Adria Cimino, The Motley Fool
5 min read
In This Article:
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Artificial intelligence is an area of enormous potential for companies and investors.
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After a few difficult months, AI stocks could resume their 2024 momentum and soar in the second half.
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Three in particular could lead the way.
Artificial intelligence (AI) stocks skyrocketed in 2024 amid excitement about this technology that could revolutionize businesses, saving time and money and leading to important discoveries. These players faced a few difficult months recently due to concerns about a potential economic slowdown. However, some of the uncertainty has passed, suggesting better days may be ahead for AI stocks.
Against this backdrop, Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN) are set to soar in the second half. Here's why.
President Donald Trump's plan to impose tariffs on imports weighed on technology stocks, including AI chip giant Nvidia, several weeks ago. This pushed Nvidia down nearly 30% from the start of the year through early April. Though the president initially exempted electronics products, this exemption was temporary, suggesting chips and other items would face tariffs at some point in the near future.
But Nvidia has since rebounded, thanks to optimism that tariffs won't be as steep as originally expected and as the company showed the strength of its earnings through the first quarter of the year. Nvidia's revenue surged 69% to $44 billion, demand remained strong, and customer comments indicate that their spending plans for the year remain intact. This bodes well for ongoing growth for Nvidia.
On top of this, the chip giant is making investments in U.S. manufacturing to limit any eventual tariff impact and sticks to its plan to update chips on an annual basis -- a move that should keep it ahead of rivals.
Today, Nvidia trades for only 33 times forward earnings estimates, down from about 50 times just a few months ago, and this level offers the stock plenty of room to run in the second half.
Among all the top tech stocks, Apple may be the one that has suffered the most amid the recent tariff turbulence. Trump, displeased that Apple has generally produced most iPhones abroad, even threatened to impose a 25% tariff on Apple's imported iPhones. Meanwhile, Apple has made efforts to diversify its manufacturing, with a plan to move much of it from China to India.
Uncertainty remains as the president wants Apple to bring iPhone production to the U.S., but doing this could result in a drastically higher price for the smartphone. All of this has hurt Apple stock, which is down about 20% since the start of the year.
