3 Must-Buy AI Stocks to Watch Right Now

Riding the AI Wave: 3 Must-Have AI Stocks to Invest in Today

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Artificial Intelligence (AI) is poised to become a multitrillion-dollar industry, revolutionizing various sectors from technology to healthcare. While the stock market has experienced significant excitement around AI, it’s not merely speculative hype. McKinsey estimates that AI could add as much as $13 trillion to the global economy by 2030. Although some AI stocks may appear overvalued, there are still high-quality opportunities with compelling risk-reward potential.

Three standout AI-related stocks investors should consider now are Taiwan Semiconductor Manufacturing Company (TSM), Tesla (TSLA), and Qualcomm (QCOM). These companies bring unique strengths and strategic positions in the AI space, making them attractive investment opportunities even in today’s competitive market.

1. Taiwan Semiconductor Manufacturing Company (TSM): The Backbone of AI Hardware

Taiwan Semiconductor Manufacturing Company (TSMC) plays a pivotal role in the AI ecosystem as the world’s largest semiconductor foundry. It holds an estimated 62% market share, producing chips for major players like Nvidia and AMD. These chips are indispensable for powering AI applications, from data centers to autonomous vehicles.

Explosive AI Chip Demand: AMD CEO Lisa Su forecasts that AI chip demand will grow at an annual rate of 60%, reaching $500 billion by 2028—more than the total semiconductor industry’s size in 2023. TSMC is ideally positioned to capitalize on this demand.
Strong Fundamentals: The stock trades at a forward P/E of 28, while analysts project a 31% average annual earnings growth over the next three to five years. This results in a PEG ratio of 0.9, indicating an undervalued stock with robust growth prospects.

Geopolitical Considerations: While TSMC faces risks related to Taiwan-China tensions, the company and the U.S. are taking proactive measures. These include investing $65 billion in new foundries in Arizona and limiting advanced chip shipments to China. Despite the geopolitical noise, TSMC remains a critical player in the global semiconductor supply chain, making it a strong bet for AI investors.

2. Tesla (TSLA): More Than Just an EV Company

Tesla’s reputation as an electric vehicle (EV) leader often overshadows its significant investments in AI. However, the company’s AI-driven initiatives could redefine its business and unlock new revenue streams.

AI-Powered Platforms: Tesla’s vehicles function as data-collecting platforms equipped with sensors to capture video and telemetry. This data fuels the company’s supercomputers, like Dojo, which enhance its Full Self-Driving (FSD) capabilities. If Tesla achieves true autonomy, it could revolutionize transportation and potentially skyrocket its valuation.
Diverse Growth Segments: While 80% of Tesla’s revenue comes from automotive sales, its Energy Generation & Storage and Services segments grew 52% and 29% year-over-year, respectively, in Q3 2024. These fast-growing segments are supported by AI advancements, such as energy optimization and autonomous technologies.

Future Potential: Beyond FSD, Tesla’s AI ambitions include the Optimus humanoid robot and robotaxis, highlighting its long-term vision to dominate AI-powered industries. For AI-focused investors, Tesla offers a unique blend of current profitability and futuristic growth potential.

3. Qualcomm (QCOM): Bridging AI and Connectivity

Qualcomm has evolved from a dominant player in the smartphone chip market to a diversified AI-driven company. Its strategic investments in AI-enabled devices, automotive, and industrial applications make it a compelling pick for investors.

On-Device AI: Qualcomm’s Snapdragon 8 Gen 3 chipsets deliver advanced on-device AI, enhancing user experiences in smartphones and beyond. This positions the company at the forefront of AI innovation in consumer technology.
Diversified Revenue Streams: Qualcomm’s automotive segment grew 55% in fiscal 2024, reflecting the rising demand for AI-enabled chips in vehicles. The company’s Internet of Things (IoT) and PC chips further strengthen its growth prospects.

Valuation and Risks: Qualcomm trades at a modest P/E ratio of 18, making it an attractive option compared to other AI chipmakers. While challenges like its legal dispute with Arm Holdings persist, Qualcomm’s diversification and steady growth signal long-term resilience.

Why These Stocks Stand Out

Despite differing core businesses, TSMC, Tesla, and Qualcomm share a common thread: they are leveraging AI to fuel growth and reshape their industries.

TSMC serves as the foundation of AI hardware, manufacturing the advanced chips needed for AI applications.
Tesla is pioneering AI software and systems, with transformative potential in autonomy and robotics.
Qualcomm bridges the gap between AI and connectivity, ensuring devices and applications function seamlessly.

Investors seeking exposure to the AI revolution would do well to consider these three stocks, each offering a unique blend of growth potential and innovation. As AI continues to expand into a multitrillion-dollar industry, these companies are positioned to thrive.

Conclusion: Investing in the AI Future

The AI boom is far from over, and its transformative impact across industries is only beginning to take shape. Companies like Taiwan Semiconductor Manufacturing Company, Tesla, and Qualcomm are not just riding the wave but actively shaping the AI-driven future.

Each of these stocks offers a compelling case for investment:

TSMC dominates the semiconductor industry and is a critical enabler of AI hardware.
Tesla is pushing the boundaries of what AI can achieve in transportation, robotics, and energy solutions.
Qualcomm connects the AI revolution to consumers and industries through its innovative chip designs and diversified product lines.

While the stock market’s enthusiasm for AI has driven some valuations to lofty levels, these companies remain high-quality opportunities with strong fundamentals and long-term growth potential. For investors looking to capitalize on AI’s multitrillion-dollar potential, these stocks provide an excellent starting point.

As always, it’s essential to do your due diligence and consider the risks, including geopolitical challenges and industry-specific hurdles. But for those willing to take a forward-looking approach, TSMC, Tesla, and Qualcomm represent three powerful ways to invest in the ongoing AI revolution.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial advice. Always consult a financial advisor before making investment decisions.