Welcome to the forefront of conversational AI as we explore the fascinating world of AI chatbots in our dedicated blog series. Discover the latest advancements, applications, and strategies that propel the evolution of chatbot technology. From enhancing customer interactions to streamlining business processes, these articles delve into the innovative ways artificial intelligence is shaping the landscape of automated conversational agents. Whether you’re a business owner, developer, or simply intrigued by the future of interactive technology, join us on this journey to unravel the transformative power and endless possibilities of AI chatbots.
The U.S. inflation rate rose 4.2% year over year in May, marking its highest rate in three years and staying far above the Fed's target of 2%. To rein in inflation, the Fed — which kept its benchmark rates unchanged in the first half of the year — might need to raise rates again.
Higher rates could drive investors away from higher-growth AI stocks and toward more conservative investments. However, I believe three of those AI stocks — Nvidia (NVDA 2.24%), CoreWeave (CRWV 5.00%), and Broadcom (AVGO 2.58%) — will still be worth buying on any short-term softness caused by inflation or fears of higher rates.
Image source: Getty Images.
Nvidia, the world's largest producer of data center GPUs, still sells the best picks and shovels for training large language models (LLMs). It also locks in its customers through its proprietary Compute Unified Device Architecture (CUDA) parallel computing platform and other services.
Nvidia faces some competitive pressure from cheaper data center GPU makers, such as AMD, and custom AI accelerator makers like Broadcom. But it will remain the top producer of general-purpose data center GPUs for the foreseeable future — and its next-gen Rubin GPUs (which will be merged with its Vera CPUs) will reinforce its leading position. It will also benefit from the growth of the agentic AI market, increased government spending on AI solutions, and the increased adoption of its chips in autonomous vehicles.
From fiscal 2026 (which ended this January) to fiscal 2029, analysts expect Nvidia's revenue and EPS to both grow at CAGRs of 46%. Those are stellar growth rates for a stock that trades at just 21 times this year's earnings. That surprisingly low valuation could limit its downside even if inflation and higher rates trigger a retreat from higher-growth AI stocks.
CoreWeave is a leading neocloud company that provides dedicated AI infrastructure services. Its AI-optimized servers, which run on Nvidia's top-tier GPUs, can process certain AI tasks about 35 times faster and at 80% lower cost than larger cloud infrastructure platforms.
CoreWeave expanded from just three data centers at the end of 2022 to 49 centers across the U.S. and Europe today. Nvidia, which supplied more than 250,000 GPUs for those servers, is also one of its top investors. The bullish thesis for CoreWeave is simple: as the AI market expands, it will land more massive infrastructure deals and its gross margins will improve.
From 2025 to 2028, analysts expect CoreWeave's revenue to grow at a 99% CAGR as it milks its massive deals with Microsoft, OpenAI, and other AI software giants. It's still unprofitable, but its stock still looks like a bargain at less than 4 times this year's sales.
Broadcom doesn't produce data center GPUs like Nvidia. Instead, it produces custom, application-specific integrated circuits (ASICs), enabling hyperscalers to perform inference tasks (e.g., applications accessing LLMs) faster and more cost-effectively than stand-alone GPUs.
In fiscal 2025 (which ended last November), Broadcom's AI chip sales soared 65% to $20 billion, accounting for 31% of its top line. By fiscal 2027, the company expects AI chip sales to reach at least $100 billion, or 58% of its projected revenue of $172 billion. That explosive growth will easily offset its slower sales of non-AI chips and infrastructure software. It can also lock in its customers by bundling together its AI chips, non-AI chips, and cloud-based software.
From fiscal 2025 to fiscal 2028, analysts expect Broadcom's revenue and EPS to grow at CAGRs of 53% and 66%, respectively. At 41 times this year's earnings, Broadcom might seem pricier than Nvidia, but it's also growing faster with more exposure to the growing inference market. Therefore, investors should accumulate more shares of Broadcom if it pulls back.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Nvidia, CoreWeave, and Broadcom should be on your shopping list.