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AI stocks took a beating last Thursday. Market leader Nvidia (NASDAQ:NVDA) saw its stock price fall by over 3.5% in one day. Admittedly, this is not the kind of movement NVDA shareholders are used to, and many new Nvidia shareholders may find the move unsettling. However, after the stock's run-up over the past year, this is normal and healthy.
Just like last time, those brave enough to brave the catastrophe may have a ticket to the next heights. Of course, valuations are stretched, and the AI boom will take a lull from time to time, but this kind of volatility is to be expected when betting on the biggest and best fast-growing companies riding the AI wave.
As the AI-focused correction continues into the last week of June, investors looking to buy at the low end may be better off investing in companies with long-term potential in the AI space.
Nvidia (NVDA)
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Perhaps no AI stock is more worth watching on the downside than the great Nvidia. Even if a shaky end to the trading week is the start of a correction or even a more serious sell-off that rouses the bears out of their caves, this won't be the first sharp drop in NVDA stock, and it won't be the last.
It's too early to call Nvidia's “peak,” as the AI boom is likely to continue for several years. Of course, stock prices don't always follow fundamentals. But given that Nvidia is so far ahead of its competitors in AI chips (Blackwell later this year, Rubin in 2026), NVDA stock remains the No. 1 AI company.
Additionally, entering the semiconductor industry requires significant upfront costs. With huge economies of scale (AI talent, data advantages, and numerous customer partnerships across many areas of technology), Nvidia seems likely to hold its own and even take the lead in the AI race, even as its competitors go all-in on AI.
AMD
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It was odd to see Advanced Micro Devices (NASDAQ:AMD) shares rise 4.6% last Thursday as semiconductors led the decline. Without a doubt, AMD stock is the best alternative to NVDA. While the No. 2 in the AI chip race is unlikely to overtake Nvidia anytime soon, there's no shame in betting on a company that's sure to win the silver medal, especially if you have the chance to buy shares at a significantly cheaper price.
A few days ago, Piper Sandler analyst Harsh Kumar said he was “very impressed” with AMD's strategy and position in the AI chip race. In particular, Kumar has high hopes for AMD's PC and server businesses heading into the second half of 2024.
We think Kumar is right to be bullish on the stock. Nvidia may be leaving most of its AI rivals behind, but AMD seems to be keeping up a good pace. While AMD is chasing Nvidia, it is also positioned to get further ahead of other AI chip companies in the race.
Corning (GLW)
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Corning (NYSE:GLW) is best known for its Gorilla Glass products, which are used on the fronts of smartphones. What many may not know is that the innovative and durable glass isn't Corning's big profit margin. And it's not the reason to own the company's stock. Rather, its fiber optics business will benefit as more AI data centers pop up around the world.
Corning Optical's Mike O'Day believes AI will “change the data center market landscape,” even noting that AI-focused data centers will need “five times more optical connectivity” — a big milestone that investors haven't fully grasped even after the surge so far this year.
GLW shares trade at a forward price-to-earnings (P/E) ratio of 20.9, so the AI tailwind may not yet be fully priced in. With AI data centers set to boom along with chips, this could be a long-term opportunity for investors.
As of the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com's Publishing Guidelines.
Joey Frenette is an experienced investment writer specializing in technology and consumer stocks. A contributor to Motley Fool Canada, TipRanks, and Barchart, Joey excels at finding mispriced stocks with long-term growth potential in rapidly changing markets.
