I’m eager to buy stocks that have been driving the Artificial intelligence (AI) boom over the past few years. Recently, they’ve performed extremely well.
We’ve seen names such as Nvidia enter the spotlight. There are also stalwart players such as Meta and Tesla, which make up two of the ‘Magnificent Seven’, to consider.
But I want to purchase companies today that may not be obvious AI candidates but that I think could be long-term winners for my portfolio as the industry continues to grow. These two look like solid candidates.
Growth focused trust
The first stock is Scottish Mortgage Investment Trust (LSE: SMT). The Baillie Gifford fund may not be under the radar but some of its holdings are. It was popular with investors during the pandemic. In 2020, it went against the trend and rose a magnificent 105%. Yet since then, it has fallen off.
It’s home to 99 companies, many of which are some of the most exciting out there. It holds names such as Nvidia, Meta, and Tesla. And through owning Scottish Mortgage I also get exposure to a host of other companies operating in the AI field. This includes companies such as Shopify and ASML, as well as unlisted shares, the most notable being Elon Musk’s SpaceX. I like this diversification for my portfolio.
While tech stocks have surged in the last few months, a high interest rate environment is a threat to Scottish Mortgage. That’s because growth stocks tend to be unpopular with investors as they revert to safer alternatives during uncertain times.
However, right now the exciting trust is currently trading at a 13.2% discount to its net asset value. That essentially means I can buy the companies it holds cheaper than their market rate.
From its all-time high, it’s down 47.1%. That said, a 10.9% rise in the last 12 months makes me hopeful that it’s finding its form again. I’m keen to snap up some shares.
Data stalwart
I’m also eyeing London Stock Exchange Group (LSE: LSEG). The stock is down 2% in 2024 as I write. I see that as an opportunity for me to capitalise on.
The business is a global financial data company. What’s even more exciting, in December 2022 it announced a 10-year strategic partnership with Microsoft that will see it build generative AI-based solutions for its customers.
The first products from the partnership will be used this year. It’s hoped the venture will “transform how financial markets participants communicate, research, analyse data and trade”.
As part of the deal, Microsoft also took a 4% stake in the firm, which is an encouraging sign.
There’s the argument that the stock looks expensive. It’s trading at 27 times earnings. For comparison, the FTSE 100 average is around 11. It also had around £6bn of debt on its balance sheet as of 31 December 2023, a 7.7% increase from 2022.
However, with its growth potential, I’m comfortable buying the stock today at its current price. Over the long run, I think it could be a strong performer for my portfolio. If I had the cash, I’d snap up both stocks today.
