AI Stocks to Consider in June
Source: fool.com
AI Stocks to Buy
Artificial intelligence (AI) is impacting the corporate world, enhancing productivity and innovation. IDC projects a $20 trillion impact on the global economy by 2030. Here are two AI stocks that could benefit.
CoreWeave
With the AI boom, billions are being invested in data centers. However, many existing data centers need updated equipment to handle AI workloads. This presents an opportunity for CoreWeave, a leading operator of specialized AI data centers. Following its initial public offering this year, CoreWeave's first earnings report showed high demand for its cloud computing services. Revenue jumped from $189 million in the first quarter of 2024 to $982 million in the first quarter of 2025. The company's revenue backlog also grew to $25.9 billion, a 63% increase year-over-year, boosted by an $11.9 billion deal with OpenAI. This backlog signals significant long-term commitments to CoreWeave's services.
CoreWeave generates revenue through contracts and on-demand services, with most revenue coming from multiyear contracts. Investors often favor companies with high revenue visibility, like CoreWeave.
One risk for CoreWeave is securing enough power to operate its data centers and meet growing demand. Data centers require substantial electricity, which could pose a challenge as AI demand increases. Currently, CoreWeave has 420 megawatts of power supporting 33 AI-optimized data centers in the U.S. and Europe and has contracts for up to 1.6 gigawatts more over several years.
With a market cap of $53 billion, CoreWeave's forward price-to-sales ratio is 11 based on its 2025 revenue outlook, which appears reasonable for a fast-growing infrastructure-as-a-service provider. Continued strong growth could drive the stock to new highs.
Advanced Micro Devices (AMD)
Nvidia is a leading AI chip supplier for data centers, but cannot dominate the entire market. There is rising demand for chips from Advanced Micro Devices (AMD), and its stock's valuation makes it an appealing option. AMD has seen varied results across its business segments. Its data center and client segments are growing, while its gaming and embedded segments are underperforming. In the first quarter, AMD's revenue decreased 3% from the previous quarter but increased 36% year-over-year, driven by data centers and demand for Ryzen processors.
High margins from data center chips contributed to a 55% year-over-year increase in adjusted earnings, demonstrating growth even with weakness in some segments. Data center performance makes the stock attractive. More than 30 computing workloads were launched using its fifth-generation EPYC Turin chip across cloud providers, including Alibaba, Amazon, Google, and Oracle. AMD's acquisition of ZT Systems will enable it to offer AI computing systems that combine chips, networking, and software, similar to Nvidia's full-stack solution.
With management expecting a recovery in its embedded chip business in the second half of the year, AMD could gain momentum by next year. The stock may be undervalued, trading at 28 times 2025 earnings estimates.