Selling the S&P 500: 2 Non-AI Stocks to Buy for $1,000 Right Now

The S&P 500 had a dream run in the first half of this year, rising 15% with almost no volatility. But it has fallen 5.7 percent from a peak in July as investors digest weak economic data combined with a currency shock in the Japanese yen.

History suggests that the S&P 500 always climbs to new highs given enough time, so this correction is likely a buying opportunity. In fact, this could be a great chance for investors to buy artificial intelligence (AI) stocks at a discount ahead of what could be a significant long-term rally.

According to many Wall Street forecasts, AI could add trillions of dollars to the global economy over the next decade, with contributions from both hardware and software companies. Here’s why investors with $1,000 to spare might want to split it evenly between stocks Advanced microdevices (AMD -0.27%) and Lemonade (LMND 1.34%) right now.

1. Advanced microdevices

AMD has emerged as a worthy competitor Nvidia in the AI ​​data center chip market. Its new graphics processing unit (GPU) MI300X is already a success among the world’s largest data center operators such as Microsoft and Oracleand many customers find performance and cost advantages over Nvidia’s industry-leading H100.

But with Nvidia about to release its next-generation GPUs built on its new Blackwell architecture — which could be up to 5x faster than the H100 — AMD can’t afford to sit still. That’s why it plans to launch the MI350 next year, and it will be based on a new architecture called Compute DNA (CDNA) 4, which could offer 35 times more performance than CDNA 3 chips like the MI300. AMD hopes that this generation of GPUs will directly compete with Nvidia’s Blackwell GPUs.

But AI is now reaching personal computers and devices, meaning AI will be processed on the device rather than relying on data centers to handle each query. This will create a faster user experience when interacting with AI chatbots and other software. AMD has just launched the Ryzen AI 300 series for notebooks, which is the fastest Neural Processing Unit (NPU) in the industry. The company says more than 100 platforms will launch with these chips in the coming quarters, from leading PC makers such as HPAsus, Acer and more.

Earlier this year, AMD said it had a 90 percent share of the AI ​​PC market, and the Ryzen AI 300 series could expand that dominance.

In the latest second quarter of 2024 (ended June 30), AMD’s data center revenue rose 115% from a year ago to a record $2.8 billion, which included 1 billion dollars in MI300 sales. The company’s customer segment, which houses Ryzen AI chips, generated $1.5 billion in revenue, which was a 49 percent increase.

This force is likely to persist for the foreseeable future. In fact, AMD just raised its full-year forecast for GPU sales to $4.5 billion (up from $4 billion just three months ago). With AMD shares down 35% from their all-time high, investors are presented with a golden buying opportunity ahead of what could be a substantial long-term growth phase.

2. Lemonade

Lemonade is an insurance company using artificial intelligence to shake up the renters, homeowners, life, pet and auto markets. The company is valued at just $1.1 billion, so it’s a pittance compared to its entrenched competitors such as Allstatewhich is worth $45 billion, or Geico, which is owned by the $922 billion Berkshire Hathaway conglomerate.

That said, Lemonade is making inroads. It had more than 2.1 million customers in the second quarter of 2024 (ended June 30) and is successfully attracting younger cohorts that have been underinsured in the past. Its technology-driven approach and commitment to charitable giving through its “Giveback” program are two reasons for its success.

Lemonade relies on AI chatbots to handle most customer interactions. Its chatbot Maya can write an offer for a potential customer in less than 90 seconds, and its AI Jim can pay claims in just three minutes without human intervention. With traditional insurers, the claims process can involve multiple phone calls and slow payouts — with younger Americans in mind hatred talking on the phone, no wonder he flocks to Lemonade.

Lemonade also uses in-house AI to calculate premiums to ensure customers are getting the fairest price possible. It even uses artificial intelligence to detect weak product and geographic markets so management can quickly adjust marketing spend. It’s driving a wave of efficiency that has allowed the company to reduce its workforce by 9% over the past year while increasing its insurance volume by 22%.

Lemonade had a record $838.8 million in premiums in effect at the end of the second quarter, with the average premium per customer also hitting a new record of $387. At the same time, the gross loss ratio (the portion of premiums paid as claims) continued to fall, reaching 79%. Lemonade says 75% is the sweet spot for a thriving insurance business, and it’s almost there.

Lemonade stock is down 90% from its all-time high, which was set during the tech frenzy of 2021. It was arguably overvalued then, but its recent weakness is due to the company’s persistent bottom line losses. However, it managed to deliver positive net cash flow for the first time in Q2, and management believes it can maintain this consistently. It means Lemonade won’t need to turn to investors (or banks) for additional funding anytime soon.

Because of the steep decline, Lemonade’s stock is now trading at a price-to-sales ratio of just 2.2, which is close to its cheapest level since the company went public four years ago.