2 Best AI stocks to buy on the decline, according to Wall Street

The artificial intelligence (AI) market is expected to grow substantially over the next few years as companies take advantage of automation and other productivity improvements provided by AI technology. This will create profitable opportunities for investors who invest in the right stocks.

With stock market volatility returning over the past month, now could be a great time to buy top AI stocks at less expensive valuations. Here are two to buy right now.

1. Nvidia

Nvidia (NVDA 1.92%) the stock has generated wealth-building returns over the past decade. Its graphics processing units (GPUs) are needed to train AI models, but Nvidia has led the GPU market for many years. The AI ​​and data center market has significantly expanded the addressable market for its hardware, and the company’s latest financial update still shows great potential for the stock.

Nvidia reported a 122% year-over-year revenue increase in its fiscal second quarter. As great as it looks, it hasn’t stopped the stock from falling 27% from recent highs. Nvidia faces several headwinds that create uncertainty for its near-term momentum, including a later-than-expected launch of its next-generation AI chips and a potential pause in spending on cloud infrastructure, a key growth driver of Nvidia data center. income.

Bank of America analyst Vivek Arya sees a buying opportunity, even if Nvidia faces more near-term uncertainty. In a recent research note, the analyst says the stock’s valuation is more attractive after the recent decline. Indeed, looking at next year’s earnings estimates, the stock is now trading at a forward price-to-earnings (P/E) multiple of 26, which is quite attractive compared to next year’s earnings growth estimate of 41%.

The analyst also cited supply chain checks that suggest Nvidia is preparing for the near-term launch of its new Blackwell computing platform, which management expects to start generating “billions” in revenue in the fiscal fourth quarter. The Wall Street consensus calls for Nvidia’s revenue to grow 41% next year to $177 billion.

Blackwell combines multiple chips, including GPUs, central processing units (CPUs), and network chips to create a powerful computing system for AI workloads. It could unlock tremendous growth for Nvidia next year, as more sophisticated AI models will require more processing power to train.

Analysts expect Nvidia to grow earnings per share (EPS) at an annualized rate of 36% over the next few years. Assuming the stock continues to trade at roughly the same valuation on a price-to-performance basis, demand for Blackwell could ultimately push the stock sharply higher over the next few years.

2. Microsoft

Microsoft (MSFT 0.94%) is another top player in AI that has had exceptional returns over the past year. The software giant is gaining share in the cloud services market as companies migrate data from on-premises servers to the cloud. This will allow enterprises to take advantage of various AI tools and models that customers can use in the Microsoft Azure enterprise-cloud service.

Microsoft Azure revenue rose 29% year-over-year last quarter. Microsoft benefited from its partnership with AI researcher OpenAI, the company behind ChatGPT. Azure OpenAI service has been used by 65% ​​of Fortune 500 companies.

Microsoft’s strong quarter still hasn’t stopped the stock from falling 14% from its most recent record high. However, most IT spending is still on-premise, so Microsoft Azure should see strong growth for several more years and support new highs for the stock.

Wells Fargo analyst Michael Turrin sees increased server supply as a catalyst for accelerating revenue growth in the second half of Microsoft’s 2026 fiscal year that ends in June. This coincides with Nvidia’s launch of Blackwell, which could drive more demand for AI servers and in turn create demand for cloud service providers like Microsoft Azure.

In the long term, the AI ​​server market is expected to grow roughly tenfold to $430 billion by 2033, according to Statista. More servers will need advanced AI chips and software to operate, which is a good indicator of long-term demand for Nvidia and Microsoft products.

Turrin maintained an Overweight (Buy) rating on the stock. Analysts’ consensus estimate expects Microsoft’s earnings to grow 13% on an annual basis over the next few years. Nvidia’s faster growth rate could provide more upside potential, but Microsoft’s recurring revenue from cloud and other services should lead to a more consistent revenue performance. This quality makes Microsoft a great stock to anchor anyone’s retirement account.