These tech stocks are well positioned for the future.
Many technology stocks have soared over the past year, driven in part by the industry’s shift toward artificial intelligence, or AI. That boom has created fierce competition as many tech companies try to cash in.
But which tech stocks have the stamina to impress not just over the next 10 months but over the next decade? To find them, you need to look for companies that are the dominant leaders in their respective markets and continue to innovate to stay on top. Here are three companies that are doing just that.
Image source: Getty Images.
1. NVIDIA
Many investors may feel like they missed the Nvidia (NVDA 2.18%) wave, and that’s understandable, but it might be wise to recalibrate your thinking by asking yourself which companies will be positioned to dominate in 10 years’ time.
Nvidia is one of those companies, boasting an estimated 70% to 95% share of the AI chip market, and company executives say demand is already outstripping supply for its latest release, the H200 AI processor, the successor to its hugely popular H100 chip.
To get an idea of just how big the demand for AI will be in the coming years, Goldman Sachs predicts that companies will spend $1 trillion over the next few years to realize their AI ambitions. If this number seems too abstract, consider that Reuters recently reported that countries around the world are investing in their own AI systems, including the Japanese government, which is building an AI supercomputer using thousands of Nvidia H200s.
Investors probably won’t see the same gains that Nvidia has seen over the past few years, but the AI race is just getting started and there’s still plenty of time. Though it’s not cheap at 41 times forward earnings, the stock has fallen about 8% over the past three months. This recent selloff presents a potential buying opportunity for investors looking for a decade-long AI investment.
2. Broadcom
If you’re interested in a slightly unconventional AI investment, Broadcom (AVGO 0.39%) might be the tech stock of choice, as the company is profiting from a niche in the AI market with application-specific integrated circuits (ASICs), which are in high demand.
These chips are useful for general-purpose AI tasks, and tech giants like Meta and Alphabet are leveraging them to achieve their artificial intelligence goals. As companies compete for AI dominance, demand for ASICs is on the rise, with Broadcom’s AI sales tripling to $3.1 billion in the most recent quarter.
Management now expects AI revenue to reach $12 billion by 2024, up from a previous forecast of $11 billion, and it could grow further: JPMorgan estimates that Broadcom’s market for AI chips could hit $150 billion in the next four to five years.
Additionally, Broadcom recently acquired software company VMware as a strategic investment to sell cloud platform services to companies looking for private cloud or hybrid cloud systems (a mix of public and private). These cloud computing platforms will become increasingly important to companies looking to build their own AI cloud systems in the coming years.
Broadcom shares are currently trading at a forward earnings of about 27, making them much cheaper than the company’s AI chip competitors.
3. Crowdstrike
Cybersecurity is a problem that never goes away as criminals find new ways to thwart existing systems, and the good news is that there are companies on the cutting edge of security, such as CrowdStrike Holdings (CRWD -0.72% ), that are leveraging AI in the fight.
CrowdStrike has been using AI for years in its Falcon security platform, but last year it made it even smarter by releasing Charlotte AI for security analysts. The integrated generative AI system helps analysts find threats and fix problems, and executives say companies using Charlotte AI can save two hours of security work every day.
As more companies use AI for security over the next decade, the company’s dominance in the field could continue to pay dividends: Morgan Stanley predicts that the AI cybersecurity market will reach $135 billion by 2035, nine times what it was in 2021.
CrowdStrike customers are already experiencing the benefits of the company’s platform and are subscribing to more services: In the second quarter, approximately 65% of customers had deployed five or more security modules on Falcon, and 45% had deployed six or more modules.
CrowdStrike shares are a bit pricey with a forward P/E of 82. However, a roughly 20% drop in the stock price over the past three months has created a buying opportunity for this technology leader at the forefront of AI cybersecurity.
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, serves on The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool subsidiary. Chris Nager has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet, CrowdStrike, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, and NVIDIA. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
