AI Chip Stocks Poised for Growth Amid Massive Infrastructure Investments

Prediction: This Top Artificial Intelligence (AI) Stock Will Start Skyrocketing After March 6 | The Motley Fool

Semiconductor bellwether Broadcom (AVGO -7.11%) has clocked impressive gains of 69% on the stock market in the past year as of this writing, but it has witnessed an indifferent start in 2025. Broadcom stock fell big time last month after Chinese artificial intelligence (AI) start-up DeepSeek claimed that it had developed a competent AI model at an incredibly low cost, calling into question the billions of dollars that are being spent by many tech giants to build out their AI infrastructure. As Broadcom has been a beneficiary of the huge AI infrastructure spending, its shares crashed significantly following DeepSeek's revelation. It is worth noting that Broadcom has clawed back a nice chunk of those losses, though the stock is still down 6% in 2025. However, the chip designer's upcoming fiscal 2025 first-quarter results, scheduled for release on March 6, could give it a nice shot in the arm. Let's see why. Broadcom's impressive rally in the past year has been driven by the healthy demand for its application-specific integrated circuits (ASICs). The company pointed out on its December 2024 earnings conference call that its custom AI chips are being used by three major cloud hyperscale customers for tackling AI workloads. Shipments of custom processors to these customers doubled in the fourth quarter of fiscal 2024, while there was a 4x jump in shipments of Broadcom's networking equipment used in AI servers. Even better, Broadcom reports that it has been chosen to supply its next-generation custom AI processors for two additional cloud hyperscalers. Reports suggest that the three big cloud computing companies currently using Broadcom's chips are Alphabet, Meta Platforms, and TikTok parent ByteDance. More importantly, two of those companies are set to increase their capital spending substantially in 2025 to support the rollout of AI infrastructure. Alphabet, for instance, is forecasting an increase of almost $23 billion in capital expenditure this year, while Meta's capex could rise by a remarkable 60% to $65 billion. The new customers that Broadcom talked about on its previous conference call could be Apple and OpenAI. According to a Reuters report, OpenAI is reportedly looking to reduce its reliance on Nvidia's graphics cards for tackling its AI workloads. It has reportedly partnered with Broadcom to design its custom in-house AI chip. Another report suggests that consumer electronics giant Apple is also working with Broadcom to develop an AI server chip. Meanwhile, Broadcom may have won more business from Apple for providing radio frequency components used in iPhones, as the latter has reportedly started dual-sourcing those chips instead of buying them solely from another chipmaker -- Skyworks Solutions. Skyworks management admitted on the latest earnings conference call that it could witness a 20% to 25% decline in content at its largest customer, and that could be good news for Broadcom investors, as per Wall Street analysts. As such, there are multiple reasons why the chipmaker could be on track to beat consensus expectations once again and issue robust guidance as well. The company has guided for $14.6 billion in revenue for the first quarter of fiscal 2025, which would be a 22% increase from the year-ago period. Its earnings are forecast to jump by a solid 37% year over year to $1.51 per share. However, the new business that Broadcom is likely to have landed of late could help it exceed its guidance, and that could send the stock soaring following its upcoming earnings report. More importantly, Broadcom's AI business is likely to take off remarkably over the next three years, which is why it makes sense to buy this AI stock before it starts heading higher. Broadcom generated $12.2 billion from sales of AI chips in the previous fiscal year. While the company hasn't issued a forecast for fiscal 2025 yet, investors can expect this figure to head substantially higher over the next three years as the company sees its addressable opportunity in custom AI processors and networking chips rising to a range of $60 billion to $90 billion by fiscal 2027. Given that Broadcom controls an estimated 55% to 60% of the custom chip market, it is in pole position to make the most of the lucrative multibillion-dollar opportunity. Not surprisingly, Broadcom carries a price/earnings-to-growth ratio (PEG ratio) of just 0.62 based on the five-year earnings growth that it is expected to deliver, as per Yahoo! Finance. A PEG ratio is a forward-looking valuation metric that takes into account a company's long-term earnings growth potential. A reading of less than 1 means that the particular stock is undervalued with respect to the growth that it could clock. So, investors can buy Broadcom at an attractive level right now, and they may not want to miss this opportunity, considering that its next earnings report could send it on a bull run.

