If you’re looking for where to start investing, I’ve got three stock picks that will set investors up well for the long term.
Individual investors have a secret weapon that helps outperform larger funds: time. We don’t have to answer to clients about quarterly performance; instead, we can focus on long-term trends and position ourselves wisely.
There are a few more consequential long-term trends than artificial intelligence (AI), and I think this makes an excellent place to locate some of the best innovations. The three best stocks in the entire market to buy are located in this sector, and I think the top three are Microsoft (MSFT +2.27%), Nvidia (NVDA +3.75%), and Broadcom (AVGO +0.17%).
All three of these stocks have massive upside despite their large size and will deliver market-crushing returns over the next few years.
Image source: Getty Images.
1. Microsoft
Microsoft is positioning itself as the go-to company for AI workloads. Its cloud computing division, Azure, is taking a neutral approach and isn’t pushing one AI model or another on users. Instead, it’s choosing to offer LLMs that developers can use to build AI applications. Additionally, Microsoft is integrating Copilot throughout all of its apps to give users AI computing power for all of their daily tasks done on Microsoft’s various offerings.
All of this has led to strong growth, with Microsoft’s overall revenue rising 17% in its most recent quarter. Azure was the star of the show, delivering 39% growth. If that was all the information I gave you, you’d think Microsoft’s stock would be valued at a reasonable level and not too far off its all-time highs, but you’d be wrong.
Microsoft’s stock has plummeted more than 30% from its all-time high set in October, and there isn’t really one good reason why. It now trades for 23.3 times trailing earnings, its lowest price in nearly a decade.
MSFT PE Ratio data by YCharts
Not only is Microsoft a smart long-term AI investment pick, but it’s also a screaming value right now, making it a top buy in the stock market.
Today’s Change
(2.27%) $8.74
Current Price
$393.11
Key Data Points
Market Cap
$2.9T
Day’s Range
$386.52 – $394.69
52wk Range
$355.67 – $555.45
Volume
191K
Avg Vol
37M
Gross Margin
68.59%
Dividend Yield
0.89%
2. Nvidia
Nvidia is a key part of the AI investment trend. Its GPUs are powering a large chunk of AI workloads, and with the new Rubin architecture coming out, Nvidia could see increased sales due to improved capability. However, Nvidia hardly needs this boost. During the past quarter, its revenue rose 73% year over year. Next quarter, management estimates 77% growth.
Today’s Change
(3.75%) $7.11
Current Price
$196.41
Key Data Points
Market Cap
$4.8T
Day’s Range
$190.77 – $196.44
52wk Range
$95.04 – $212.19
Volume
5M
Avg Vol
179M
Gross Margin
71.07%
Dividend Yield
0.02%
That’s nearly unbelievable for a company of Nvidia’s size, but it shows how strong the momentum is in the AI buildout. Nvidia believes that by 2030, global data center capital expenditures will rise to $3 trillion to $4 trillion. Considering that the big four AI hyperscalers will likely spend around $650 billion this year, that’s huge growth.
Nvidia is a top AI stock pick and a no-brainer buy right now. There are still many years’ worth of strong growth ahead for Nvidia, making it an excellent stock to scoop up.
3. Broadcom
Broadcom is looking to take some of Nvidia’s market share in the computing market. It’s using a different approach by building AI-focused ASICs (application-specific integrated circuits). These devices are nothing new, but their application to AI is. Their computing units are starting to become the rage in the AI world, with the most popular option being the Tensor Processing Unit (TPU), developed by Google and Broadcom.
Today’s Change
(0.17%) $0.66
Current Price
$380.41
Key Data Points
Market Cap
$1.8T
Day’s Range
$376.31 – $382.22
52wk Range
$161.61 – $414.61
Volume
883K
Avg Vol
27M
Gross Margin
64.96%
Dividend Yield
0.65%
By the end of next year, Broadcom expects custom AI chips to generate more than $100 billion in revenue. For reference, the division these devices are accounted for in produced $8.4 billion during its past quarter, which also includes other AI semiconductor products. This showcases how explosive growth will be over the next few years, making Broadcom stock a must-buy as a result.
