What You Will Learn

• AI investing leverages algorithms and machine learning for enhanced data analysis and market prediction.
• Real-time adaptability of AI-driven platforms allows for dynamic portfolio adjustments based on market trends.
• Big data and predictive analytics are central to AI investing, facilitating insight into historical trends and future market behavior.
• Evaluating the features of AI stock picking tools can significantly influence investment strategies and outcomes.
• Critical analysis of AI-driven insights, including accuracy and real-time updates, ensures informed investment choices.

We Want to Hear From You!

As you explore AI investing and its various tools, we’d love to know your thoughts! What aspect of AI stock picking excites you the most? Is it the enhanced data analysis capabilities, the potential for real-time insights, or the automated trading processes?

Submit

Recap of Key Points

Here is a quick recap of the important points discussed in the article:

• AI investing enhances decision-making by leveraging algorithms and machine learning for data analysis.
• Key advantages include improved risk management, automated trading, and real-time market insights.
• AI-driven platforms offer features like dynamic portfolio rebalancing and sentiment analysis, allowing for adaptive investment strategies.
• Access to big data and predictive analytics is crucial for making informed investment choices in AI investing.
• When selecting AI stock picking tools, consider user interface, data analytics, custom alerts, and integration with brokerage accounts.
• Evaluate AI-driven insights by assessing prediction accuracy, real-time updates, risk assessment features, and user testimonials.

Broadcom (AVGO -2.69%) has been one of the biggest winners of the artificial intelligence (AI) boom, with its stock already up nearly 50% this year and hitting new all-time highs. A move like that often raises the question of whether it’s too late to buy the stock.

In Broadcom’s case, the answer is no. The company has a much larger AI opportunity in front of it, and the market is only starting to recognize how big that could be.

A custom AI chip powerhouse

Broadcom’s edge comes from its custom AI chip business, where it works with hyperscalers (owners of massive data centers) to design chips built for specific workloads. This is very different from Nvidia‘s off-the-shelf graphics processing unit (GPU) business, although in many cases, these custom chips are taking the job of a GPU.

Broadcom helps its customers develop what are called application-specific integrated circuits, or ASICs. These chips can take years to design and are created for customer-specific purposes. As such, they tend to deliver better performance and have lower power consumption for the particular tasks for which they’ve been designed compared to the more flexible GPUs.

Broadcom first proved itself when it helped Alphabet design its Tensor Processing Units. Those chips are now a critical piece of Alphabet’s cloud computing infrastructure and have given it a performance edge over rivals. Broadcom has since landed multiple new customers, including Meta Platforms and ByteDance. Management has said these three customers alone represent a $60 billion to $90 billion market opportunity in fiscal 2027 (ending in October 2027).

That would be a huge win by itself, but Broadcom recently revealed a fourth customer, which analysts widely believe is OpenAI, with an order topping $10 billion for next year (fiscal 2026). The timing matters here, as Broadcom had been talking about fiscal 2027 as the year its custom chip business really takes off. If OpenAI is already moving to production much earlier than expected, it means that growth is going to accelerate before then.

OpenAI and Apple change the picture

Adding OpenAI into the mix is a game-changer. The company has become the face of generative AI, with its models powering ChatGPT and its close ties to Microsoft helping power its AI offerings. With AI workloads exploding, OpenAI is looking to reduce its dependence on Nvidia and control costs. Broadcom is stepping right into this need, and with the inference market expected to eventually far surpass training, the demand for chips that can lower inference costs is a big one.

Apple, meanwhile, is an even newer customer, earlier in its development timeline. Apple has been trailing in AI, which is something it surely wants to remedy, and one way to do this is with its own custom chips. Once that happens, Broadcom will have another massive revenue stream layered in on top of Alphabet, Meta, ByteDance, and now OpenAI.

This is why the stock’s rally isn’t the end of the story. Broadcom is in a position to be the go-to designer for the biggest names in tech wanting to create their own AI chips. Companies are looking for an alternative to Nvidia and for ways to reduce inference costs, and Broadcom is starting to fill that need.

Image source: Getty Images.

Networking and software add support

That said, Broadcom isn’t just a custom chip play. Its networking business is also critical to AI infrastructure, supplying components like Ethernet switches and optical interconnects that move data inside the largest AI clusters. And when the company wins custom AI chip deals, that will feed into this business as well.

