My 3 Favorite AI Stocks to Buy on the Continued Chip Sell-Off

While artificial intelligence (AI) infrastructure stocks have helped lead the market higher over the past few years, more recently, these stocks have come under pressure. There is some fear of an eventual slowdown in the data center build-out, but this does look more like a typical market breather after a nice run.

Three of my favorite semiconductor stocks to buy on this sell-off are Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Broadcom (NASDAQ: AVGO). All three still have huge growth opportunities in front of them, and spending on AI data centers should remain strong for many years.

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Nvidia

The pullback in Nvidia's stock has taken its valuation down to a forward price-to-earnings ratio (P/E) of 16 times analysts' estimates for its fiscal 2028 (which ends in January 2028). That makes it one of the best bargains in the chip space. Given the moat its CUDA software platform has established, the company is set to continue dominating the market for AI model training, as most foundational AI code was written on CUDA and optimized for its graphics processing units (GPUs).

And while the use of data center processing power is shifting toward more inference and agentic AI workloads, the company is also well positioned here. Nvidia has transformed itself from a simple GPU maker into a complete AI infrastructure player, offering end-to-end servers designed for specific AI tasks. Its acquisition of Groq gave it chips designed specifically for inference, which it has incorporated into its CUDA ecosystem. Meanwhile, its networking portfolio has become the fastest-growing part of its business.

With strong growth still ahead, Nvidia remains a top stock to own, and a good buy at its discounted valuation.

AMD

Advanced Micro Devices is currently riding two of the hottest trends in AI: inference and agentic AI. The company's chip offerings make it much better positioned to take a larger slice of the AI inference pie, and it already has large GPU deals in place with OpenAI and Meta Platforms.

Inference is much more about fast memory access than raw compute power, and this is where AMD has focused its efforts. Its chiplet design allows its GPUs to be packaged with more memory, while its recent acquisition of memory optimization platform MEXT will allow it to virtually expand memory capacity without sacrificing performance, helping customers reduce costs.

At the same time, the company is set to ride a powerful wave in agentic AI. While other types of AI workloads have largely needed GPUs to provide their processing power, agentic AI workflows require more participation from central processing units (CPUs).

AMD has long been a leader in data center CPUs, and as AI agents proliferate, the need for CPUs is expected to grow rapidly. In fact, the GPU-to-CPU ratio in new data centers is expected to shrink from 8 to 1 for training to 1 to 1 for agentic AI. AMD has projected that the data center CPU market will double in size to $120 billion by 2030. It is already developing CPUs specifically for agentic AI.

With huge revenue growth ahead of it, AMD is a top stock to buy after its sell-off.

Broadcom

Broadcom has been one of the biggest beneficiaries of the trend among hyperscalers to deploy custom AI accelerators to help save costs. It helped Alphabet develop its Tensor Processing Units (TPUs), and with the search giant set to spend up to $190 billion on AI infrastructure this year, Broadcom is set to see rapid growth. Adding to that, Alphabet has agreed to sell Anthropic $21 billion worth of TPUs.

The success of TPUs led other hyperscalers to turn to Broadcom for help in developing custom AI chips. It expects this to grow into a more than $100 billion business in its fiscal 2027, while Citigroup has projected that Broadcom's AI revenue could rise to $180 billion in its fiscal 2028. The company also has a fast-growing data center networking business, and after signing a $30 billion deal with Apple (NASDAQ: AAPL), its non-AI chip business also looks set for a turnaround.

The stock is trading at a forward P/E of just 20 times fiscal 2027 estimates. Given its potential explosive growth, that's too cheap, and makes it an attractive buy.

Citigroup is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.