1 Undervalued Artificial Intelligence (AI) Stock to Buy Right Now | The Motley Fool

Despite the hype, the artificial intelligence (AI) revolution is just getting started. In the coming years, expect to see rapid improvements across the entire sector, with new AI-powered products and services consistently released to both consumer and corporate end users. Which product or service will win long term is anyone's guess. But the situation is much clearer when it comes to the suppliers that will make this AI revolution occur in the first place. In fact, there's only one company I'd bet big on moving forward. Everyone who has researched AI stocks is already familiar with Nvidia (NVDA -8.48%). The company is one of the world's largest businesses, with a total market capitalization worth several trillion dollars. But when it comes to betting on the AI revolution, which will continue to grow in scale and pace over the coming decade, Nvidia still has plenty of room to run. That's due to several reasons, the biggest of which is simply end-market growth. According to a recent research report from global consultancy firm Deloitte, "Chip sales are set to soar in 2025, led by generative AI and data center build-outs." But it's not just any type of chip that will see massive growth. Specifically, the growth will occur in one emerging category: AI graphics processing units (GPUs). Deloitte estimates that these chips represented around 20% of total chip sales in 2024, with revenue totaling around $125 billion. In 2025, AI-specific chips should grow global sales to around $150 billion, a decent year-over-year increase. But things will really start to take off in the back half of this decade. Lisa Su, the CEO of chipmaker Advanced Micro Devices, believes the total addressable market for AI chips could reach $500 billion in 2028 -- larger than almost the entire chip industry last year. There have been many chip wars in the past in which certain chipmakers rose to dominance only to eventually lose their crowns due to competition. However, this cycle has the potential to be a bit different. It's not that Nvidia won't eventually cede some of its dominant market share for AI GPUs, which is likely between 80% and 85% right now. But in the long term, the total growth in AI infrastructure demand may allow for several winners. That is, while Nvidia may cede share over time, spending on its products may be so robust that overall sales continue to climb at impressive rates for years to come. There's even a chance that Nvidia somewhat maintains its current stranglehold on the AI GPU market due to one specific advantage: its developer ecosystem. This sustainable advantage makes the stock a buy right now for patient shareholders. Nvidia's current lead in AI GPUs boils down to a few factors. First, it made massive investments in the AI space well before most of its competitors. Second, it used the results of this early investment to build an early lead and then continued to invest the proceeds in more innovation, allowing it to build innovation momentum as the AI space took off. Finally, and perhaps most importantly, the company went all-in on developer attraction and retention nearly two decades ago with a new programming model and language for its GPUs, plus a free software development kit called CUDA. In a nutshell, these moves allowed it to attract developers into its architecture ecosystem, using its products across the entire tech stack. This gave developers performance benefits and created a level of "stickiness" for Nvidia's products, an advantage that eventually translated into its AI products. As a report by industry publication Communications of the ACM concludes: CUDA software only runs on Nvidia GPUs. ... Rising application usage, such as for training LLMs [large language models] and running inference engines built with CUDA software, requires more Nvidia hardware. ... In this case, Nvidia dominates both the hardware and software sides of the platform. With a hold on both the software and hardware sides of the equation through long-term developer outreach and collaboration, Nvidia remains a great long-term option for investors betting on the AI revolution.

