News

Earlier this month, Nvidia's (NASDAQ: NVDA) CEO Jensen Huang delivered a groundbreaking keynote speech at Computex 2024, unveiling the company's ambitious plans to accelerate the pace of innovation in artificial intelligence (AI).

His landmark address heralded the dawn of digital humans, physical AI, and a host of other revolutionary advancements. These groundbreaking innovations are poised to unlock new frontiers for humanity, but they also come with significant risks that cannot be ignored – particularly by stock investors.

With this primer in mind, the following is a concise overview of the key players in AI, emerging trends, and one novel risk factor investors should bear in mind in the era of ultra-smart machines.

The key players: OpenAI, Microsoft, and Nvidia

OpenAI creates increasingly sophisticated models that can understand and generate human-like text, while Microsoft (NASDAQ: MSFT) invests billions to accelerate AI development.

For example, Microsoft, in collaboration with OpenAI, is reportedly planning to build a $100 billion AI-data center designed to power a supercomputer called 'Stargate'. Feasibility issues not withstanding, this herculean effort underscores the industry's intent to transform the world.

Nvidia, for its part, plays a crucial role in providing the computational power necessary to train deep learning models with next-generation chips like Blackwell, positioning the company at the epicenter of the AI revolution.

Nvidia also has plans to use its proprietary platforms to drive the creation of digital humans, capable of performing a wide array of repetitive, laborious, and boring tasks.

How to invest in this brave new world

For investors, this period presents an unprecedented opportunity. Generative AI is forecast to add trillions to the global economy in the coming years.

How should investors prepare for this trend? AI infrastructure stocks like Microsoft and Nvidia should continue to outperform the S&P 500 over the next five to 10 years due to the unstoppable AI superbuild.

Additionally, robotics companies like AeroVironment (NASDAQ: AVAV) and Teradyne (NASDAQ: TER) scan as compelling AI-adjacent plays, given the imminent emergence of physical AI in everyday life.

3D virtual reality players like Meta Platforms (NASDAQ: META) and Roblox (NYSE: RBLX) should also enjoy a period of hypergrowth in the near future, as these platforms become more realistic, engaging, and finely tuned to human behavior.

Embracing AI, while hedging against its unique risk profile

The AI revolution is not merely knocking at our door. It has already entered our lives, whether we welcome it or not.

As investors, we must adapt to this technological phase shift by strategically investing in high-quality companies at the forefront of AI innovation.

Microsoft and Nvidia emerge as top choices due to their deeply entrenched positions in AI architecture.

AeroVironment and Teradyne also deserve consideration as secondary AI plays, given their crucial roles in developing advanced physical AI systems.

Moreover, Meta Platforms and Roblox stand out as key players in the realm of AI-powered virtual reality. These companies are shaping the future of immersive experiences, blurring the lines between the digital and physical worlds.

We must also recognize the substantial risk of not owning at least some of these AI stocks – or at least an exchange-traded fund (ETF) geared toward this theme.

AI poses an existential threat to numerous legacy industries. Owning a handful of AI-centric stocks like AeroVironment, Microsoft, Meta Platforms, Nvidia, Roblox, and/or Teradyne can hedge a portfolio against this underappreciated risk factor.

Final thoughts

As the AI revolution gains momentum, investors face a crucial choice: either embrace the change and adapt their strategies accordingly or risk being left behind in a world reshaped by technology. After all, the next five to 10 years will likely see traditional portfolio construction strategies underperform due to the transformative nature of AI.

Buying and holding a basket of AI stocks is therefore becoming an urgent necessity. The companies discussed above form the very heart of the AI revolution in many ways, making their shares worth considering as automation, physical AI, and virtual reality become part of the fabric of everyday life.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $808,105!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 10, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment, Meta Platforms, Microsoft, Nvidia, and Roblox. The Motley Fool recommends Teradyne and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.