The AI stock boom is in full swing. Nvidia (NASDAQ:NVDA) has been the leader in this space, and while the current rally is not sustainable, the trend in AI is absolutely sustainable. It’s got investors looking for the top AI stocks to buy on the dip.
Investors love to use the term “bubble,” and when they do, they’re not always wrong. The move in EV stocks was unsustainable for many reasons. So was the move in many cryptocurrencies.
That’s not to say Tesla (NASDAQ:TSLA) will spiral into oblivion, and Bitcoin (BTC-USD) will be obsolete in a few years. It’s to say that many of these short-term momentum bursts are not sustainable because most entities were not good businesses.
With artificial intelligence, though, these businesses are actually improving efficiency. They are creating opportunities where there were no opportunities before. The technology enhances prior results and creates results in previously impossible areas. Put another way, AI is not a bubble (although some of the price action may be).
Let’s look at the top AI stocks to buy on a dip.
Top AI Stocks to Buy: Nvidia (NVDA)
I recently looked at a few “AI sleeper stocks” out there now. Perhaps they’ll never get the AI boost many of their peers are getting now. However, they have mostly flown under the radar. For Nvidia, that couldn’t be further from our current situation.
Shares have exploded to all-time highs, and the company’s market capitalization has eclipsed the $1 trillion mark. Investors have finally realized that for AI to exist, a company like Nvidia will have to power it.
The thing is, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) may dominate AI-based search. Microsoft (NASDAQ:MSFT) may dominate AI-based chat and/or enterprise AI. Adobe Systems (NASDAQ:ADBE) will likely dominate AI-based photos, Photoshop, marketing, etc.
That’s great, and those companies will do really well. But for those firms to do well with AI, Nvidia is what will be powering them.
That said, shares have gone into silly-rally mode. Nvidia stock is up 175% so far this year and, at the recent high, was up almost 300% from the 52-week low in October. This name desperately needs to pull back, but I suspect that there will be dip buyers until the rally becomes exhausted.
AI Stock Boom: Microsoft (MSFT)
I mentioned Microsoft above, but it’s fallen out of the AI discussion lately. That’s as the conversation has completely shifted to Nvidia and more of the speculative names in the space. Even stocks that aren’t fully in on the AI space yet are starting to get bid higher.
However, Microsoft was one of the first AI stocks to really take off to the upside. Since then, it’s been a slow-and-steady type of upside rally.
The firm’s better-than-expected earnings results on April 25 helped propel the move higher. The results led to a one-day gain of more than 7% and a three-day rally of 11.5%.
Microsoft’s multi-billion investment in ChatGPT’s parent company OpenAI has led to a steady stock price. In fact, the company has gained many times that investment total (reportedly $13 billion) over the last few months, with Microsoft’s market cap growing by more than $600 billion since March 1.
Investing in Booming AI Stocks: Adobe Systems (ADBE)
Apparently, the secret’s out regarding Adobe Systems and AI. I actually included this name on my AI sleeper stocks list, but the cat appears to be out of the bag. Shares have surged more than 10% in back-to-back weeks.
That’s as investors realize that AI will be an asset and a tool for Adobe’s customers, not something that replaces Adobe. That said, Adobe certainly hasn’t rallied like many other tech names, and as a result, that should allow it to have more room to the upside.
I would consider all of the names on this list to be top AI stocks to buy when we get a pullback.
It’s possible that the AI stock rally will fade, and these names will see a large correction. However, artificial intelligence is not a short-term hype piece. It’s a sustainable technology that will impact almost every industry. When the dust settles, there will be winners.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.