3 No-Brainer Artificial Intelligence (AI) Stocks to Buy Now With $400

Core Viewpoint - The recent pullback in AI stocks presents an opportunity for investors to enter the market, despite some stocks experiencing significant price drops [1][2]. Group 1: Microsoft - Microsoft has established a strong position in AI through its investment in OpenAI, making its Azure cloud platform a leading choice for developers [4]. - Azure's revenue grew by 31% in the latest quarter, driven by a 157% year-over-year increase in AI services, with OpenAI as a major customer committed to using Azure through 2030 [5]. - Management anticipates Azure revenue to increase in the second half of fiscal 2025 due to demand outpacing available capacity, suggesting strong future revenue growth [6]. - Microsoft's enterprise software business benefits from AI through its Copilot AI agents, leading to double-digit revenue growth in its productivity and business segment [7][8]. - Microsoft shares currently trade at $370, with a forward price-to-earnings ratio of 28, supported by strong free cash flow and share buybacks [9]. Group 2: Adobe - Adobe faces challenges from AI-powered tools that threaten its high-end creative software market [10]. - The company has developed its own AI model, Firefly, which is integrated into its products, enhancing user experience and retention [11][12]. - Management projects revenue growth from $21.5 billion in 2024 to $30 billion over the next three years, with a compound annual growth rate of 12% [13]. - Adobe's stock trades at 17 times forward earnings, presenting a value opportunity despite concerns over competition from AI tools [14]. Group 3: Applied Materials - Applied Materials is a key player in semiconductor manufacturing, essential for AI training and inference, and is the largest supplier of wafer fabrication equipment globally [15]. - The company benefits from a virtuous cycle of revenue generation, allowing for increased investment in research and development, which enhances its competitive edge [16]. - High switching costs for semiconductor manufacturers protect Applied Materials' market position, as changing suppliers involves significant expenses [17]. - The company has recently increased its dividend by 15% and authorized a substantial share repurchase, indicating confidence in continued free cash flow growth [18]. - Applied Materials' stock has fallen to under $140 per share, with a forward P/E of 14.8, making it an attractive investment opportunity [19][20].