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3 Genius Artificial Intelligence (AI) Stocks You'll Regret Not Buying Now
It’s not uncommon to look with regret at stocks you didn’t buy or that you sold too early. This is all part of the investing learning process, which is healthy.
However, I think three stocks are trading at a discount right now that you’ll regret not buying at today’s prices. These three are artificial intelligence (AI) leaders, and each of them is down a fair bit from their all-time highs.
The three stocks I’m eyeing are Microsoft (MSFT 1.92%), Nvidia (NVDA 3.17%), and Broadcom (AVGO 2.99%). These three are bound to be higher a year from now, and they look like screaming buys at today’s prices.
Image source: Getty Images.
It’s not often you can say that Microsoft’s stock is historically cheap, but I think it is right now. Microsoft transformed itself as a business around a decade ago, shifting from a perpetual license model to a subscription one. Additionally, it became more focused on cloud computing. This marked the transition into a new company around a decade ago, so any metric that valued Microsoft then is irrelevant for the current state of the business.
If we look at Microsoft’s price-to-earnings ratio over the past decade, it has seldom been this cheap.
MSFT PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
While it still has a ways to go before it is truly the cheapest it has been over the past decade, we are quickly approaching that point. Surprisingly, there is really nothing wrong with Microsoft’s stock, and this sell-off is unwarranted. It looks like a great deal right now, and investors will be kicking themselves later if they don’t take action and buy now.
Nvidia is in a similar boat, but I’m going to use a different valuation metric. Demand for Nvidia’s graphics processing units (GPUs) is off the charts and has led to unreal growth. For this fiscal year, Wall Street expects Nvidia to deliver an incredible 70% revenue growth rate. However, according to the stock’s valuation, this is the last year of rapid growth expected by the market.
NVDA PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio.
At 22 times forward earnings, Nvidia has nearly the same price tag as the **S&P 500 **(^GSPC 1.51%), which trades for around 21 times forward earnings. A valuation this low essentially conveys that Nvidia will grow at a rapid pace this year but be a market-matching stock after that. However, we know that’s not the case because AI data center demand is expected to persist through at least 2030, and Nvidia is continuously booking new growth as it launches new hardware.
As long as AI spending keeps up next year and beyond, Nvidia is a steal right now. I think that’s a pretty safe bet, making the stock a no-brainer buy.
Last is Broadcom. Broadcom isn’t trading at a cheap valuation, but the company is expected to deliver huge growth over the next year.
The primary reason to invest in Broadcom right now is its custom AI chip business. These AI chips are designed in collaboration with the end user and can offer huge savings over traditional accelerated computing devices (like Nvidia’s GPUs) in some applications. As AI hyperscalers attempt to maximize their capital expenditures, these chips are projected to be more in demand, and Broadcom’s guidance backs that up.
Expand
NASDAQ: AVGO
Broadcom
Today’s Change
(-2.99%) $-9.57
Current Price
$310.27
Key Data Points
Market Cap
$1.5T
Day’s Range
$309.93 - $321.50
52wk Range
$138.10 - $414.61
Volume
1M
Avg Vol
26M
Gross Margin
64.96%
Dividend Yield
0.78%
By the end of 2027, Broadcom expects its AI chip business to generate $100 billion or more in revenue. For reference, its AI semiconductor business (which includes other products outside of its custom AI chips) generated $8.4 billion in revenue during its latest quarter, up 106% year over year. With growth like that expected in the next year, Broadcom is an absolute buy right now, as the market isn’t expecting it to be able to deliver on this outlook, or the stock would be valued at a much higher level than its current $1.5 trillion market cap.