Artificial intelligence (AI) remains a major theme in the market. The market still has just a taste of what this technology can offer, and the results are already promising.
If investors have not aligned part of their portfolio with this technology, it is not too late. There are many great AI stocks that can be phenomenal investments and be purchased at a fair price, providing exposure to one of the most promising technological revolutions since the Internet.
Taiwan Semiconductor
Taiwan Semiconductor (NYSE:TSM) is one of the best ways to invest in AI because it will win regardless of which software or AI model is better. TSMC makes the chips for critical infrastructure, such as graphics processing units (GPUs) that process AI models. Since Taiwan Semiconductor is a foundry, it creates chips for companies that compete with each other, such as Nvidia And AMD. By being neutral in the AI arms race, TSMC is in a great position.
Management is also excited about the prospects that AI technology brings to its business. They expect the share of its business associated with building AI-related chips to grow at a compound annual growth rate of 50% over the next five years. This growth will allow AI chips to represent more than 20% of its overall turnover by then.
This is massive growth that makes Taiwan Semiconductor a solid investment. Although the stock isn’t as cheap as it once was, it’s still a fair buy at 24 hours. times forecast profits.
Considering that the S&P500 trading at 21.5 times earnings, Taiwan Semiconductor trades at only a slight premium to the broader market.
Alphabet
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) stumbled as almost every company around it launched and integrated generative AI models. Now, Alphabet has caught up with its competitors and rolled out several features integrating this technology across its entire product ecosystem.
Still, AI is only a small part of Alphabet’s investment thesis, since advertising accounts for more than three-quarters of its overall revenue. The AI tools developed by Alphabet for advertising are far more important than any others because they provide value to paying customers.
One example is the integration of its Gemini model into its Performance Max (PMax) product. Compliance with all PMax guidelines significantly increases the chances of a successful advertising campaign. Before, you had to go back and forth a few times to check all the boxes; now this can be done instantly as Gemini can ensure all guidelines are met. This type of efficiency gets investors excited about the prospects of generative AI.
Because of its struggles, Alphabet also trades at a lower premium than many of its big tech peers, at 23 times forward earnings. This is a great price to pay for the stock, and investors should take advantage of this price while they still can.
Amazon
Amazon (NASDAQ:AMZN) may not be at the top of investors’ minds when researching AI stocks. Even though the company is a…