1 Artificial Intelligence (AI) Stock That Could Be Bigger Than Nvidia in 5 Years | The Motley Fool

Nvidia (NVDA -8.48%) crafted an incredible business model over the past two decades. In 2006, the company unveiled its CUDA developer platform, which included a programming interface, compiler, driver, runtime environment, and toolkit. Nvidia gave developers a customized ability to program its GPUs to accelerate applications, giving Nvidia's chips an advantage over the competition. By the late 2010s, as deep learning became more popular, CUDA already was the go-to standard for GPU acceleration. And since most deep-learning tools were specifically designed for CUDA, this made it hard for users to switch to other GPUs, effectively locking them into using Nvidia's products. It's this dynamic that has helped Nvidia become a $3 trillion business. But as we've seen in past cycles, competition for GPUs will slowly heat up. Over time, another company could end up even bigger than Nvidia. Advanced Micro Devices (AMD -4.99%), colloquially referred to as AMD, is an afterthought in the race for artificial intelligence (AI) GPU dominance. According to most estimates, Nvidia has at least an 80% market share for AI GPUs, though some estimates reach 90% or higher. Suffice it to say, when it comes to supplying the AI industry with critical components like GPUs, Nvidia is indisputably king. But let's take a look back at previous chip cycles to see how things have played out over not just months or years, but full decades at a time. In 2006, Intel had a dominant lead in graphics chips, with a 40% market share. AMD took second place with just over 25%, and Nvidia came in at just under 20%. One year later, Intel still held the lead position with a roughly 39% market share, but AMD and Nvidia swapped places. Nvidia now commanded an almost 30% market share, with AMD slipping under 20%. Here's another example. In 2021, Intel held a 64% market share for data center chips. Nvidia came in at 27%, with AMD at just 9%. Two years later, Intel had fallen to just 26%, with Nvidia soaring to 66% and AMD still languishing at 8%. The point here isn't that these shifts will translate cleanly to today's AI GPU environment, but that throughout history, chip leads have traded hands many times, even over fairly short periods of time. Which companies will eventually catch up with Nvidia? The future remains unknown, of course, but AMD is investing heavily to compete on AI over the long term. Last quarter, the company released its MI325X AI accelerator chip, which will compete directly with Nvidia's H200 GPUs. AMD also recently unveiled its next-generation MI350 chips, which should compete with Nvidia's next-generation Blackwell chips by the middle of 2025. AMD's CEO Lisa Su has said that she'd like the company to become the "end-to-end" AI leader over the next decade. "This is the beginning, not the end, of the AI race," she told investors late last year. But can AMD actually catch up to Nvidia? Nvidia's dominance in the AI GPU market is not necessarily generated by better chips. The company arguably has superior chips versus the competition right now. But over time, the combined research and development budgets of the world's competing chipmakers will likely narrow this lead, and eventually topple it. What makes Nvidia's products so special is that, as AMD's CEO hopes will one day be true for her company, Nvidia really is an "end-to-end" provider, controlling both the hardware and software components, leading to exceptional lock-in with developers and businesses. But AMD is clearly making inroads with customers with its latest generation of chips. Microsoft and Meta Platforms recently signed on as customers for its current generation of MI300 AI GPUs. According to AMD's own estimates, the total addressable market for AI chips will reach $400 billion by 2027. Considering both AMD and Nvidia combine for just over $30 billion in AI data center chip sales today, there should be plenty of space for AMD to grow considerably, even if Nvidia remains on top for years to come. While possible, it'll be difficult for AMD to overtake Nvidia over the next five years. But that doesn't rule out AMD as a promising AI GPU investment.

