Generational investment opportunities don’t come around often, but I think that’s exactly what we have on our hands right now. Artificial intelligence (AI) is a once-in-a-lifetime investment opportunity, and the effects that it has on the economy and investing in general will be felt for some time. However, there are still questions surrounding which stocks…
Generational investment opportunities don’t come around often, but I think that’s exactly what we have on our hands right now. Artificial intelligence (AI) is a once-in-a-lifetime investment opportunity, and the effects that it has on the economy and investing in general will be felt for some time.
However, there are still questions surrounding which stocks to invest in, as many of the generative AI companies are still private and aren’t open to public investors. Instead, I think investors should look at the companies supplying them with computing components, as they will make money regardless of who the ultimate winner is.
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The three stocks that look like genius buys now are Broadcom(NASDAQ: AVGO), Nvidia(NASDAQ: NVDA), and Nebius (NASDAQ: NBIS). All three of these stocks have massive and growing revenue streams right now, making them top stock picks in the AI buildout.
Image source: Getty Images.
Broadcom and Nvidia are competing for the same market space. However, there’s a huge opportunity that’s large enough for multiple companies to thrive in. McKinsey & Company estimates that cumulative data center expenditures will total $7 trillion by 2030. Nvidia estimates that annual global data center capital expenditures will reach $3 trillion to $4 trillion by 2030 as well. Regardless of which estimate you believe, there’s a huge opportunity here, and Broadcom and Nvidia are slated to capture a large chunk of the computing power portion of it.
Nvidia makes graphics processing units (GPUs), which are incredibly powerful units and suited for accelerated computing tasks of all varieties. These are the industry standard of AI computing, and it will be nearly impossible to topple Nvidia from this leadership position. However, that’s not what Broadcom is trying to do.
Broadcom teams up with a client (often an AI hyperscaler) to design a custom AI chip that is specifically formulated for the workloads it will see. While this makes them inflexible compared to a GPU, it allows them to specialize in the chosen workload, often resulting in better performance at a lower price tag. While Broadcom’s custom AI chips aren’t applicable for every scenario, they make sense to deploy alongside Nvidia’s GPUs.
Both companies see massive growth for the foreseeable future, but the market isn’t pricing them that way.
AVGO PE Ratio (Forward) data by YCharts.
Both stocks are trading at a relatively cheap price tag, using the forward price-to-earnings ratio. However, if you use next fiscal year’s projected earnings, they become dirt cheap. The market is really only pricing in a successful 2026. If each company can deliver a strong 2027 as is projected, these stocks are indeed cheap and should be bought with no hesitation.
Nebius is a neocloud company that’s building out AI computing infrastructure for clients to build their AI applications on. Nvidia backs Nebius, and it has a deal to provide Nebius with the most cutting-edge products before anyone else. This makes Nebius an obvious company to partner with if you’re a prospective AI client, which is helping its revenue to soar.
The company is rapidly expanding its data center footprint, increasing from two sites in 2024 to seven in 2025. By the end of 2026, it expects to have 16 data center sites operational worldwide. That explanation is necessary because the demand for its platform is there.
In the fourth quarter, Nebius’ core AI revenue rose 802% year over year. By the end of 2026, it expects to have an annual run rate of $7 billion to $9 billion, up from $1.25 billion at the end of 2025. Nebius is growing at an unbelievable pace, yet the stock is heavily selling off thanks to concerns surrounding the AI buildout. With Nebius’ stock down more than 20% from its all-time high, now is a perfect time to scoop up shares.
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Keithen Drury has positions in Broadcom, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
A Generational Investment Opportunity: 3 AI Stocks I’m Buying Now was originally published by The Motley Fool
