2 Outperforming AI Stocks That are Still Worth Buying, According to Goldman Sachs

The AI room really has some strong legs as we march through the peak of the summer season. And while investors should always brace for turbulence, even when the resilient market proceeds smoothly higher even in the face of perceived threats that would have caused a sell-off earlier in the year, I do think it’s not too late to hunt down some of the AI gainers as they continue to seize the opportunity at hand.

In this piece, we’ll look at two fast gainers highlighted by Goldman Sachs (NYSE:GS) analysts as still worthy buys with year-ahead price targets that entail more room to run. Indeed, not all winners can keep winning as the second half unfolds. But the following names, I think, are not names to bet against, especially as they continue executing with perfection.

Nvidia

No big surprise here. Despite adding another 4% to its market cap on Tuesday’s session, Nvidia (NASDAQ:NVDA) stock remains the unstoppable AI hero that can’t be held down (or even flat) for too long. The stock’s recent breakout past $170 per share has been impressive. Indeed, the tremendously positive reaction was fully warranted, given the massively positive headline that added fuel to the NVDA stock surge. Indeed, Washington’s green light for the firm to start selling select AI chips in China again is a big deal.

And it may not yet be fully reflected in the stock quite yet, given how much of a needle-mover the Chinese market is. Even after the latest pop, Goldman Sachs analyst James Schneider sees Nvidia shares climbing all the way to $185 per share. Perhaps it won’t take all too long before Jensen Huang’s GPU empire passes the $5 trillion milestone! At this pace, it feels like the big move isn’t all too far off.

Mr. Schneider likes the “expanding customer base,” but perhaps most importantly, he’s a fan of “the pace of innovation.” Indeed, Nvidia isn’t waiting for anyone. And under the leadership of Jensen Huang, there’s more market share to gain, even as the firm powers higher while its Magnificent Seven peers stay (mostly) grounded on the tarmac going into August. For now, Nvidia will be ready to sell the H20 GPU to Chinese customers.

But the big question moving forward is whether Nvidia will be allowed to sell its more advanced chips. Perhaps access to Nvidia’s best chips is the most valuable bargaining chip that the U.S. has in trade negotiations with China.

Broadcom

Broadcom (NASDAQ:AVGO) is another stellar performer that’s doubled up many times over in recent years. With 208% gains posted in the past two years, the high-flying AI chip firm is nearly as hot as Nvidia, especially as we learn more about the custom silicon plans of its big-tech peers.

Goldman’s James Schneider has a $315 per share target on the $280 stock. He thinks custom chips and enterprise networking silicon are drivers that could help Broadcom continue to run. He’s absolutely right to stick with the name despite its recent melt-up moment.

As it captures a greater share of the AI ASIC (application-specific integrated circuit) market opportunity, perhaps Mr. Schneider will need to raise his target again, perhaps closer to the $400.00 per share target held by HSBC’s Frank Lee, who’s been among the most bullish on Wall Street veterans covering the name.

At 33.5 times forward price-to-earnings (P/E), perhaps AVGO shares are a less obvious AI play to buy on strength. Personally, I think its latest breakout has legs as the firm looks to show the world the organic growth that it’s capable of as the next stages of the AI boom unfold. Personally, I think $400 per share isn’t outside the realm of possibility, especially if the AI bull market (and the rest of the tech sector) has another few quarters to go before the next big correction.