Warren Buffett, a well-known value investor and stock market guru, feels that it is much preferable to purchase a great firm at a fair price than a good company at a fabulous price.
However, it can be difficult to adapt Buffett’s strategy to the artificial intelligence (AI) sector. Although it’s difficult to find affordable AI stocks in this booming industry, there are some exceptional deals to be found.
They are Alphabet (NASDAQ: GOOGL), the parent company of Google (NASDAQ: GOOG), Dell Technologies (NYSE: DELL), and Micron Technology (NASDAQ: MU). These three companies may be especially attractive to Buffett-minded investors since they provide exposure to several facets of the AI industry. A closer look at these businesses can be found here.
1. Technology of Microns
Micron was established in 1978 and focuses on computer memory and storage technologies. The business claims to have created the first 1-gamma memory chip in history this year.
The smallest memory chip on the market today allows for more components, which boosts speed and power. The chip’s compact size makes it perfect for supporting AI on mobile devices because of these desirable characteristics for AI hardware.
Micron’s products are well-liked for AI because of this type of technological innovation. For instance, the company’s fiscal second quarter, which concluded on February 27, saw sales of its high-bandwidth memory chips surpass $1 billion for the first time. Consequently, sales for the quarter increased by about 40% to $8.1 billion from $5.8 billion the previous year.
Fiscal second-quarter net income doubled year over year to $1.6 billion as a result of this robust sales increase. As a result, diluted profits per share (EPS) increased from $0.71 to $1.41 over the previous year.
With a third-quarter revenue prediction of approximately $8.8 billion, a significant rise from $6.8 billion in the previous year, Micron anticipates sustained sales growth. With its new 1-gamma memory chip, the company is well-positioned for continued success in the AI era, and its AI sales are on a roll.
2. Technologies from Dell
In order to create AI systems, Dell sells PCs, servers, and other hardware. Among its clients is the trendy AI firm CoreWeave.
Although it competes in a crowded sector, the company is gaining market share as consumers are eager for hardware that powers AI. In its fiscal first quarter, which concluded on May 2, sales climbed 5% year over year to $23.4 billion. “The demand for AI-optimized servers was exceptionally high,” stated Jeff Clarke, chief operating officer.
Given the current macroeconomic volatility, which clouds consumers’ information technology investments, Clarke’s remarks are reassuring. Dell’s share price fell as a result of recent news that the federal government is reducing its spending on technology.
However, the long-term demand for AI puts Dell in a position to increase revenues. Actually, more than $12.1 billion worth of AI hardware was ordered by customers in Q1. This outcome, according to Mr. Clarke, exceeded “the entirety of shipments in all of [fiscal 2025].” Additionally, Dell expects its sales to increase from $95.6 billion in its last fiscal year to at least $101 billion in its 2026 fiscal year.
3. The alphabet
Alphabet developed its own artificial intelligence (AI) and integrated it into a number of its products, such as Google Cloud and the Google search engine. The strategy is working.
Due to increased usage brought about by integrating AI into its search engine, Google’s first-quarter revenue increased to $50.7 billion from $46.2 billion in 2024. AI also drove growth in Google Cloud’s first-quarter sales, which increased from $9.6 billion to $12.3 billion over the previous year.
Alphabet’s progress with AI increased first-quarter sales to $90.2 billion from $80.5 billion in 2024 and net income to $34.5 billion from $23.7 billion in the previous year. Diluted earnings per share jumped from $1.89 in 2024 to $2.81 as a result.
Following the company’s defeat in two significant antitrust actions brought by the US government, its shares fell. According to CEO Sundar Pichai, the court struggle is far from done and may take years to resolve because management has the right to appeal the rulings.
Meanwhile, Alphabet’s business is expanding thanks to AI, and the corporation is committed to building on its successes in this field. With projections for $75 billion in capital expenditures this year, up from $52.5 billion in 2024, it is making substantial investments in its tech infrastructure.
Fantastic, at a reasonable cost
Alphabet, Dell, and Micron have all expanded their companies over many years, paid dividends, and developed successful AI solutions. These characteristics imply that they are the kind of “wonderful companies” in the AI sector that Buffett has in mind.
Does their shares, however, trade at what he would consider a “fair price?” These three companies’ forward price-to-earnings (P/E) ratios are compared to those of Microsoft and Nvidia, two of the biggest names in artificial intelligence.
With forward P/E multiples much lower than those of Nvidia and Microsoft, Micron, Dell, and Alphabet all appear to be excellent investments when compared to their AI peers.
As demonstrated by their track record, Alphabet, Dell, and Micron are strong AI firms with attractive valuations that make them the perfect long-term investments for Buffett-style investors.
