Invest in the AI Revolution: Two Stocks to Secure for the Long Haul
AI is a massive growth driver for numerous tech companies, with IDC predicting it'll contribute close to $20 trillion to the global economy by 2030. If you're looking to invest in AI-driven stocks, Nvidia (NVDA -3.00%) and Taiwan Semiconductor Manufacturing (TSM 0.60%) are worth considering.
1. Nvidia
Nvidia's GPUs have consistently been the preferred choice for tech companies needing top-notch chips for their data centers. The company sits comfortably at the helm of the AI processor market, with an estimated 70-95% share[1]. This lead provides Nvidia with a solid foundation to maintain its position in the AI chip race.
New innovations like the Blackwell GPU for AI are further strengthening Nvidia's position. Powerful and 2.2x faster than its Hopper GPUs, it's already in the hands of major clients, and Jensen Huang, Nvidia's CEO, is preparing for an unprecedented wave of AI data center spending[1].
The strong third-quarter earnings report (ending Oct. 27) showcased Nvidia's growth potential. With a 94% revenue increase to $35.1 billion and a 118% non-GAAP earnings spike to $0.81 per share, it's clear that Nvidia's data center segment is driving its growth[1].
However, Nvidia's shares currently carry a high P/E ratio of 54.5, which is higher than the S&P 500's 30.6. Given the AI spending boom and Nvidia's domination of the AI chip market, its shares might have more room to expand.[1]
2. Taiwan Semiconductor
Taiwan Semiconductor Manufacturing is an intriguing AI investing angle. Unlike the other mentioned companies, it doesn't focus on developing software or high-powered processes. Instead, it manufactures the semiconductors that the world's most advanced data centers rely on.
With 90% market share of the world's most advanced processors, Taiwan Semiconductor is in a great position to benefit from the AI chip demand over the next few years. During the latest quarter (ending Sept. 30), sales skyrocketed by 36% to $23.5 billion and earnings increased by 54% to $1.94 per ADR. [1]
With the estimated data center spending reaching $2 trillion over the next five years, Taiwan Semiconductor will likely be the preferred supplier of processors. Its stock currently has a moderate P/E ratio of 29.5, making it an attractive investment option as AI semiconductor demand accelerates.
[1] Enrichment Data: Nvidia and Taiwan Semiconductor Manufacturing are well-positioned to capitalize on the AI chip market growth. Both companies have displayed consistent performance in the third quarter, with Nvidia reporting 94% revenue growth and Taiwan Semiconductor sales increasing by 36%. However, Nvidia's shares have a higher P/E ratio, which could potentially affect their growth in the near future. [1]
- Given the significant growth potential in the AI chip market, investors might consider diversifying their finance portfolio by including stocks like Nvidia, which boasts an impressive 94% revenue increase and a dominant position in the AI processor market.
- Taiwan Semiconductor, with its 90% market share of the world's most advanced processors, is an appealing option for those looking to invest in finance sectors that are poised to benefit from the estimated $2 trillion in data center spending over the next five years.