On top of that, Broadcom now has a meaningful software business thanks to its acquisition of VMware. It has been streamlining VMware and shifting it to a subscription model, while also positioning it to manage AI workloads across hybrid and multi-cloud environments. That makes Broadcom an increasingly important player in enterprise AI as well.

Why the stock still looks attractive

Broadcom’s stock has already had a big run, and it’s not cheap on a forward price-to-earnings (P/E) basis, with a 38 multiple. However, the opportunity in front of it is huge, and it just got bigger with OpenAI.

The pace at which OpenAI’s custom chips moved from concept to production suggests that Broadcom may be able to speed the process along more quickly than expected. When a company the size of Apple is next in line, that’s absolutely huge. Networking and software provide additional growth levers, but the real story is Broadcom’s position as the custom AI chip partner to the biggest players in tech.

That’s why even after hitting new highs, Broadcom stock still looks like a buy.

The Invesco QQQ Trust (QQQ -1.91%) is the fifth-most popular exchange-traded fund (ETF) worldwide as measured by assets under management. Several prominent billionaires added to their positions in the first quarter, as detailed below:

• Ken Griffin of Citadel Advisors added 2.2 million shares. The Invesco QQQ Trust now ranks as the third-largest position in the hedge fund, excluding options.
• Israel Englander of Millennium Management added 474,300 shares. The ETF now ranks among the 25 largest positions in the hedge fund, excluding options.
• Steven Cohen of Point72 Asset Management added 7,950 shares. The ETF remains a relatively small position in the hedge fund.

Citadel, Millennium, and Point72 are three of the most profitable hedge funds in history as measured by net gains. That makes all three money managers good sources of inspiration, and individual investors should consider following their lead with this ETF. The Invesco QQQ Trust could turn $500 per month into $432,300 in 20 years.

Image source: Getty Images.

The Invesco QQQ Trust is heavily invested in technology companies likely to benefit from artificial intelligence

The Invesco QQQ Trust measures the performance of the Nasdaq-100, an index that tracks the 100 largest nonfinancial companies listed on the Nasdaq Stock Exchange. The ETF has more than 60% of its assets invested in technology stocks, many of which are likely to benefit as the artificial intelligence (AI) revolution continues to unfold.

The 10 largest holdings in the Invesco QQQ Trust are listed by weight below:

1. Nvidia: 9.8%
2. Microsoft: 8.7%
3. Apple: 7.2%
4. Amazon: 5.6%
5. Broadcom: 5.3%
6. Alphabet: 5%
7. Meta Platforms: 3.5%
8. Netflix: 2.8%
9. Tesla 2.6%
10. Costco Wholesale: 2.3%

AI spending across hardware, software, and services is forecast to grow at 35.9% annually through 2030, according to Grand View Research. Several companies listed above should benefit.

Amazon, Microsoft, and Alphabet are the three largest public cloud providers, meaning demand for AI infrastructure should be a tailwind. And Nvidia is the undisputed leader in data center GPUs, the most popular type of AI accelerator.

Apple has introduced generative AI capabilities for iPhones. Meta Platforms is leaning on AI to increase user engagement across its social media platforms and improve outcomes for advertisers.

Netflix recently started using generative AI to create content for movies and shows. Broadcom is the market leader in AI networking chips and custom AI accelerators, and Tesla recently launched an autonomous ride-hailing service.

History says the Invesco QQQ Trust can turn $500 invested monthly into $432,300 in 20 years

Excluding dividends, the Invesco QQQ Trust advanced 1,340% during the last two decades, which is equivalent to 14% annually. Including dividends, the index fund achieved a total return of 1,560%, compounding at 15% annually. I will assume a more modest return of 12% annually to introduce a margin of safety.

At that pace, $500 invested monthly in the fund would be worth $105,200 in one decade and $432,300 in two decades. Some investors may prefer to save more or less each month, so the chart below shows how different contribution amounts would grow over time, assuming annual returns of 12%.

Returns were determined using the investor.gov compound interest calculator.

Investors need two more pieces of information. First, the Invesco QQQ Trust has been very volatile in the past due to its heavy exposure to technology stocks. The index fund fell more than 12% from its record high seven times in the last decade. Similar volatility is likely in the future.

