The artificial intelligence trend isn’t a fad.
Companies have been investing in AI for several years. But the technology became front-and-center for investors after Nvidia (NASDAQ:NVDA) did a lot of the heavy lifting for the Nasdaq 100 this year.
The growing AI trend can mint many millionaires. If you want to become the millionaire next door, it’s important to know how that concept took form. Rather than starting multi-million dollar businesses or getting lucky with speculative investments, the “millionaires next door” spend as little as possible and practice good financial habits.
That foundation gives them more money to invest into promising companies. Artificial intelligence can lead to many technological breakthroughs and evolutions. These are three stocks that can lead that charge and help you become the millionaire next door.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been using AI for several years to enhance advertising results for its clients. It offers relevant search engine suggestions and helps businesses run optimized ad campaigns.
Alphabet gained an outsized share of the search engine market, becoming the juggernaut of SEO. Artificial intelligence investments can fuel additional gains.
Shares have increased by over 50% year to date (YTD), up by roughly 150% over the past five years. Currently, the stock has a 30 P/E ratio and is on the rebound. Alphabet reported 7% year over year (YOY) revenue growth and 15% YOY net income growth in Q2.
While Alphabet is making the bulk of its revenue from advertising, it’s Services and Cloud businesses are also growing. Google Services experienced 5.5% YOY revenue growth, yet Cloud emerged as the big winner with 28.0% YOY revenue growth. The company’s “Other Bets” revenue segment also surged, but it’s too small at the moment to have any meaningful impact on Alphabet’s financials.
Supermicro (NASDAQ:SMCI) has been one of the biggest winners over the past few years. Shares have more than tripled YTD, gaining over 2,000% within the past five years!
The company’s server and storage solutions are equipped to handle artificial intelligence tools, and a Nvidia partnership is also drumming up new business. The company has seen unprecedented demand for AI and other advanced applications. This contributed to a 33.6% YOY increase in revenue in the fourth fiscal quarter.
Despite the incredible run-up, Supermicro remains a relatively unheralded stock with most of its popularity coming from investors who focus on artificial intelligence stocks.
The stock’s market cap is only $15 billion, and it has a 25 P/E ratio. Valuation isn’t an issue with this stock, and rising revenue and profits can make the valuation more enticing for future investors. You don’t have to invest in companies with trillion-dollar market caps or corporations that are approaching that level to benefit from the AI surge.
It’s difficult to write any article about artificial intelligence without mentioning Nvidia (NASDAQ:NVDA). The company’s valuation is in a better place, especially when investors look at the company’s forward P/E ratio.
Nvidia has strong revenue and earnings growth that blows away the majority, if not all, of the currently publicly traded companies. NVDA’s next earnings report is coming November 21st and is expected to post substantial revenue and earnings growth.
The company’s graphics processing unit (GPU) computing chips aren’t only for artificial intelligence applications. This chips are at the center of many technological mega-trends, such as gaming, professional visualization, data centers, and automotive.
Revenue from gaming and professional visualization both increased by double-digits from the previous quarter. The data center segment has been Nvidia’s big winner that area investors focus on the most. The company’s Q2 data center revenue came at an astonishing $10.32 billion, up 171% YOY.
Any significant pauses in the data center business can bring down Nvidia’s valuation. But those slowdowns don’t seem to be in play at the moment. It can take a few years before revenue deceleration brings data center revenue closer to Nvidia’s other revenue segments.
Long-term investors may benefit from accumulating shares at current prices and using long-term horizons to become the millionaires next door.