofa in 2016 and was spun off through an initial public offering last September. Nvidia, which nearly acquired Arm before antitrust regulators scuttled the deal, is still one of the top investors. Arm designs energy-efficient chips and licenses its designs to other chip manufacturers QualcommMediaTek and Apple. It doesn’t produce any chips itself, but its chip designs are used in about 99% of all premium smartphones today.

Arm still relies heavily on the cyclical smartphone market, but has increasingly designed chips for the automotive, PC and cloud markets. It has also rolled out its new Armv9 designs, which are optimized for handling AI tasks across its markets. These new AI chip designs generate much higher royalties than Arm’s non-AI chip designs.

From fiscal 2024 to fiscal 2027 (which ends in March 2027), analysts expect Arm’s revenue to rise at a CAGR of 23%, while earnings per share will rise at a CAGR of 88%. Arm’s shares look expensive at more than 100 times next year’s earnings, but could have plenty of room as the AI ​​market expands and gradually replaces the x86 chip architecture used by enterprises. Intel And AMD.

Should You Invest $1,000 in Oracle Now?

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Leo Sun has positions at Apple. The Motley Fool holds positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, Oracle and Qualcomm. The Motley Fool recommends Broadcom and Intel and recommends the following options: long calls in January 2026 for $395 at Microsoft, short calls in January 2026 for $405 at Microsoft, and short calls in November 2024 for $24 at Intel. The Motley Fool has a disclosure policy.

3 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run was originally published by The Motley Fool