Second, the ETF has an expense ratio of 0.2%, meaning shareholders will pay $20 per year on every $10,000 invested. Comparatively, the average expense ratio on U.S. index funds and mutual funds was 0.34% in 2024.

BigBear.ai (BBAI -6.98%) and Innodata (INOD -2.94%) represent two different ways to invest in the booming artificial intelligence (AI) market. BigBear.ai develops AI modules for edge networks, while Innodata helps large companies prepare their data for AI applications.

Over the past 12 months, BigBear.ai’s stock surged more than 390% as it impressed investors with the stabilization of its business and the rollout of its biometric security services. Innodata’s stock rose about 140% as the market’s demand for its AI-oriented services soared. Should you still buy either of these high-flying AI stocks today?

Image source: Getty Images.

The differences between BigBear.ai and Innodata

BigBear.ai’s three main AI modules — Observe, Orient, and Dominate — ingest data, identify trends, and predict future outcomes, respectively. It installs its modules on edge networks, which receive and process that data before it reaches its clients’ origin servers. It also shares that data with bigger AI-driven companies, such as Palantir.

Before BigBear.ai went public by merging with a special purpose acquisition company (SPAC) in late 2021, it claimed it could triple its annual revenue from $182 million in 2021 to $550 million in 2024. However, its revenue grew from $146 million in 2021 to only $158 million in 2024, as it grappled with tough competition, macro headwinds, and the bankruptcy of its top customer, Virgin Orbit. To boost its revenue and expand its ecosystem, it acquired the AI vision firm Pangiam last April.

Innodata went public back in 1993, but it didn’t attract much attention because it was a small analytics software provider that increased its revenue at a compound annual growth rate (CAGR) of 6% from 1994 to 2018. But in 2018, it launched a suite of task-specific microservices that could efficiently prepare large amounts of data for AI applications.

Five of the “Magnificent Seven” companies subsequently hired Innodata to prepare their AI-oriented data, and its annual revenue surged at a CAGR of 20% from 2018 to 2024. Its business boomed because those large tech companies often spend 80% of their time preparing the data for a new AI project and just 20% of that time training the actual algorithm. To speed up that inefficient process, those tech giants outsourced the preparation of that data to Innodata.

Which company could grow faster over the next three years?

Over the next three years, BigBear.ai’s growth should be driven by its swelling backlog of government contracts — which include new digital ID and biometrics services for the Department of Homeland Security (DHS) at airports and other ports of entry, a modernization project for the U.S. military’s Orion Decision Support Platform (DSP), and new supply chain initiatives. It could also attract more commercial clients as the macro environment warms up again.

During the same period, Innodata’s growth should be fueled by the rapid expansion of the generative AI market, which should drive its big tech customers to ramp up their spending on its data preparation services. It will likely attract even more large customers.

Data source: Marketscreener.

BigBear.ai’s revenue growth is expected to accelerate in 2025 and 2026, but analysts have not yet set any firm forecasts for 2027. Innodata’s revenue growth is expected to decelerate in 2026 and 2027 as it saturates its core customer base of Magnificent Seven customers, and its potential expansion into other markets hasn’t been factored into those estimates yet.

BigBear.ai is not yet profitable, but analysts expect it to narrow its net losses through 2026. Innodata turned profitable in 2024, and analysts expect its net income to grow at a CAGR of 16% through 2027 as its pricing power in its niche market improves and economies of scale kick in.

Which stock is a better value right now?

With a market cap of $2.1 billion, BigBear.ai trades at 12 times this year’s sales. Innodata, which is valued at $1.6 billion, trades at less than 7 times this year’s sales.

BigBear.ai looks a bit pricey if its revenue growth doesn’t accelerate in 2027 and beyond. Its growth in the government sector is encouraging, but those contracts can be less predictable than its commercial contracts. It’s also still growing at a slower rate than higher-growth AI leaders such as Palantir.

Meanwhile, Innodata appears to be a better value because analysts’ longer-term estimates for 2027 may be too conservative. With all that cash coming in from its Magnificent Seven customers, it could still have plenty of ways to expand both organically and inorganically over the next two years. So, while BigBear.ai and Innodata might both benefit from the secular expansion of the AI market, Innodata’s stronger growth, higher profits, and lower valuation make it the better buy.