Two Notable Artificial Intelligence Stocks Worth Investing in During January
With the surge in artificial intelligence (AI) technology, tech companies are pouring billions into generating new products and services. Goldman Sachs predicts a massive $1 trillion investment in generative AI over the coming years as companies strive to keep pace with competitors. This unprecedented spending will boost leading AI companies, propelling their growth for years to come. So, which AI stocks should you consider investing in? Let's explore two top contenders: Broadcom and Taiwan Semiconductor Manufacturing.
Broadcom (AVGO)
Broadcom takes the lead in AI due to its advanced application-specific integrated circuits (ASICs), many of which are now integral to AI data center infrastructure. Tech giants like Alphabet and Meta rely on Broadcom's hardware to meet the processing power their AI software requires.
Broadcom's financials reflect its AI growth. Fiscal 2024 sales increased by 44%, reaching $51.5 billion, while non-GAAP net income soared by 29% to $23.7 billion. The AI revenue itself skyrocketed by 220%, surpassing $12 billion.
Leveraging this trend, Broadcom has reportedly begun working on an AI chip with ChatGPT creator OpenAI. Additionally, with most of its large clients planning roadmaps extending to 2027, Broadcom's custom AI accelerators and networking hardware sales are projected to reach a serviceable addressable market in the range of $60 billion to $90 billion.
Despite a high forward price-to-earnings ratio (P/E) of 38.1, Broadcom's AI-driven sales and continued demand for advanced data center chips indicate more room for growth.
Taiwan Semiconductor Manufacturing (TSM)
Another promising investment angle in the AI realm is Taiwan Semiconductor Manufacturing, a world leader in advanced chip production. With an estimated 90% market share, TSM plays a crucial role in powering the best AI processors, thanks to its 3-nanometer (nm) process node chips. Its planned commercialization of 2nm process node chips in 2025 will further solidify its position in the market.
TSM recently reported impressive Q3 sales growth—up 39% to $23.5 billion, and earnings increase by 54% to $1.94 per American depositary receipt (ADR). With companies like Nvidia, AMD, and other tech giants utilizing TSM's advanced manufacturing, the AI chip market, forecasted to grow by over 30% in 2024, represents a significant opportunity for TSM.
TSM's forward P/E ratio of 22.8 is more affordable than that of Broadcom, making it an attractive choice for those seeking AI exposure at a lower price point.
Investing in AI stocks like Broadcom (AVGO) and Taiwan Semiconductor Manufacturing (TSM) could offer lucrative opportunities as the global AI market develops. Keep in mind that the AI sector is evolving rapidly, and further research is always recommended before making investment decisions.
The predicted investment of $1 trillion into generative AI by tech companies over the coming years, as mentioned by Goldman Sachs, is expected to greatly benefit leading AI companies like Broadcom and Taiwan Semiconductor Manufacturing.
Broadcom's advancements in application-specific integrated circuits (ASICs) have made it a key player in AI data center infrastructure, with tech giants like Alphabet and Meta relying on its hardware for processing power.
Taiwan Semiconductor Manufacturing holds an estimated 90% market share in advanced chip production, powering the best AI processors with its 3-nanometer (nm) process node chips.
With Broadcom's high forward price-to-earnings ratio (P/E) of 38.1 and Taiwan Semiconductor Manufacturing's more affordable forward P/E ratio of 22.8, both companies present unique investment opportunities in the rapidly growing AI market, with tens of billions of dollars predicted to be spent on AI chips over the next few years.
