Artificial intelligence stocks have been top performers in the market. Nvidia’s (NASDAQ:NVDA) blowout earnings brought more attention to the space and created a gold rush of sorts. While many AI stocks have been scorching hot, investors have to discern the winners from the richly valued investments.
The best AI stocks can continue to deliver robust gains in the years ahead. High gains in the past do not indicate a stock is overvalued. Pinpoint stocks with reasonable valuations and robust financial growth can strengthen your portfolio.
Investors looking for exposure to AI stocks may want to consider these picks.
Coursera (COUR)
Coursera (NYSE:COUR) is an online education platform that features thousands of online courses from universities, corporations, and other entities. Students can receive degrees, certifications, and other accolades for completing courses on the platform.
Coursera uses artificial intelligence to make training course recommendations and help students finish the material. In fact, the company makes money from a monthly subscription and by receiving a percentage of tuition payments processed on its platform. They collaborate with over 300 leading universities and companies to give students many choices.
A poorly timed IPO makes the stock gains look unimpressive over the past five years. Specifically, the company went public in 2021 when many tech companies hit their peak. However, shares rallied by over 50% in 2023. A 21% year-over-year (YOY) revenue increase in the third quarter contributed to the stock’s outperformance.
College enrollments have been declining as more people question whether college is necessary and if student debt is worth it. Although enrollments are decreasing, students still need ways to learn. If this trend continues, Coursera stands to benefit as students get online degrees and certifications to save money.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) offers cloud networking services and hardware for large data centers. These centers will become more plentiful and take on higher workloads due to artificial intelligence. The company’s two largest customers are Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META).
As tech giants increase their data spending, Arista Networks stands to gain. AI will keep the money coming in and help the company post enticing revenue numbers for investors.
The company reported 28.3% YOY revenue growth in Q3 and 54% YOY net income growth. In fact, ANET’s net profit margin exceeded 35% for the quarter.
The stock trades at a 32 forward P/E ratio which means it depends on continued revenue and earnings growth to justify the valuation. ANET has been a consistent top performer, which reflects the company’s ability to generate strong financials each year. Shares almost doubled in 2023 and are up by 365% over the past five years.
Supermicro (SMCI)
Supermicro (NASDAQ:SMCI) offers advanced server and storage solutions that handle intense workloads of AI tools and applications. Also, the company’s products generate demand from 5G and cloud companies.
Additionally, the stock has outperformed the market and more than tripled in 2023. Shares are up by more than 1,700% over the past five years. Supermicro is a profitable enterprise that closed Q3 with $530 million in cash and cash equivalents. Further, revenue jumped by 14% YOY, while net income experienced a YOY decline. However, the company proceeded to raise its fiscal 2024 outlook from $10 billion to $11 billion in revenue.
Thus, Supermicro’s growth days seem ready to continue. Leadership anticipates $2.7 billion to $2.9 billion in sales during the second quarter of fiscal 2024. In comparison, the company generated $1.8 billion in revenue during the Q2 of fiscal 2023. Supermicro’s guidance implies 55.5% YOY revenue growth at the midpoint.
On this date of publication, Marc Guberti held long positions in ANET and SMCI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.