3 Stocks to Profit From the AI Revolution

Artificial intelligence (AI) has been a leading driver for many tech stocks like Nvidia in recent years. However, as the AI revolution matures, investors may be looking for ideas beyond Nvidia. There are several ways to approach AI, from hardware and software companies to connectivity solutions, infrastructure plays, and more. Broadcom (AVGO -0.87%), Synopsys (SNPS -1.40%), and Astera Labs (ALAB -1.64%) support large-scale data centers and cloud computing. Here's why all three growth stocks are worth buying now. Broadcom's AI business is delivering exponential growth Daniel Foelber (Broadcom): Just a few years ago, the biggest markets for Nvidia's graphics processing units (GPUs) were gaming, enterprise graphics design, visualization, and more. Now, high-end GPUs used in data centers are the most important and fastest-growing part of the business. Nvidia's leadership in GPUs for data centers positions the company at the forefront of the AI revolution. However, the concentration in one end market has made Nvidia less diversified. Broadcom, another tech giant, is far more diversified than Nvidia. It could be worth a closer look for investors looking to profit from AI in a variety of ways. Broadcom surpassed $1 trillion in market cap in December, with the stock price increasing over 600% in just five years. The company has two segments. Semiconductor Solutions involves hardware, including chips, ethernet switches, networking devices, and more. The Infrastructure Software segment has become a much larger share of the company since Broadcom completed its acquisition of VM Ware in November 2023. The segment focuses on network and storage management, virtualization, cloud management, application performance monitoring, and more. Broadcom's majority share of the application-specific integrated circuits (ASICs) market is an advantage in the age of AI. GPUs are workhorses that can handle various tasks, whereas ASICs are custom-engineered for specific tasks. Lacking flexibility, ASICs tend to be cheaper and more cost-effective than GPUs. Broadcom's XPU is the company's chip used to train generative AI models. Partnerships with major tech companies have led to explosive growth in XPUs. On the company's Q4 fiscal 2024 earnings call, Broadcom said that XPUs led its AI revenue to grow from $3.8 billion in fiscal 2023 to $12.2 billion in fiscal 2024 -- representing 41% of semiconductor revenue. Put another way, Broadcom's AI business -- led by ASICs -- made up a staggering 23.6% of total revenue in fiscal 2024. Broadcom is unique because it has massive upside potential from AI, but it also has a stable network connectivity business. To top it all off, Broadcom pays a growing dividend, with the payout increasing over tenfold in the last decade. Add it all up, and Broadcom stands out as a balanced tech giant to buy now. An AI stock that could see demand explode for its solutions in the coming years Lee Samaha (Synopsys): The boom in spending on AI applications has far-reaching consequences. For Synopsys, an electronic design automation (EDA) software, hardware, and services company, increased spending on AI semiconductors boosts the demand for its solutions for designing, implementing, and producing chips. Moreover, Synopsys's increased spending isn't just coming from its traditional semiconductor and electronics customers; hyperscalers (large-scale data centers that provide cloud computing services) are also customers. The deepening and broadening of demand will likely extend beyond semiconductor, electronics, and data center customers as more products have embedded chips. That's part of the reasoning behind Snopsys' acquisition of simulation and analysis software company Ansys, a company with a complementary technology (Synopsys and Ansys are longtime partners) but with a much broader client base. As such, the Ansys acquisition will add to Synopsys' already excellent growth prospects. According to Wall Street analysts, Synopsys is already set to grow sales at a mid-teens rate and free cash flow at a 30% rate over the next few years. However, the longer-term picture could look even brighter after the Ansys deal (set to complete in the first half of 2025) is complete. The broader industrial markets (for example, automotive, aerospace, and industrial products) that are already Ansys customers could also become Synopsys customers, and the ability to sell a comprehensive solution (design ad production solutions alongside simulation and analysis) is compelling. Astera Labs provides the computing backbone for AI and cloud infrastructure Scott Levine (Astera Labs): Nvidia has benefited considerably from the explosive growth in the AI industry, but it's hardly the only game in town. Those looking for an alternative option to Nvidia can direct their attention toward Astera Labs, a developer of connectivity solutions for cloud computing and AI applications. Unless you keep up with companies that have recently held their initial public offerings (IPO), Astera Labs may not be a recognizable name since it held its IPO less than a year ago, but that doesn't mean the AI-oriented stock doesn't warrant serious attention. The usage of AI and generative AI tools is escalating rapidly and shows no signs of slowing down. In order to meet the steep computing demands that these tools require, Astera Labs (which counts Nvidia and Advanced Micro Devices as its customers) provides several solutions to support the underlying computing infrastructure. In 2024, for example, the company introduced its Scorpio Smart Fabric Switches, which are specifically designed for AI infrastructure at cloud computing, and it has begun to ship limited quantities in anticipation of ramping up production. Growing revenue 242% year over year and reporting operating cash flow of $136.7 million (compared to negative $12.7 million in 2023), Astera Labs is coming off a strong 2024 and charging into 2025 -- a year in which management projected "to be a breakout year as we enter a new phase of growth driven by revenue from all four of our product families to support a diverse set of customers and platforms" in its fourth-quarter 2024 financial results press release. Since it's still the early innings for Astera Labs, there is great potential for investors to enjoy significant rewards from clicking the buy button. Of course, its inexperience as a public company also represents a higher degree of risk, so investors should be comfortable with a more speculative investment.

