Nvidia stock isn’t the only way for UK investors to capitalise on the AI boom

Nvidia stock has surged due to the global interest in artificial intelligence. Here, Edward Sheldon highlights three other shares that could benefit.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

artificial intelligence investing algorithms

Image source: Getty Images.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK investors have been piling into Nvidia stock this year. This is due to the fact that the company – which designs high-performance computer chips – is at the heart of the artificial intelligence (AI) revolution.

I see Nvidia as a great AI stock. However, it’s not the only way to play the theme. With that in mind, here are three others for the AI boom.

AMD

First up, we have Advanced Micro Devices (NASDAQ: AMD) or ‘AMD’ for short. It’s another leading designer of high-performance computer chips.

AMD is very active in the AI space. But it doesn’t have the market position that Nvidia has.

Its market share could potentially rise in the future though.

Right now, AMD is ramping up production of its flagship MI300 artificial intelligence chips. These are are designed to compete against Nvidia’s H100 AI chips and could be launched by the end of the year.

If the company can get this product to the market in the near future, demand could be very high as right now Nvidia’s chips are in short supply.

AMD stock is a little cheaper than Nvidia from a valuation perspective. This is a plus.

However, it’s still quite expensive (the forward P/E ratio is about 39 versus 42 for Nvidia). If growth slows, the stock could take a hit.

Lam Research

Next, we have Lam Research (NASDAQ: LRCX). It’s a leading provider of semiconductor manufacturing equipment.

This company strikes me as a great ‘picks and shovels’ play on the artificial intelligence boom.

AI is going to require a lot of chips to be successful (it’s rumoured that ChatGPT-5 is going to require about 50,000 Nvidia H100 chips). So, demand for chip manufacturing equipment should be high in the years ahead.

Lam looks well placed to benefit here. It specialises in equipment that helps chip manufacturing plants (fabs) print layers of transistors in advanced chips. And it’s one of the biggest players in this space.

Lam shares currently trade on a P/E ratio of about 24. So, they are a bit less risky than Nvidia, to my mind. They can still be volatile though as the semiconductor industry is cyclical.

I’m confident in the long-term story, however.

It’s worth noting that Lam recently raised its quarterly guidance thanks to AI-related demand so it’s already benefiting from the technology.

Arista Networks

Finally, we have Arista Networks (NYSE: ANET).

It specialises in lightning-fast ethernet switches and routers for data centres. It also offers software that controls the hardware and keeps customers locked in.

I see this company – which serves the likes Microsoft, Alphabet, and Amazon – as a good play on AI due to the fact that its technology helps organisations move vast quantities of data over the Internet at incredible speeds.

With its products, tech companies can build high-performance AI networks in a simple and scalable manner.

This stock has done well this year thanks to AI, rising about 60%. After that kind of jump, and with the stock now trading on a P/E ratio of around 32, a pullback could be on the cards.

Taking a long-term view, however, I think it has huge potential. I’m keen to add it to my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ed Sheldon has positions in Alphabet, Amazon.com, Lam Research, Microsoft, and Nvidia. The Motley Fool UK has recommended Alphabet, Amazon.com, Arista Networks, Lam Research, Microsoft, and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Growth Shares

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Should I follow Warren Buffett and sell my favourite shares?

Billionaire US investor Warren Buffett has been selling tons of Apple shares and other stocks of businesses he thinks are…

Read more »

Illustration of flames over a black background
Investing Articles

After rocketing 232% in a year can this red-hot FTSE 250 stock keep going gangbusters?

Harvey Jones says this FTSE 250 stock's on fire after smashing the index over the last year. It's cheaper than…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

At a bargain-basement price now, is it time for me to buy this 8%-yielding FTSE 250 media stock?

Shares in this FTSE 250 broadcasting firm continued their recent decline after the latest results release, leaving them looking an…

Read more »

British Isles on nautical map
Investing Articles

Should I buy more BAE Systems shares at 1,350p?

BAE Systems shares have had a fantastic run since early 2022, yet still don't appear overvalued. Is it now time…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Down 38% in weeks! Time to snap up NIO stock?

NIO stock's more than doubled in value over the past five years but has been on a wild ride lately.…

Read more »

Investing Articles

Should I put money into index funds now the FTSE All-Share has paused?

The FTSE All-Share index has been treading water since May. Is it smart to put money into tracker funds now…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Growth Shares

1 FTSE 250 stock I’d love to snap up in the next stock market crash

Jon Smith reveals a FTSE 250 share on his watchlist that he thinks is a little overvalued right now but…

Read more »