<div id="readability-page-1">Many investors flocked toward artificial intelligence (AI) stocks over the past years to capitalize on the growth of generative AI platforms like OpenAI's ChatGPT. That bullish stampede drove many tech stocks higher -- even as inflation, high interest rates, and other macro headwinds battered other less-resilient sectors. But as the first half of 2024 ends, some investors might be wondering if the historic AI rally will run out of steam. I think investors should be a bit more selective with their AI stocks, but three of the most obvious plays -- Nvidia (NVDA -0.36%), Super Micro Computer (SMCI -7.98%), and Microsoft (MSFT -1.30%) -- are still worth buying. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83ODE3NDYvYW5kcm9pZHMtYnVzaW5lc3Mtc3VpdHMuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83ODE3NDYvYW5kcm9pZHMtYnVzaW5lc3Mtc3VpdHMuanBnJnc9NzAw"/>Image source: Getty Images. </div> <h2>1. Nvidia</h2> Nvidia is the largest producer of discrete graphics processing units (GPUs) in the world. It once generated most of its revenue from the PC gaming market, but its data center GPU sales skyrocketed over the past two years to become its largest business segment. The growth was entirely driven by the rapid expansion of the AI market since Nvidia's high-end GPUs are widely used to accelerate machine learning and AI tasks. All of the world's top generative AI companies -- including OpenAI, Microsoft, and Alphabet's Google -- currently use its GPUs. Nvidia now controls 88% of the discrete GPU market, according to JPR, and the market's demand for its chips continues to outstrip its supply. As a result, analysts expect its revenue and adjusted earnings to grow 98% and 109%, respectively, in fiscal 2025 (which ends next January). Its stock still looks reasonably valued at less than 50 times forward earnings and could head even higher as the AI market expands. <h2>2. Super Micro Computer</h2> Super Micro Computer, also known as Supermicro, carved out its own niche by producing high-performance, liquid-cooled servers for demanding tasks. That's why it wasn't too surprising when Nvidia partnered with the company a few years ago and granted it access to its high-end data center GPUs before many of its larger competitors. Nvidia's support enabled Supermicro to claim a 10% share of the dedicated AI server market. Bank of America expects it to grow its slice to 17% over the next three years as the broader market expands 150%. Supermicro already generates about half of its revenue from AI servers, but that percentage should keep rising as it gains ground against bigger server makers and diversifies its business with new AI servers powered by Advanced Micro Devices' cheaper chips. For 2024, analysts expect Supermicro's revenue and earnings to grow 110% and 102%, respectively. Those are incredible growth rates for a stock that trades at just 23 times forward earnings, so it could still have plenty of room to run. <h2>3. Microsoft</h2> Microsoft became a growth stock again over the past decade as it expanded its cloud-based services and Azure -- which became the world's second-largest cloud infrastructure platform after Amazon Web Services (AWS). It also became the largest investor in OpenAI and subsequently integrated the start-up's generative AI tools into Azure, its Bing search engine, and its other cloud-based services. The expansion of that AI ecosystem boosted Azure's growth and widened its moat against Google in the search and advertising markets. It also acquired Activision Blizzard last year to strengthen its Xbox gaming business and lock more gamers into its subscription-based Game Pass and Cloud Gaming ecosystems. Microsoft's broader diversification makes it a balanced way to profit from the growth of the cloud, AI, and gaming markets. Analysts expect the company's revenue and adjusted earnings to grow 14% and 13%, respectively, in fiscal 2025 (which ends next June). Its stock might not seem cheap at 34 times forward earnings, but its strengths should justify its higher valuation. </div>

SMCI

Investors are advised to be selective with AI stocks, but Nvidia, Super Micro Computer, and Microsoft are still worth buying. Nvidia dominates the discrete GPU market with its high-end GPUs used in AI tasks. Super Micro Computer, with its liquid-cooled servers, is expected to gain a larger share of the AI server market. Microsoft's expansion in cloud-based services and integration of AI tools make it a balanced investment.

- Investors have shown interest in AI stocks like Nvidia, Super Micro Computer, and Microsoft due to the growth of generative AI platforms. Nvidia dominates the GPU market, driven by AI market expansion, with analysts predicting significant revenue and earnings growth. Super Micro Computer, with Nvidia's support, aims to increase its share in the AI server market, expecting substantial revenue and earnings growth. Microsoft's growth stems from cloud services, Azure, and AI integration, making it a balanced investment in cloud, AI, and gaming markets, despite a higher valuation.
- Nvidia's revenue and earnings are expected to grow significantly, driven by AI market expansion and GPU dominance. Super Micro Computer anticipates growth in the AI server market share, with substantial revenue and earnings growth projections. Microsoft's diversified portfolio in cloud, AI, and gaming markets positions it as a balanced investment choice, despite a relatively higher valuation.
- Analysts foresee robust growth for Nvidia, Super Micro Computer, and Microsoft, driven by AI market trends, AI server market expansion, and cloud-based services. Despite varying valuations, these companies offer potential for investors seeking exposure to the AI, cloud, and gaming sectors.

3 Artificial Intelligence (AI) Stocks to Buy in June 2024