A broad surge of interest in artificial intelligence (AI) has been driving the stock market for more than a year now, stretching back to the November 2022 release of OpenAI’s ChatGPT chatbot.
Since then, a handful of early leaders in AI technology have risen into the stratosphere. Powered by AI accelerator chips NvidiaThe stock is up 410% in 16 months. Builder of high performance computer systems Super Microcomputer It grew even faster with a 1,100% increase over the same period.
I understand if you hesitate to buy shares in these skyrocketing AI stocks. What goes up doesn’t necessarily come down quickly, but the risk of a diagnosis is real.
Don’t worry, though. There are many ways to tap into the AI boom without relying on the most obvious (and perhaps overpriced) market darlings.
Right now, I see deep value and exciting AI-driven growth for the Google parent over the next few years the alphabet (GOOG 0.78%) (GOOGL 0.77%) And the chip maker Taiwan Semiconductor Manufacturing (TSM -1.90%).
Taiwan Semiconductor: Providing AI Chips to a Hungry World
Demand for AI-powered computing power is skyrocketing. Taiwan Semiconductor, or TSMC for short, is at the center of this technological transformation.
In January’s fourth-quarter earnings call, CEO CC Wei pointed out that more complex AI software requires more raw computing power, so demand for faster and more energy-efficient chips will increase over time. It should keep increasing. As the industry’s leading supplier of advanced manufacturing technology, Wei’s company is poised to capitalize on this massive demand growth in the coming years.
“The value of TSMC’s technology position is increasing, and we are all in a good position to capture a large market share in terms of semiconductor components in AI,” Wei said.
V’s analysis highlights TSMC’s strategic position to make the most of the ongoing explosion in AI applications. While its stock has performed well, with a nearly 70% gain since November 2022, TSMC’s pivotal role in enabling the next wave of AI development suggests the stock has room to grow.
Every chip designer worth his silicon wants in on the AI frenzy, and TSMC is here to turn its clients’ visionary AI dreams into physical chips. For example, Nvidia is one of the company’s most important customers. TSMC lets you invest in a company that is powering the future of technology, making it a wise choice behind the scenes amid the AI boom.
Alphabet: Time to capitalize on decades of silent AI leadership
Alphabet’s commitment to integrating AI into its suite of advertising products underscores its strategic vision.
Senior leadership at parent Google is clear on AI’s transformative potential. In his fourth quarter call, Chief Business Officer Philipp Schindler emphasized the company’s long-standing commitment to AI-powered tools and platforms.
“AI has been a core of our advertising products for a very, very long time,” Schindler said. “And recent developments are really allowing us to drive greater value for advertisers across a wide range of areas: bidding, targeting, creative, as well as our core advertiser and publisher experiences.”
Alphabet’s measured approach to AI integration should keep the company at the forefront of consumer-facing online services for years to come. At the same time, stocks’ modest gains during the AI surge point to an underappreciated upside. With the stock trading at a modest 23 times earnings over the past 16 months, barely beating the broader market, Alphabet’s stock isn’t getting the AI-driven respect it deserves from market makers.
The company’s innovations, particularly in making advanced AI tools accessible to a wider range of advertisers, position it to capitalize on the next wave of AI growth. For investors, Alphabet is not only keeping pace with AI evolution but actively leading it. The company’s role in the digital economy may become even more indispensable over time.
In other words, Alphabet looks like a low-cost AI titan today. Next time you have some investable cash looking for a forever home, don’t hesitate to give this stock a serious look.
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Anders Byland has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the Super Microcomputer. The Motley Fool has a Disclosure Policy.