4 No-Brainer AI Chip Stocks to Buy Right Now | The Motley Fool

Spending on artificial intelligence (AI) infrastructure is set to see a big boost this year, which will undoubtedly help a number of semiconductor stocks with ties to AI chips. For example, the big three cloud computing companies -- Amazon, Microsoft, and Alphabet -- budgeted a combined $255 billion in growth capital expenditures (capex), largely related to AI infrastructure, this year. Meanwhile, Meta Platforms announced that it will spend up to $65 billion on AI infrastructure. Not to be outdone, a consortium of companies led by Japan's Softbank and OpenAI committed to spending $500 billion on AI infrastructure in the U.S. over the next few years through Project Stargate. Let's look at the AI chip companies set to reap the benefits. Nvidia (NVDA -4.05%) is the leader in graphics processing units (GPUs), which are the main chips used in AI training and inference due to their superior processing speeds. The chips were originally designed to help speed up graphics rendering in video games. But later, the company let customers program the chips for other tasks through its CUDA software program. Today, through its CUDA X platform, which was built on top of CUDA, it offers GPU-accelerated microservices and libraries designed specifically for AI. CUDA helped give Nvidia customers a superior experience and created a wide moat for the company. This can be seen in its approximately 90% market share in the GPU space. As such, the company is poised to be one of the biggest winners from increased AI infrastructure spending. In addition, the stock is attractively priced, trading at a forward price-to-earnings (P/E) ratio of 25 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.5, with PEGs below 1 considered undervalued. While Nvidia is the leader in mass merchant GPUs, Broadcom (AVGO -3.56%) has become the leader in helping customers design their own custom AI chips. While these application-specific integrated circuits, or ASICs, lack the flexibility of GPUs, they generally have better performance and more efficient power consumption for the specific task for which they were designed. Broadcom's first custom AI chip customer was Alphabet, as it helped it design its tensor-processing unit (TPU) called Trillium. Since then, it added other customers that are believed to include Meta Platforms, ByteDance, OpenAI, and most recently, Apple. Broadcom noted that just its top three customers could deploy up to 1 million AI chips in 2027, representing a $60 billion to $90 billion revenue opportunity in 2027. While Nvidia will likely get a nice piece of that revenue with its GPUs, Broadcom also has a huge opportunity as well. In addition, Broadcom also makes components needed for AI infrastructure such as switches and NICs (network interface cards). The stock is reasonably priced at a 30 times forward P/E. While Advanced Micro Devices (AMD -2.92%) is a distant second to Nvidia in the GPU space, the company carved out a niche with its GPUs for AI inference. As AI continues to grow, so will this market. However, where AMD shines is with its central processing units (CPUs) designed for data centers. While GPUs provide the power, CPUs provide the brains. Its EPYC CPUs continued to gain market share in the data center space. Last quarter, it said its market share was well above 50% at hyperscalers, which are companies that operate massive data centers. While the number of CPUs used in AI infrastructure is not nearly as many as the number of GPUs, they still play an important role, and this part of AMD's business should continue to grow. Meanwhile, its CPUs have also been gaining share in the personal computer (PC) space as well. The company should see good AI-related growth from both its CPU and GPU offerings. Trading at 24 times 2025 analyst estimates, the stock is attractively valued given the opportunity ahead of it. With more AI chips will come more chip manufacturing, which is where Taiwan Semiconductor Manufacturing (TSM -0.93%), or TSMC, steps in. The company is the leading semiconductor contract manufacturer in the world, counting companies like Apple, Nvidia, and Broadcom among its top customers. Chip manufacturing is not an easy process, and TSMC has become the clear leader and a valued partner to its customers in the chip-making process. With competitors such as Intel and Samsung struggling, TSMC garnered strong pricing power over the years and is slated to see a price increase this year as well. This led to both strong revenue growth as well as improving margins, which is a great combination. In addition, TSMC continues to expand its manufacturing capacity by building new foundries (chip-manufacturing plants) to keep up with demand. New facilities in Arizona and Japanese went online in Q4, and it currently has plans to build two more facilities, one in Arizona and one in Germany. Meanwhile, the stock is cheap, trading at a forward P/E of 22 times and a PEG of under 0.8.

