1 Incredible Artificial Intelligence (AI) Stocks to Buy and Hold for the Next 10 Years

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Artificial intelligence (AI) has become the single hottest trend in investing over the past year and a half, and there's a good chance that the rapid spread of this technology will continue to be a major development for the stock market over the next decade. It will be a stimulus. .

After all, the global AI market is expected to reach $2.6 trillion in annual revenue in 2032, up from $538 billion last year. Buying and holding solid semiconductor stocks for the long term is a great way to take advantage of this huge opportunity. This is because training and deployment of AI models is not possible without AI chips.

This explains why top companies and governments are lining up to buy chips from the likes. Nvidia, the graphics specialist's shares are on the rise thanks to impressive growth on the top and bottom lines. However, you should also consider buying another chip maker to make the most of the AI ​​boom: Taiwan Semiconductor Manufacturing (NYSE: TSM ).

TSMC is a solid play on the AI ​​chip boom.

Known as TSMC, the Taiwan-based foundry giant is at the heart of the AI ​​semiconductor market as its process nodes allow customers like Nvidia to produce powerful chips. For example, Nvidia's Hopper architecture, which allowed the company to become a dominant player in the AI ​​chip market, was based on TSMC's 4N manufacturing process.

And now, Nvidia is going to produce its next-generation Blackwell AI processors using TSMC's 4NP process. However, Nvidia isn't the only one lining up to get their hands on TSMC's chips. Intel It has reportedly tapped TSMC's 3-nanometer (nm) chip production line to make the processor for the notebook.

It's worth noting that Intel is itself a chipmaker, unlike Nvidia, which only designs its own chips and outsources its fabrication to TSMC. However, Intel has been left behind in the race to develop advanced chips, which is why it is tapping TSMC for manufacturing. Given that TSMC continues to push the envelope on the product development front and is poised to move to more advanced process nodes, such as 2nm, it wouldn't be surprising to see continued demand from the likes of Intel and Nvidia.

As it turns out, these aren't the only chipmakers that have turned to TSMC to power their AI ambitions. From Qualcomm To AMD To apple To Broadcom To Marvell TechnologyTSMC's list of customers is long and impressive. As a result, the company's factory utilization rate remains high. For example, TSMC's 3nm chip-production line reportedly had a 95% utilization rate last month.

Such solid demand explains why TSMC's business is set to peak in 2024. Its revenue grew 27% year-on-year in the first five months of the year. This is a good turnaround compared to last year when the company's revenue declined due to poor market demand. Looking ahead, TSMC's revenue growth should remain steady as the company capitalizes on its strong foundry market share of 62% and flexes its pricing power.

TSMC has a lead of nearly 50 percentage points over the second-place foundry company, Samsung. This explains why the company is reportedly in a position to raise the prices of its chips. At the same time, investors should note that TSMC is going to ramp up its advanced chip production capacity by 60% by 2026 to meet more AI-related orders.

Overall, it can be said that TSMC is pulling the right levers to ensure that it continues to make the most of the long-term opportunities that AI presents. This could help the company's revenue grow significantly over the next decade as the AI ​​chip market is expected to total $372 billion in 2032, up from just over $15 billion in 2022.

Investors can expect healthy gains in the next decade.

Analysts are expecting TSMC's earnings to grow at an annual rate of 21% over the next five years. However, as the following chart indicates, the company's earnings per share (EPS) growth estimates have increased significantly over the past year.

TSM EPS estimates for the current fiscal year chart

According to the chart above, TSMC's earnings could grow by about 23% this year to $5.18 per share in 2023. Next year, however, its bottom line is forecast to grow at a faster pace of 25%. Estimates for 2026 are also bullish, and it wouldn't be surprising to see this semiconductor stock beat analyst estimates in the long run considering the huge market opportunity it sits on. .

NextPlatform, an online publication that covers high-performance computing and hyperscale data centers, estimates that AI could send TSMC's overall top line as much as $180 billion in 2030. Keep in mind that the AI ​​chip market could grow even by the end of the decade.

That's why investors looking to add AI stocks to their portfolios would do well to buy the chipmaker before it hits its 61% year-to-date return in 2024.

Should You Invest $1,000 in Taiwan Semiconductor Manufacturing Now?

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Intel, and Marvell Technology and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a Disclosure Policy.

1 Incredible Artificial Intelligence (AI) Stocks to Buy and Hold for the Next 10 Years was originally published by The Motley Fool.

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