Should I buy these stocks for exposure to the artificial intelligence (AI) boom?

There’s been loads of hype around what stocks to buy for the artificial intelligence (AI) revolution recently.

That’s understandable. The industry has taken the market by storm. We’ve seen some of the largest players in the sector with soaring share prices. I have some exposure to it. But I’d potentially be keen to increase that.

Are these two stocks the ones I should be buying?

Nvidia

Let’s start with one of the most popular stock out there at the moment. That’s Nvidia (NASDAQ: NVDA). Its seems like its share price hasn’t been able to slow down recently. Investors are piling into the stock and it’s easy to see why.

It’s an AI frontrunner. When it comes to graphics processing units, it sets the gold standard. It’s believed that the company has a 90%-95% market share. Some of its customers include juggernauts such as Tesla, Meta, and Microsoft.

The business has posted exceptional growth in the last few years. In 2023, its revenues climbed 126%. For the current quarter alone, the firm is forecasting a 233% rise in sales!

LSEG

The other stock I’m considering is FTSE 100 stalwart London Stock Exchange Group (LSE: LSEG). Its rise hasn’t been quite as impressive as Nvidia’s. That said, a 28.9% jump in the last 12 months has caught my attention.

The business may not seem like a conventional AI stock. However, after recently signing a 10-year deal with Microsoft, which will see it develop generative AI tools, I like its prospects.

The Group provides financial data, analytics, and news services, among other things, for millions of customers, including some of the largest companies in the world. This latest deal will allow it to help its users “achieve more by transforming how they discover data, create models, make informed decisions, and ultimately create unique insights”.

There’s also a 1.2% dividend yield. While that may seem insignificant, the firm has steadily been growing it in the last few years. On top of that, it has initiated a £1bn share buyback scheme for 2024.

The stock does look a little bit on the expensive side trading at 27 times earnings. With the amount of debt on its balance sheet rising, this is also a source of concern.

But are they worth it?

But at their current prices, are both stocks worth it?

Let’s start with Nvidia. I can understand talk of a bubble around the company. Investors have come to expect so much. At some point, demand for its AI chips will slow down and some shareholders having got used to its impeccable growth will be disappointed. No doubt this would see its share price take a massive hit.

Some believe investors are ignoring other issues too, such as a potential ban on selling to China. I already own some Nvidia stock. I’m happy with the exposure I have for now.

On the other hand, I think that London Stock Exchange Group could be a smart play. Its multi-year deal suits my long-term investment outlook. I see it thriving in the years to come as continues to build its AI capabilities. If I had the spare cash, I’d consider adding it to my portfolio.

The post Should I buy these stocks for exposure to the artificial intelligence (AI) boom? appeared first on The Motley Fool UK.

setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#FFFFFF", 'color', '#FFFFFF'); })()

More reading

• Nvidia stock is flying but it’s not the only chip manufacturer worth looking at
• Is it too late to buy Nvidia shares?
• My Nvidia stock’s up 107%. What should I do?
• I’m selling Nvidia shares near $1,000 to buy this top passive income stock
• I bought Fundsmith Equity last June. Should I have bought Nvidia stock instead?

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended Meta Platforms, Microsoft, Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.