Prediction: These 2 Artificial Intelligence (AI) Stocks Will Be the Biggest Winners of 2025 | The Motley Fool

These two players have what it takes to excel through each stage of AI development. Artificial intelligence (AI) stocks have driven the stock market higher, supercharging the bull market and leading the S&P 500 to its second consecutive year of double-digit gains. And this momentum is very likely to continue. That's because the AI growth story is in its early days -- the infrastructure build-out isn't over, and on top of this, the phase of applying AI to real world problems is just getting started. Analysts predict that today's $200 billion AI market will top $1 trillion by the end of the decade. All of this means it's not too late to get in on AI stocks. and these players could boost your portfolio as soon as this year. But how do you choose these potential winners? Companies that play key roles in the AI build-out and have the ability to also benefit as the use of AI, e.g., through AI agents, takes off make perfect candidates. My prediction is these two AI stocks, ones that can excel throughout the AI growth story, will be the biggest winners of 2025. Let's check them out. I know what you're thinking: Nvidia (NVDA) already has soared in this AI boom, so is this player really going to score yet another victory? It's true that this stock has climbed more than 800% over the past two years, but even considering that, the company today trades for only 30 times forward earnings estimates. This leaves plenty of room for growth, especially considering the company's position in the market. Nvidia is the world's No. 1 AI chip designer, and the biggest tech companies flock to this player for its latest innovations. In fact, Nvidia has said multiple times in recent months that demand for its new Blackwell architecture -- released over the fiscal fourth-quarter (Q4) ending in January -- has surpassed supply. The company has used words including "insane" and "staggering" to describe the level of demand. All of this bodes well for Nvidia's revenue growth in the months to come, and this could power the shares higher this year. This is on top of an already strong earnings picture, with revenue and profit soaring in recent quarters. Importantly, Nvidia has committed to ongoing innovation, promising to update its chips on an annual basis. This should make it very difficult for rivals to unseat this leader. As a result, Nvidia has what it takes to continue growing revenue over time. And this company isn't only relying on chips. It's developed an entire portfolio of products and services, so Nvidia should benefit from every stage of AI growth -- from the infrastructure build-out to the use of AI in our daily lives. All of this makes me optimistic about Nvidia's share performance potential this year and beyond. You may associate Amazon (AMZN) more with your shopping list than with AI innovation, but this company actually is one of today's biggest AI winners. Amazon benefits from AI through both its e-commerce business and its cloud computing unit, Amazon Web Services (AWS). In e-commerce, Amazon uses AI to streamline its operations and better serve its customers. For example, it uses the technology to predict consumer demand for certain products and design the best delivery routes. This helps Amazon gain in efficiency and therefore lower costs. But where Amazon really is hitting it out of the park is in the cloud business. AWS offers a broad range of AI products and services, from premium chips from Nvidia and its own in-house designed chips for cost-conscious customers to a fully managed service that offers customers access to popular large language models (LLMs) to tailor to their own needs. Through AWS, customers also can build their own AI agents, or software that can reason and apply solutions to real world problems. This could help Amazon excel during the next wave of AI growth, as businesses actually put AI into action. AWS' AI tools and services already have generated significant growth for the company, with the unit reaching a $115 billion annual revenue run rate last year. And since AWS is the biggest contributor to Amazon's overall profit, this is extremely positive. Now, let's consider Amazon's valuation. The stock is trading for about 34 times forward earnings estimates right now, down from more than 45 times just a few months ago. In light of Amazon's already proven strengths in AI and the potential for long-term growth as AI continues to develop, this level looks dirt cheap. And that's why I predict Amazon may be one of the biggest AI winners of 2025.

