Artificial intelligence (AI) is already a huge growth driver for many technology companies and will likely be a catalyst in the years to come. IDC study estimates AI spending will help 20 trillion dollars to the global economy by 2030.
But which companies are poised to benefit from AI taking off over the next decade? Here's why Nvidia (NASDAQ:NVDA) And Semiconductor manufacturing in Taiwan (NYSE:TSM) should be on your AI stock shortlist.
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While many companies currently benefit artificial intelligenceNvidia has the potential to continue to exploit this massive trend for many years to come. Nvidia's GPUs have long been a top choice among tech companies that need the best chips for their data centers, with the company holding about 70% to 95% of the AI processor market.
This lead gives Nvidia a good head start in the AI chip race, and the company continues to release new semiconductors to ensure it isn't caught off guard. The latest iteration is the company's Blackwell GPU for AI, which Nvidia CEO Jensen Huang said during the third quarter earnings call was already in the hands of top customers and is 2.2x faster than its Hopper GPUs.
Huang is preparing his company for an unprecedented wave of AI data center spending, which he says will reach 2 trillion dollars over the next five years.
The good news for investors is that it won't take years for Nvidia to benefit from AI. In the company's third quarter (ended October 27), revenue increased 94% to $35.1 billion, and non-GAAP (generally accepted accounting principles) profits soared 118%. at $0.81 per share. Much of the company's growth is already being driven by Nvidia's data center segment, whose sales increased 112% to $30.8 billion during the quarter.
The only thing to note with Nvidia stock is that it's not cheap. The company's stock currently has a price-to-earnings ratio of 54.5, higher than S&P500It is (INDEXSNP: ^GSPC) 30.6. But with AI spending increasing and Nvidia leading the pack with its GPUs, there's likely more room for this tech giant.
Taiwan Semiconductor is a unique investment angle in AI because the company does not create any cutting-edge software or high-powered processes. Instead, it makes the semiconductors for the world's most advanced data centers.
The company makes about 90% of the world's most advanced processors and its business is booming. In the third quarter (ended September 30), the company reported revenue of $23.5 billion, up 36% from the year-ago quarter, and a profit increase of 54%. at $1.94 per American Depository Receipt (ADR).
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