Finding value in artificial intelligence (AI) stocks can be challenging, especially if you’re working with a limited investment budget of around $200. Nevertheless, certain stocks stand out due to their growth potential and robust market position. In this article, we’ll explore three compelling AI growth stocks to consider right now, all of which are priced under $200 and are well-positioned to leverage the burgeoning AI sector.
Artificial intelligence has dominated conversations on Wall Street for over two years. According to FactSet Insight, over 40% of S&P 500 companies have mentioned “AI” in their earnings calls for five consecutive quarters. With virtually every industry evaluating how recent AI innovations can transform their operations, the focus is not merely on AI as a buzzword but as a driver of substantial growth and opportunity.
However, not every company harnessing AI has seen clear financial benefits; for some, implementing AI may serve as a cost center with uncertain returns. Therefore, investors should be cautious about not overpricing growth potential, especially as companies scale. That said, let’s take a closer look at three AI stocks that could deliver strong value to investors looking to make informed choices with a modest budget.
### 1. Alphabet (GOOGL)
Alphabet, the parent company of Google, has faced significant scrutiny regarding the impact of AI on its core search services. Recent testimony from Apple’s Eddy Cue indicated a surprising drop in search queries on the Safari browser, suggesting that AI-driven platforms like ChatGPT might be capturing some of Alphabet’s market share.
Despite these challenges, Alphabet stands to gain more from AI than it loses. The company has successfully integrated AI into its search functionality, increasing user engagement while maintaining traditional monetization rates. New features such as Circle-to-Search and Google Lens are particularly valuable, enhancing user experience and driving product searches.
Furthermore, Alphabet’s Google Cloud business is thriving, with a 28% revenue increase in Q1 and a significant jump in operating margins from 9.4% to 17.8%. The demand for AI services is propelling growth in this division, offering promising opportunities for further financial expansion.
Trading at approximately $177 per share, Alphabet stocks hover around 18.5 times forward earnings expectations. This presents an appealing entry point for investors, especially given Alphabet’s strong cash flow, a profitable cloud business, and significant capital returns.
### 2. Qualcomm (QCOM)
Qualcomm may not be the first name that comes to mind when discussing AI chip manufacturers, but it has a significant role to play. Typically known for chips utilized in smartphones, Qualcomm is now setting its sights on the data center market. They aim to develop CPUs that complement AI accelerator chips, leveraging expertise in low-power, high-performance chip design.
Recently announcing its acquisition of Alphawave Semi, Qualcomm is bolstering its data center offerings. Despite steep competition, there’s a growing trend towards performing AI processing directly on devices. This approach boosts security and speed while providing a competitive edge, positioning Qualcomm favorably as on-device AI becomes a market differentiator.
Currently priced around $160 per share and trading at about 13.5 times forward earnings, Qualcomm presents an attractive valuation for a company holding substantial positions in the Android device ecosystem. Apple’s shift towards its custom chipsets may weigh on Qualcomm, but the impact is manageable as most other competitors lack the scale to replicate Qualcomm’s solution.
### 3. Applied Materials (AMAT)
As demand for AI-driven chips rises, someone must manufacture these advanced semiconductors, and that’s where Applied Materials enters the picture. This company specializes in wafer fabrication equipment essential for chip manufacturing, including etching and deposition tools.
Applied Materials boasts a comprehensive portfolio that allows it to effectively compete with specialized equipment makers, and its scale enables robust revenue reinvestments in research and development. As chip production surges due to evolving technologies, Applied Materials has capitalized on this trend, reporting a 7% sales increase in its latest quarter despite market fluctuations.
In addition, the company’s expanding margins—now exceeding 49%—indicate solid financial health. Once manufacturers purchase Applied Materials’ equipment, they tend to remain loyal, leading to long product lifecycles and recurring service revenues.
Trading around $175 per share and featuring a forward P/E ratio of approximately 18.5, Applied Materials offers a compelling investment opportunity. Its steady revenue growth and favorable margin prospects make it a worthwhile consideration for investors looking to enter the semiconductor space.
### Conclusion
Investing in AI stocks can be a lucrative endeavor, especially if you choose the right companies that balance growth potential with a reasonable stock price. Alphabet, Qualcomm, and Applied Materials each represent unique aspects of the AI ecosystem, from software to chip manufacturing. They are positioned to leverage current technological advancements and consumer trends, making them worthy additions to anyone’s investment portfolio, even with a limited budget of $200.
In summary, if you’re considering diving into the world of AI stocks, don’t overlook these three companies. Each offers compelling reasons to invest, and their capabilities in harnessing AI’s transformative power could yield substantial returns in the long run.
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