Why AI Stocks Meta Platforms, CrowdStrike, and Broadcom Are Rebounding Today | The Motley Fool

After struggling over the past week, large artificial intelligence stocks are in the green today, ahead of Nvidia's earnings report, which is due out after the market closes. Given the importance of Nvidia to the entire AI trade, the company's earnings results, guidance, and comments on broader AI trends have the potential to influence the entire sector and perhaps the broader market as well. Shares of Meta Platforms (META 2.59%) traded 3.5% higher as of 12:52 p.m. ET today. Shares of CrowdStrike (CRWD 4.19%) and Broadcom (AVGO 4.52%) both traded 5% higher at that time. Without question, investors are turning their attention to AI chip king Nvidia and the company's release of its fiscal year fourth-quarter and full-year earnings results after the market closes. Wall Street analysts on average project earnings per share of $0.85 and quarterly revenue to have grown 72% year over year to $38.1 billion. However, the market will also be paying close attention to CEO Jensen Huang's comments on a variety of topics critical to the broader AI ecosystem, including the emergence of DeepSeek and its broader implications on AI capital spending and how easy and inexpensive it eventually could be to replicate large language models. Furthermore, analysts will also likely question management about the Trump administration's potential policies regarding export controls on chips and how they may impact the company if they go into effect. In company-specific news, Meta might be in talks to build a new data center campus to house its artificial intelligence projects. The cost of the campus could surpass $200 billion, according to The Information, which first reported the news, citing anonymous sources. It seems that almost every other day, Meta is discussing some new massive AI infrastructure project, although a spokesperson from the company reportedly denied these rumors, calling them "pure speculation." Bank of America analyst Tal Liani reiterated his buy rating on CrowdStrike today and increased his price target to $420. Liani wrote that he expects the company to meet or beat consensus estimates when CrowdStrike reports its earnings on March 4. Liani believes the company's core business will continue to show growth, while there could be increased revenue from cross-selling and up-selling. While there wasn't a ton of news about Broadcom today, the company did announce yesterday the release of new technology that enables further interoperability between AI data centers. Nvidia's latest results clearly could be an inflection point for the AI sector. After dealing with some adversity in 2025, good results and guidance from Nvidia and positive comments from Huang could get AI stocks back on track. Meanwhile, bad results and comments that concern investors could mean further declines ahead. That said, these are short-term concerns. Longer term, AI stocks are still vulnerable to the higher-for-longer rate environment and potentially concerns over a weakening consumer and potential recession, although a recession could also bring further rate cuts. Trading at 90 times forward earnings, I don't see any need for investors to jump into CrowdStrike, despite the company running a solid business. Broadcom and Meta look a little more appealing these days, trading at nearly 34 and 27 times forward earnings estimates, respectively. Broadcom's custom chip business and Meta's ability to monetize AI have been highlighted by many analysts. I don't own any of these large AI stocks right now, but I think these are solid and more affordable options over peers.

