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History says these 3 AI stocks could be big winners in the second half of 2024

There are no signs that the equity market rally is coming to an end anytime soon. Investors remain optimistic about artificial intelligence (AI), and with the possibility of the Fed cutting interest rates later this year, there could still be catalysts in the coming months that drive stock prices higher.

If you’re looking for AI-related stocks that could do well in the second half of the year, consider: NVIDIA (NASDAQ: NVDA), modern micro devices (NASDAQ:AMD)And Tesla (NASDAQ:TSLA)These companies have historically delivered good results in the second half of the year and could now be a good buying opportunity.

NVIDIA

Nvidia is an easy choice for investors these days simply because the company is at the forefront of virtually everything AI-related. The company’s powerful GPUs put it in a great position to continue to benefit from rising AI-related spending. And it’s still innovating. Earlier this year, Nvidia unveiled its new Blackwell chips, which will be the best and most efficient for training AI models.

The company generated nearly $40 billion in free cash flow over the past four quarters and has ample resources to continue investing in its business and improving its products and services even further. For this reason, many analysts and investors remain optimistic about the company even though its market capitalization now exceeds $3.3 trillion.

Historically, Nvidia has performed well in the second half of the year. Here’s a look at second-half earnings over the past 10 years.

Average

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

33.1%

17.1%

(3.6%)

47%

37.5%

43.3%

(43.7%)

33.9%

127.1%

63.9%

8.1%

Source: YCharts.

There have been some big moves in the third and fourth quarters for Nvidia in the past, but I wouldn’t get my hopes up that the stock will do so well again in the second half of 2024, simply because the stock’s valuation is already high. But with plenty of catalysts still in place, this is one AI stock that’s easy to justify buying and holding.

modern micro devices

Advanced Micro Devices, or AMD, isn’t nearly as popular as Nvidia, but it could be an underrated AI investment. The company was a little late to the AI ​​chip game, but its new hardware entries are solid. Tech giants like Microsoft And Meta-platforms plan to use these cheaper alternatives to Nvidia chips.

Some companies may also want to buy AMD chips to reduce their dependence on a single supplier. The proof will ultimately be in the results, which have been somewhat disappointing so far. In the first quarter, AMD’s revenue rose just 2% year over year to $5.5 billion. But if demand for its AI chips proves strong, the second half of the year could actually be a good one for AMD. That’s how the stock has performed in the second halves of recent years.

Average

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

30.2%

29.4%

(15.3%)

53.2%

74.3%

51%

23.2%

(17.6%)

120.6%

19.6%

(36.3%)

AMD is averaging a return of over 30% in the second half of the year, which is only slightly below Nvidia’s earnings. Investors looking to diversify their semiconductor positions beyond Nvidia or who are concerned about the high valuation should buy AMD, which is sure to deliver strong results in the coming quarters.

Tesla

Tesla shares are up just 3% so far this year, and that’s only thanks to a recent rally. The company is a leading electric vehicle (EV) maker, and automation is a big part of its business, but it’s also working on robotics and other AI technologies. CEO Elon Musk has big dreams, so calling Tesla just an automotive stock would be missing the bigger picture.

For now, however, conditions in the electric vehicle market will have a major impact on the stock’s performance. Both macroeconomic and company-specific headwinds are weighing on Tesla, at least in the short term. But the company recently reported better-than-expected second-quarter delivery numbers, which helped restore optimism about the stock. That could suggest that second-quarter financial results, due to be released later this month, will be better than feared. In the first quarter of 2024, the company’s revenue fell 9% to $21.3 billion and operating profit plunged 56% to less than $1.2 billion.

But if upcoming earnings are better and Tesla’s robotaxi event planned for August proves to be a positive catalyst, investors could have several reasons to be optimistic about the stock. And consider Tesla’s track record for the second half of the year:

Average

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

28.5%

(5.1%)

(45.1%)

55.5%

226.8%

87.2%

(3%)

(13.9%)

0.7%

(10.5%)

(7.4%)

Source: yCharts.

Tesla isn’t nearly as consistent as AMD or Nvidia. The company has had some rough years. But it also shows that with the right catalysts, Tesla has the potential for big swings in value that could make the second half of the year a winner for investors.

For AI investors and Musk fans, the stock’s reduced valuation could represent a good opportunity to buy and hold it for the long term.

Should you invest $1,000 in Nvidia now?

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. David Jagielski does not own any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

History says these 3 AI stocks could be big winners in the second half of 2024. Originally published by The Motley Fool

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