Artificial intelligence (AI) stocks are currently out of favor in the market. There is too much uncertainty surrounding the war in Iran and skepticism about the payoff on AI spending. This is causing the markets to sell off AI stocks, and this may sound like a terrible time to be buying. However, I think it’s the opposite.
AI technology isn’t expected to reach maturity for several years. As a result, more AI spending will be needed to get us there. Although the market is skeptical about what the return on investment will be for AI, it isn’t stopping the AI firms from pursuing multi-year expansion plans. I think the long-term outlook on AI stocks is still bullish, and investors should use this sell-off as a buying opportunity.
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I’ve got five stocks that I think are smart buys in April, and investors should use the relative weakness in the market to load up on them while they’re cheap.
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Nvidia(NASDAQ: NVDA) and Broadcom(NASDAQ: AVGO) are my first two picks. These two provide computing units for AI. While they are both competing for market share, each company’s product tackles a different portion of AI computation.
Nvidia’s graphics processing units (GPUs) are the do-it-all computing units that can be deployed in many situations. They aren’t the cheapest option by a long shot, but they are the most flexible and have the best product ecosystem surrounding them. Nvidia’s products are the industry standard, and there’s a reason why management believes that Blackwell and Rubin chip lifetime sales will total $1 trillion through 2027.
Instead of building another broad-purpose computing unit to challenge Nvidia’s GPUs, Broadcom is partnering directly with AI hyperscalers to design custom AI chips catered to their clients’ workloads. These computing units would fail miserably if they were subjected to the wide range of tasks that GPUs are. Still, when they are deployed for specific purposes where inputs are similar, such as AI inference, they offer superior performance when cost is integrated. The market for these chips is booming, and Broadcom expects them to generate more than $100 billion in annual revenue by the end of 2027.
Both Broadcom and Nvidia are producing computing units that are necessary for the AI buildout. With most projections pointing toward spending lasting through at least 2030, scooping up both of these stocks while they’re down at least 20% from their all-time highs is a smart move.
Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) and Microsoft(NASDAQ: MSFT) are two AI hyperscalers that are spending a ton on computing capacity. However, both are also earning a solid return on that spending through their respective cloud computing divisions, Google Cloud and Azure. These two segments put up jaw-dropping growth in their most recent quarter, with Azure’s revenue rising 39% year over year and Google Cloud’s increasing by 48%.
Both Alphabet and Microsoft are leaders in the AI realm, and will be a key part of how AI transforms both business and personal lives. This locks them into being market leaders for the foreseeable future, but they aren’t escaping the recent sell-off.
Microsoft is down a jaw-dropping 35% from its all-time high, while Alphabet is down more than 20%. Neither of the investment theses has changed since they last set their all-time highs, making right now a great time to scoop them up at a discount.
Last is a more obscure stock pick, Nebius (NASDAQ: NBIS). Nebius is similar to Alphabet and Microsoft because it’s a cloud computing company. However, it’s laser-focused on providing the best AI hardware available, and even has a deal with Nvidia to obtain access to the newest technology before anyone else.
This makes it an incredibly popular platform to utilize for AI computing, and it’s seeing explosive growth as a result. At the end of this year, Nebius expects its annual run rate to reach $7 billion to $9 billion, up from $1.25 billion at the end of 2025. That’s rapid expansion, and showcases that the demand for AI computing power is greater now than ever.
Nebius is a great way to invest in that demand, and with the stock down 30% from its all-time high, now is the perfect time to load up on this AI winner.
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Keithen Drury has positions in Alphabet, Broadcom, Microsoft, Nebius Group, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
