Despite a surge of growth since the beginning of last year, the artificial intelligence (AI) market remains a compelling investment opportunity. The industry was worth $200 billion in 2023 and is racing past that figure, expanding at a compound annual growth rate of 37% and projected to achieve just under $2 trillion in spending by 2030. As a result, companies and investors will likely continue to profit from providing AI tools, services, and hardware for years.
So whether you’re new to investing in AI or looking to expand your current position, it’s worth taking a closer look at the companies driving the market forward. Here are two artificial intelligence stocks to buy hand over fist in August.
1. Advanced Micro Devices
Chipmakers play a crucial role in AI. Advances in the chip industry have only recently made it possible for developers to deliver on the AI concepts theorized decades ago. Graphics processing units (GPUs) specifically have become the go-to for companies’ training AI models and large language models like OpenAI’s ChatGPT. As a result, chip designer giants like Advanced Micro Devices (NASDAQ: AMD) and its chief rival, Nvidia, have profited from soaring GPU sales over the last year.
AMD was slightly late to the AI party compared to Nvidia, with its fellow chipmaker securing an estimated 90% market share in AI GPUs last year. However, AMD has made significant headway in the industry in 2024, which could see it steal a lucrative share of the sector.
The company reported its second-quarter 2024 earnings last month, with revenue popping 9% year over year. The period benefited from a significant spike in AI GPU sales, represented by a 115% increase in data center revenue. Meanwhile, its client division, which includes income from central processing unit (CPU) sales, posted revenue growth of 49% year over year.
Total operating income for the quarter increased 18% from 2023, with AMD’s quarterly free cash flow up 81% in 2024. The company’s cash hoard is growing, enabling it to keep investing in AI and catch up to Nvidia.
Q2 2024 was a turning point for AMD, showing its biggest business is now AI, with data centers earning the largest portion of revenue. The company has growth opportunities in multiple areas of the industry, including AI-enabled PCs, cloud computing, self-driving technology, and more.
AMD’s price-to-earnings ratio (P/E) is eye-watering at 189. However, as the chart shows, that ratio has decreased by 85% since the start of the year. Meanwhile, it’s considerably below its 12-month average of 462, while AMD’s stock rose 52%.
As a result, the company’s stock is trading at its best value in months. AMD’s P/E is likely inconsequential compared to its growth potential in AI, and should improve as it continues to deliver positive quarterly results. As a result, its stock remains an exciting long-term buy and one to buy hand over fist right now.
2. Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is an AI stock you don’t want to sleep on this year. The company has become increasingly competitive in cloud computing, a quickly expanding area of AI. Its diverse range of products, such as YouTube, Android, Google, and Chrome, gives it countless opportunities to tout its generative software features.
Meanwhile, Alphabet debuted its Google Pixel 9 smartphone in mid-August. This flagship model is packed with AI features such as photo editing and the Gemini AI assistant, which secures Alphabet’s position in the growing AI smartphone market. As a result, the company has planted seeds throughout the industry that could deliver considerable gains in the coming years.
Alphabet’s AI strategy sees it is playing to its strengths, a scheme it used to gain dominance in advertising. The company has become the biggest name in the $740 billion digital advertising market, primarily thanks to the potency of its products. Alphabet has effectively used the billions of users that platforms like Google, Chrome, and YouTube attract to build a highly profitable ad business. And now it’s doing the same with AI.
Over the last year, Alphabet has added generative features to Google Search, Android, Cloud, and YouTube. The company is making moves to become a leading provider of AI to businesses and consumers worldwide. Meanwhile, products like the Pixel 9 take that further by offering AI hardware.
Alphabet’s stock is up 19% year to date, outperforming all the companies in the chart. Yet its stock also offers the most value, a pairing that isn’t seen often. Alphabet’s P/E of 24 makes it a bargain AI stock and one too good to ignore this August. Its massive potential in the industry and potent services could offer major gains in the coming years.
Should you invest $1,000 in Advanced Micro Devices right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in August was originally published by The Motley Fool
