One trend has dominated the market for over two years now: artificial intelligence (AI). Companies have collectively added trillions of dollars to their market caps thanks to the massive spending on AI and the investor excitement around its potential. Despite the massive run the market is currently on, there could be a lot more AI spending yet to come.
Research firm IDC expects businesses to spend $307 billion on AI solutions this year, and that number is projected to more than double to $632 billion by 2028. Of course, not every company will be a winner from all that spending on AI. And even if a company has great prospects, its stock must still present attractive value, which is increasingly difficult among the run-up in stocks.
But investors with just $200 can still find great opportunities among AI stocks in today's market. Here are three no-brainer buys right now.
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the parent company of Google, and it plans to spend a massive amount on building AI infrastructure in 2025. Management expects to spend $75 billion on capital expenditures this year, primarily for servers.
That speaks to the opportunity management sees in AI, and it's already showing strong signs of capitalizing on that opportunity. The company started incorporating AI-generated responses to search queries in 2023. By the end of 2024, those AI Overviews were available in 100 countries and drive higher satisfaction and engagement than traditional search results. Importantly, Google isn't cannibalizing its advertising business. "We actually see monetization at approximately the same rate," SVP of Google Philipp Schindler said on Alphabet's fourth-quarter earnings call.
AI is also behind advances in products like Google Lens and the Circle to Search feature on Android devices. Generative AI has the potential to improve Google's advertising business, making it easier for marketers to develop new creatives and test ad campaigns.
Google Cloud has been a big beneficiary of the increased AI spending from other businesses. Its revenue grew 30% last year while its operating margin expanded to 14%. It could see significant growth in the years to come as management noted it remains capacity-constrained and its competitors sport higher operating margins.
While Alphabet is spending heavily on AI, it's seeing strong returns on its investment. Earnings per share grew 39% last year and analysts expect 12% further growth this year. Still, shares trade for just $170 as of this writing, less than 19 times analysts' 2025 consensus earnings expectation. That's an incredible bargain for investors and well-deserving of your $200.
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Producing high-end AI chips requires a lot of specialized equipment, and one of the largest equipment manufacturers in the world is Applied Materials (NASDAQ: AMAT). Unlike most other semiconductor equipment manufacturers, Applied has a broad portfolio of equipment that can serve a range of customers.
As chip production expands and becomes increasingly complex, the demand for Applied's products will continue to grow. And there are a couple of factors that ensure Applied will win the majority of new contracts with foundries.
First, it benefits from a virtuous cycle, whereby foundries spend more money with Applied than any other equipment maker, giving the company more to invest in R&D. It spent $3.2 billion on research and development to create more advanced equipment in 2024 capable of high-end chip production and lowering error rates in that production. That budget absolutely dwarfs its competitors, ensuring it can continue to offer better equipment than anyone else in the market for years to come.
Second, foundries can't afford the downtime required to switch equipment providers. On top of that, there's risk that other equipment won't be able to keep up with advances in technology, which is an unnecessary risk for any manager to take. In other words, the switching costs to move away from Applied's equipment are very high.
Applied also operates a high-margin service business to ensure its equipment operates as expected. That business is expected to grow quickly as the complexity of chip manufacturing increases and foundries ramp up production of their next-generation chips.
With the stock trading for just $158 as of this writing, it looks like a great bargain for anyone looking to get started investing in AI stocks with just $200. That stock price translates into a forward PE of about 17 and an enterprise-value-to-sales multiple of less than 5. Whichever way you look at it, it's a great value for a company with the competitive position of Applied Materials.
Advanced Micro Devices (NASDAQ: AMD) is often seen as playing second fiddle to Nvidia (NASDAQ: NVDA) when it comes to making all-important GPUs for AI servers. Indeed, AMD disappointed investors when it forecasted a 7% sequential decline in revenue for 2025's Q1, and affirmed its data center business would experience a similar decline. By comparison, Nvidia forecasts a 9% sequential increase in revenue in its comparable quarter.
Still, investors may be discounting the value of AMD's GPU business alongside its progress in taking market share in the x86 CPU market for both servers and consumer PCs. While Nvidia has a significant advantage over AMD with its CUDA software and advanced hardware, AMD provides an important resource for hyperscalers as a secondary source of compute power.
Management expects the total addressable market for AI accelerator chips will be more than $500 billion in 2028. Even a small share of that market would be huge for AMD, which generated $12.6 billion in revenue from its data center segment last year.
Importantly, AMD has a lot of upside to its margins right now. It increased its gross margin from 45% to 53% in 2024. And while it might not have the pricing power of Nvidia, it should benefit from scaling its operations. That should lead to meaningful operating margin expansion over the next few years toward management's long-term target in the mid-30s from 24% last year.
At a price of about $100 per share, investors with $200 could pick up two shares of AMD, and it's certainly worth the price. Shares currently trade for just 21 times analysts' estimate for this year's earnings. On top of that analysts expect earnings to grow another 34% in 2026. With the potential growth ahead for the company, it deserves a higher multiple, and it could end up being a great investment for anyone just getting started with AI stocks.
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*Stock Advisor returns as of February 24, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet and Applied Materials. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Applied Materials, and Nvidia. The Motley Fool has a disclosure policy.
3 No-Brainer Artificial Intelligence (AI) Stocks to Buy With $200 Right Now was originally published by The Motley Fool
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