Investing in AI Stocks Under $200
Some of the biggest winners during the current bull market have been artificial intelligence (AI) stocks. The booming demand for AI infrastructure, software, and development tools has created wealth for many companies and their investors over the last few years. Despite the strong growth in AI, it’s clear that there’s plenty more potential ahead.
Businesses are projected to spend a whopping $235 billion on AI this year, according to market researchers. This spending is expected to climb dramatically, reaching $631 billion by the end of the decade. By 2032, expenditure on generative AI alone might climb to an astounding $1.3 trillion.
With the surge in share prices of many companies connected to the AI boom, it may seem challenging to find AI stocks you can buy for under $200. While fractional share trading is an option through many brokerages, owning an entire share can feel more satisfying. Here are three AI stocks you can buy, currently trading at less than $200 per share that make for compelling investments.
1. Broadcom (NASDAQ: AVGO) - $163/share
Broadcom's stock price has recently dropped below $200 for the first time in years, primarily due to a 10-for-1 stock split. Despite this, its market cap has seen remarkable growth, climbing nearly tenfold from its low in 2020, indicating further room for progress.
This chipmaker specializes in various semiconductors essential amid the AI boom. Broadcom produces networking chips that manage workloads across the computing power available in a data center. Their Jericho3-AI Fabric connects up to 32,000 chips, ensuring that tech corporations can maximize their investments in GPUs and other components.
Moreover, Broadcom manufactures AI accelerator chips specifically designed for training and utilizing large language models. The company collaborates closely with big tech firms like Alphabet and Meta Platforms to create application-specific integrated circuits, or ASICs, that are increasingly found in major data centers worldwide.
On top of its robust chip portfolio, Broadcom’s stakes include enterprise software solutions. Their recent acquisition of VMware solidified their enterprise software division. This comprehensive suite of offerings enables Broadcom to secure customers effectively, mitigating competitive threats.
Despite Broadcom's strong stock performance over the past few years, shares currently trade at just 27.7 times forward earnings, a slight premium compared to the S&P 500's average. This valuation is relatively attractive when considering the numerous opportunities for continued growth across broad sectors.
2. Qualcomm (NASDAQ: QCOM) - $175/share
Qualcomm is renowned for crafting the wireless communication chips crucial for smartphone connectivity to 5G networks. Although facing challenges with major customers building in-house solutions, its partnerships with Android phone makers are set for growth.
The company dominates the connectivity chips market in smartphones while also producing core processors for many Android devices. For instance, its Snapdragon chipset enhances manufacturers' integration with modems, proving essential in today’s competitive smartphone market. Qualcomm is also venturing into the automotive and Internet of Things (IoT) markets, reflecting its adaptability in the face of fluctuating demands.
Recently, Qualcomm has begun to introduce AI-focused CPUs aimed at the PC market, which could diversify their revenue streams down the line. Additionally, the demand for on-device computing power for generative AI applications is on the rise. Qualcomm's upcoming AI advancements in devices could make these capabilities widely appealing across various sectors.
Despite being in a heavily competitive market, Qualcomm’s stock trades at a forward P/E multiple of just 15.5—well below the S&P 500. This valuation, accompanied by strong demand from smartphone manufacturers, positions Qualcomm as a lucrative investment opportunity.
3. Alphabet (NASDAQ: GOOG) - $165/share
Alphabet owns some of the most widely used online platforms, including Google and YouTube, which are integral to its robust advertising revenue. Although regulatory scrutiny has arisen, Alphabet's established foothold in the search engine market remains strong.
AI integration has become part of Alphabet’s evolution, enhancing its search capabilities, with features such as AI Overviews driving engagement among users. The company's cloud computing segment is also expanding rapidly, propelled by significant investment in AI technologies and custom chip designs to enhance its offerings.
Despite facing increased competition from new AI assistants, Google’s dominance remains intact. Their generative AI services generated notable revenue streams early in the fiscal year, drawing interest from developers worldwide. Additionally, Google’s large cash flow allows for share buybacks, potentially enhancing earnings per share moving forward.
Currently, Alphabet trades at a forward P/E ratio of 21.8, in line with the broader market, though it’s argued that Alphabet could warrant a premium given the growing digital advertising market and intensifying cloud spending related to AI applications.
Frequently Asked Questions
What are the top AI stocks to buy under $200?
The top AI stocks currently under $200 include Broadcom, Qualcomm, and Alphabet, each showcasing significant growth potential in the AI market.
How can investing in AI stocks benefit me?
Investing in AI stocks can provide opportunities for significant returns as businesses increasingly leverage AI technologies across various sectors.
Why is Broadcom a strong investment?
Broadcom is a strong investment due to its extensive semiconductor portfolio and strategic partnerships, allowing it to capitalize on the growing demand for AI infrastructure.
What challenges does Qualcomm face?
Qualcomm may face challenges as major clients shift toward developing in-house solutions, but the overall market demand for its products remains robust.
What are Alphabet’s growth prospects?
Alphabet has strong growth prospects due to its leading position in digital advertising and significant investments in AI and cloud computing, paving the way for future revenue streams.
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