Tech stocks are on the rise in 2023. Many of the market's most popular names are soaring as hopes of interest rate cuts continue to spur interest. But artificial intelligence (AI)artificial intelligence) may be the most important factor to consider. Many of the top “Magnificent 7” stocks certainly value this driver, and this catalyst has impacted some companies more than others.
of Nasdaq With stocks currently trading near all-time highs, valuations certainly seem overvalued, but given the AI tailwind, some tech stocks may be relatively undervalued (or at least fairly valued).
Here's a look at three stocks investors should consider.
Alphabet (GOOG, GOOGL)
In 2024, alphabet (Nasdaq:GoogleNasdaq:GoogleAlphabet is doing well. The company's recent earnings report beat analyst expectations. The company continues to capitalize on robust ad spending, fueled in part by its major AI integration. The company's success is showing up in its financial results, especially now that its market cap has surpassed $2 trillion.
Despite the stock rising more than 42% due to innovations like Google Veo and advances in Google Search and Gemini, I believe it remains undervalued at a price-to-earnings ratio of 27.2x. As a central player in AI software development, Alphabet's shares offer an attractive opportunity heading into the summer.
Investors should give Alphabet a lot of thought given its long-term growth potential driven by AI. The fact that the stock has performed well over the past 18 months is a sign of strength, not overvaluation. In fact, there's a reason why all 37 analysts surveyed rate Google stock a “Buy.”
Meta Platform (META)
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As a pioneer of top social connections, Meta Platform (Nasdaq:Meta) has been focused on expanding its business and innovating with AI. From Facebook to Messenger to Instagram, META continues to revolutionize the way we connect. Currently, Meta Platforms is focused on Augmented Reality and Virtual Reality (AR/virtual reality) offers immersive social experiences. The company's forays into these areas are driven by AI, and given the direction the company is heading, there are a lot of integrations possible.
The higher revenues and profits expected from these initiatives have allowed Meta Platforms to move in a direction that many thought was impossible. In fact, the company's recently declared quarterly dividend of $0.50 per share is a pleasant surprise for shareholders.
But it's been driven by fundamentals. Institutional interest in the company has grown in 2024, with holdings reaching nearly $722 billion. META stock ranks 6th among institutional investors, with 808 investors opening positions. And the stock has risen 32% year-to-date (YTD) and first quarter net profit increased 117%. META's Llama 3 AI demonstrates the company's ambition to lead in AI, while rising ad impressions and pricing metrics point to substantial advertising revenues.
Adding to its influence, Mark Zuckerberg has emerged as a leading advocate of open-source AI, breaking away from the cautious approach of tech giants like Apple. Microsoft (Nasdaq:MSFT) and Alphabet's move sparked a debate about the accessibility of AI, with Zuckerberg calling for AI to be made available to all developers.
Nvidia (NVDA)
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It is a top choice for institutional investors across a range of metrics. NVIDIA (Nasdaq:NVDA) is showing resilience with a strong stock performance and rising share price. With a $1,000 share price and strong Q1 earnings, analysts are very bullish on NVDA stock. This AI darling is seeing explosive sales and profit growth, driving a fundamental rise in its stock price. Now, expectations are rising, indicating that investors remain optimistic about Nvidia's trajectory.
And Nvidia continues to exceed expectations as profits soar thanks to its dominance in chip manufacturing and AI: Net income hit $14.88 billion on revenue of $26.04 billion. Jensen Huang foresees a new era of AI factories that he believes will revolutionize data centers.
Additionally, Huang dismissed concerns about future demand, citing strong first-quarter growth from generative AI training. Data center revenue hit a record high of $22.6 billion, accounting for 86% of total quarterly revenue. If this trend continues, there is certainly a lot of appeal in Nvidia's upside potential.
On the date of publication, Chris McDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com's Publishing Guidelines.
