3 No-Brains Artificial Intelligence (AI) Stocks You Should Buy Right Now for $200

Some of the biggest winners of the current bull market have been artificial intelligence (AI) stocks. The booming demand for AI infrastructure, software, and development tools has made some companies and their investors a lot of money over the past two years. Despite the strong growth in AI, there may still be a long way to go.

Companies will spend a whopping $235 billion on AI this year, according to a report by research firm IDC. But the same analysts expect spending to grow to $631 billion by 2028. By 2032, spending on generative AI alone could grow to $1.3 trillion, according to an analysis by Bloomberg Intelligence.

Now that many AI-related companies have seen their stock prices soar, it can seem impossible to find AI stocks you can buy for as little as $200. While many brokerages allow you to trade fractional shares, there’s something great about owning a whole share of a company. Here are three AI stocks you can buy for under $200 a share that seem like obvious investments right now.

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1. Broadcom ($163 per share)

Broadcom‘S (NASDAQ: AVGO) The stock recently fell below $200 per share for the first time since 2020 — not because investors are selling or because the company is struggling, but because it completed a 10-for-1 stock split in July. Its market capitalization is up nearly 10-fold since its 2020 low, but it could have even more room to maneuver.

The chipmaker specializes in several types of semiconductors that are incredibly valuable in the wake of the AI ​​boom. It makes networking chips that help route workloads through the computing power available in a data center. Its Jericho3-AI Fabric, for example, can connect up to 32,000 chips in a data center. That helps ensure that big tech companies spending tens of billions on GPUs and other chips get their money’s worth on those investments.

It also builds AI accelerator chips specifically tailored to training or using large language models. It works closely with large technology companies such as Alphabet (NASDAQ:GOOG) (NASDAQ: GOOGL) AND Meta Platforms to design these integrated circuits for specific applications, or ASICs. They can be cheaper and require less power to operate than GPUs for the same tasks, and they are an increasingly large part of the hardware in the world’s largest data centers.

Broadcom also makes chips for other applications, including smartphones, which has proven to be a stable and growing business. In addition, the company has an enterprise software portfolio for mainframe and virtualization software, anchored by assets it acquired last year in its acquisition of VMware. Its broad portfolio, combined with its chip business, allows it to focus on locking in customers with multiple offerings that work well together, protecting it from the competition.

Despite the stock’s strong performance over the past few years, the stock currently trades at just 27.7 times forward earnings. That’s a small premium over S&P500mid-market valuation, but well below other AI chipmakers. Given the multiple sources of potential growth, Broadcom stock should prove to be a solid investment at its current price.

2. Qualcomm ($175 per share)

Qualcomm (NASDAQ: QCOM) is best known for making wireless communications chips that allow smartphones to connect to carriers’ 5G networks. While its business faces significant headwinds because it’s one of its biggest customers — Apple — is taking steps to produce its own next-generation modems, and its cooperation with Android phone manufacturers is growing.

In addition to Qualcomm’s dominance over most smartphone connectivity chips, it also makes the core processors in many Android phones. Its Snapdragon application processing unit is one of the best smartphone chips, offering manufacturers easy integration with modems. It also makes chips for automotive and Internet of Things applications, which are growing markets with increasingly demanding computing and connectivity needs.

Qualcomm made a move into the PC market with its AI-focused processors earlier this year. While its efforts in that area likely won’t have a big impact on its revenue in the near future, they could ultimately lead to a big diversification push.

Importantly, Qualcomm will benefit from the push to start delivering the computing power for generative AI on devices, rather than outsourcing all of its processing to the cloud. The upcoming new AI features that Apple unveiled in June are largely focused on on-device processing. Many other companies will want to follow Apple’s lead in this regard. Qualcomm has emphasized that its PC chips can run AI applications on devices without an internet connection. And AI applications in cars and IoT networks will need to be able to run quickly and locally. These trends bode well for sales of Qualcomm’s high-end chips.

Qualcomm is trading at a price-to-earnings multiple of just 15.5. That’s well below the S&P 500’s multiple, despite the fact that strong demand from smartphone makers should drive the company’s revenue and earnings in the near to medium term, and AI PC chips could be a long-term growth story for the company. At that valuation, Qualcomm stock looks like a great buy.

3. Alphabet ($165 per share)

Alphabet owns the world’s most popular search engine (Google) and video-sharing site (YouTube). These properties are part of a family of Internet services that support the company’s core advertising business.

Despite some regulatory pushback, Google’s dominance of the internet search market is unlikely to change anytime soon. Furthermore, AI assistants like ChatGPT have failed to significantly impact the company’s business. In fact, Google is integrating AI into search with its latest feature, AI Overviews, and is seeing excellent engagement and satisfaction with the results.

As AI transforms its core business, it’s fueling growth for Google’s cloud computing unit. Google Cloud is the third-largest public cloud platform and is growing rapidly. The company is investing heavily in AI capabilities with its custom chip designs (backed by Broadcom) and expanding its compute capabilities. That’s helped it land big deals with major developers, including Apple, which trained its large language model on Google Cloud’s TPU.

Management says its generative AI services generated billions of dollars in revenue in the first six months of 2024, attracting more than 2 million developers. But there’s still a long way to go to grow. Google is embracing the opportunity to invest in its own AI development while also renting out cloud computing power to other developers, ensuring it can fully leverage its capital investments.

The stock is currently trading at a P/E ratio of 21.8. That’s in line with the S&P 500, but Alphabet likely deserves a premium valuation as it benefits from secular growth in digital advertising and a huge boom in AI cloud spending. In the meantime, it’s using its massive cash flow to buy back shares, which is boosting earnings per share. As such, earnings growth should remain strong. This looks like a great AI stock to buy as long as it stays below $200.

Is it worth investing $1000 in Broadcom now?

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former Facebook chief market development officer and spokeswoman and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Levy holds positions in Alphabet, Apple, Meta Platforms, and Qualcomm. The Motley Fool holds positions in and recommends Alphabet, Apple, Meta Platforms, and Qualcomm. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.