AI Stocks to Consider: Microsoft and Intel

The AI market is booming in 2024, with Nvidia leading the charge. However, for investors who may have missed the Nvidia rally, other high-quality AI stocks like Microsoft (MSFT) and Intel (INTC) offer compelling opportunities. Here’s a closer look at why these two stocks are attractive picks in 2024.

1. Microsoft (MSFT):

Financial Snapshot:

• Market Cap: $3,086 billion
• Current Price: $415.26
• Today’s Change: (-1.26%) -$5.29

Key Drivers:

1. AI in Azure Cloud Computing: Microsoft’s Azure cloud computing platform has experienced remarkable growth, with a 30% year-over-year increase in revenue during the second quarter of fiscal 2024. AI services contributed significantly to this growth.
2. CoPilot AI Assistant: Microsoft’s AI-powered assistant, CoPilot, embedded in products like Microsoft 365, GitHub, and the security platform, is expected to drive substantial improvements in average revenue per user in the coming years.
3. PC and Gaming Business Recovery: Microsoft’s core PC and gaming businesses are poised for recovery in 2024, with the productivity and business processes division returning to double-digit growth.

Valuation:

• Microsoft currently trades at a price-to-sales (P/S) ratio of 13.3 times, which is considered expensive compared to the industry’s median valuation of 2.2 times.
• Despite the elevated valuation, Microsoft’s strength in the AI market and positive IT spending trends make it a compelling buy in 2024.

2. Intel (INTC):

Financial Snapshot:

• Market Cap: $186 billion
• Current Price: $44.03
• Today’s Change: (+1.66%) $0.72

Key Drivers:

1. AI in Client PC Market: Intel’s market-leading position in the client PC market positions it well to capitalize on the expected 3.4% year-over-year growth in the total PC market in 2024, driven by the PC refresh cycle and AI capabilities.
2. AI PC Systems: Intel’s Core Ultra client processors (Meteor Lake) are designed for AI workloads on client PCs. Partnerships with over 100 independent software vendors and plans to release 300+ AI-accelerated software features indicate a strong push in the AI PC market.
3. Foundry Business Growth: Intel’s foundry business anticipates becoming the second-largest foundry by 2030. With commitments from multiple clients and a disclosed total deal value pipeline of over $10 billion, the foundry business is expected to play a crucial role in supplying AI-optimized chips.

Valuation:

• Intel is currently trading at a P/S ratio of 3.5 times, significantly lower than peers like Nvidia and Advanced Micro Devices. The reasonable valuation makes Intel an attractive long-term AI buy.

Conclusion:

While Nvidia has seen extraordinary gains, Microsoft and Intel present strong investment cases in the AI space. Microsoft’s robust performance in cloud computing and AI services, coupled with recovery in core businesses, makes it a smart buy. Intel, with its focus on the AI PC market and promising growth in the foundry business, offers an attractive entry point at a reasonable valuation.

Note: The stock prices, performance figures, and financial data are fictional and for illustrative purposes only.