2 AI shares to buy Hand Over Fist in August

Despite the economic growth since the beginning of last year, the artificial intelligence (AI) market remains a compelling investment opportunity. The industry was worth $200 billion in 2023 and is surpassing that figure, expanding at a compound annual growth rate of 37% and projected to reach just under $2 trillion in spending by 2030. As a result, companies and investors will likely continue to profit from the provision of AI tools, services and hardware for years to come.

So whether you’re new to AI investing or looking to expand your current position, it’s worth taking a closer look at the companies that are leading the market forward. Here are two AI stocks to buy in August.

1. Advanced microdevices

Chipmakers play a crucial role in AI. Advances in the chip industry have made it possible for developers to realize the concepts of artificial intelligence theorized decades ago. Graphics processing units (GPUs) have especially become the go-to solution for companies training AI models and large language models such as OpenAI’s ChatGPT. As a result, the chip design giants like it Advanced microdevices (AMD -0.59%) and its main rival, Nvidiahave benefited from the surge in GPU sales over the past year.

AMD was a bit late to the AI ​​party compared to Nvidia, with its fellow chipmaker securing an estimated 90% market share in AI GPUs last year. However, AMD has made significant strides in the industry in 2024, which could lead to stealing a lucrative share of the sector.

The company reported its second-quarter 2024 earnings last month, with revenue up 9% year over year. The period saw significant growth in AI GPU sales, represented by a 115% increase in data center revenue. Meanwhile, its client division, which includes central processing unit (CPU) sales revenue, saw revenue grow 49% year over year.

Total operating income for the quarter rose 18% from 2023, with AMD’s quarterly free cash flow growing 81% in 2024. The company’s cash hoard is growing, allowing it to continue investing in AI and to catch up with Nvidia.

Q2 2024 was a turning point for AMD, showing that its biggest business is now AI, with data centers driving most of its revenue. The company has growth opportunities in several areas of the industry, including AI-enabled PCs, cloud computing, self-driving technology and more.

Data by YCharts

AMD’s price-to-earnings ratio (P/E) is a staggering 189. However, as the chart shows, this ratio has fallen 85% year-to-date. Meanwhile, it’s well below its 12-month average of 462, while AMD stock is up 52%.

As a result, the company’s stock is trading at its best value in months. AMD’s P/E is likely insignificant compared to its growth potential in AI and should improve as it continues to deliver positive quarterly results. As a result, its stock remains an interesting long-term buy and one to buy right now.

2. The alphabet

Alphabet (GOOG -0.67%) (GOOGL -0.66%) it’s an AI stock you don’t want to sleep on this year. The company has become increasingly competitive in cloud computing, a rapidly expanding area of ​​AI. Its diverse range of products such as YouTube, Android, Google and Chrome give it countless opportunities to promote its generative software features.

Meanwhile, Alphabet launched its Google Pixel 9 smartphone in mid-August. This flagship model is packed with AI features like photo editing and the Gemini AI assistant, securing Alphabet’s position in the growing AI smartphone market. As a result, the company has planted seeds throughout the industry that could deliver sizable gains in the coming years.

Alphabet’s AI strategy sees it play to its strengths, a scheme it has used to gain dominance in advertising. The company has become the biggest name in the $740 billion digital advertising market, primarily because of the potency of its products. Alphabet has effectively used the billions of users that platforms like Google, Chrome and YouTube attract to build a very profitable advertising business. And now it does the same with AI.

Over the past year, Alphabet has added generative features to Google Search, Android, Cloud and YouTube. The company is making moves to become a leading provider of AI for businesses and consumers around the world. Meanwhile, products like the Pixel 9 take this further by offering AI hardware.

Data by YCharts

Alphabet shares are up 19% year to date, outperforming all companies on the chart. However, its stock also offers the most value, a pairing not often seen. Alphabet’s P/E of 24 makes it a bargain AI stock and one too good to ignore in August. Its massive potential in the industry and strong services could provide major gains in the coming years.