2 Top Artificial Intelligence Stocks to Buy Right Now | The Motley Fool

Artificial intelligence (AI) applications will likely be a key determinant of economic growth for the next decade and beyond. However, the burgeoning AI industry is anything but static. Just last month, China's DeepSeek R1 model was a watershed moment, which showed that a top-performing large language model could be built at very low cost. The exact effect of DeepSeek on the industry is still not known today, but it does appear that AI is on its way to becoming cheaper, but also more pervasive. In that light, here are two companies that look to be in good position right now as the industry moves forward. Microsoft (MSFT -1.90%) has been a huge long-term winner, but has actually dramatically underperformed the Nasdaq Composite (^IXIC -2.20%) over the past year, up just 1.5% versus the Nasdaq's 23%-plus gain. Still, there's nothing fundamentally wrong with Microsoft. The past year's underperformance merely appears to be a consolidation period after a couple of years of strong gains. Likely, there will be another period of outperformance in the future, perhaps the near future. It may seem odd to recommend Microsoft now. After all, in late 2022 and early 2023, Microsoft was perceived as an early leader in AI thanks to its investment in OpenAI, the company behind ChatGPT. However, over the past year, Microsoft's cloud computing competitors appear to have caught up in the AI races, either through building their own competitive large language models or investing in other strong AI start-ups. Furthermore, OpenAI appears to be distancing itself from Microsoft. According to a recent report by The Information, OpenAI now plans to get three-quarters of its compute from Stargate by 2030, rather than Microsoft. Stargate is a massive data center project unveiled last month by OpenAI and SoftBank. But this doesn't appear to be an indictment of Microsoft's technical capabilities. Rather, it's merely that Microsoft CEO Satya Nadella isn't willing to spend tens of billions of dollars without a high probability of getting returns on those investments. Nadella has also previously noted Microsoft's massive AI investments have better corresponding demand signals than others'. This is because Microsoft's Azure cloud tends to serve large enterprises that will likely use AI at scale, rather than riskier start-ups. In fact, in a recent interview, Nadella predicted that by 2027 to 2028, there will likely be an AI "overbuild." But that doesn't particularly bother Nadella, as he says Microsoft will be able to then lease computing capacity at low rates. Nadella also said he doesn't give much credit to terms like "artificial general intelligence," or other nontangible milestones, but rather views AI success in terms of tangible financial improvements, such as increased efficiency and faster economic growth. This is all really encouraging to Microsoft investors. The last thing investors would want is for the company to spend huge amounts of money without a tangible payoff. Moreover, Nadella understands Microsoft's position as a cash-rich company with the ability to take advantage of other's mistakes. While Microsoft's stock hasn't really moved over the past year, it should still be a long-term AI winner and a safe tech stock to own through this transition. Another longtime tech winner that has underperformed recently is Applied Materials (AMAT -2.29%). In fact, Applied's stock is down over 9% over the past year. This is despite Applied beating revenue and earnings expectations every quarter over that time period. So, like Microsoft, Applied's recent stock performance merely seems like the business growing into its valuation after a couple of very strong years. But at just 22.5 times trailing earnings, this is a pretty solid value today for this long-term compounder. Applied is the largest, most diversified semiconductor equipment maker, with a big concentration in etch and deposition. Etch and deposition intensity is only going up for leading-edge chips, as innovations such as gate-all-around transistors and backside power delivery are just beginning to be implemented by leading-edge chipmakers. As AI logic chips incorporate these new innovations, Applied should outgrow the overall semiconductor industry, which itself should outgrow the overall economy. In addition, Applied has a strong position in lagging-edge chip equipment as well. Those segments are currently going into a downturn after a strong past of couple years. Moreover, Applied noted that about $400 million of its China sales will go away in the year ahead, due to newer restrictions that just came out in December. The combination may have caused Applied to sell off after its recent earnings report. But these headwinds are really a drop in the bucket; Applied has made over $27.6 billion in revenue over the past year. Management also guided to 6.8% year-over-year revenue growth in the current second fiscal quarter. That's not bad at all, considering the China headwind. Meanwhile, Applied's strong margins enable it to shower cash on shareholders via share repurchases and dividend increases. All in all, the recent pullback offers an excellent opportunity for long-term investors to add to their stakes.

3 Artificial Intelligence Stocks to Buy Like There's No Tomorrow | The Motley Fool

Artificial Intelligence (AI) continues to look like it has the potential to be a game-changing technology that helps shape the world we live in. It also has the potential to be one of the best areas to invest in over the long haul. That is, if you make the right AI investment decisions. Not every AI-related stock will generate live-changing returns, but there are some already doing that (with the potential to keep doing it). Let's look at three AI stocks to buy like there is no tomorrow. That's a lot of money being directed toward AI infrastructure, and Nvidia will capture its fair share of this spending. While Amazon and Alphabet use some custom AI chips, they also both use Nvidia's GPUs. Meanwhile, Nvidia has about a 90% market share in the mass-merchant GPU market due to the wide moat it has created with its CUDA software platform and CUDA X AI microservices and libraries, which have proven to be superior to rivals such as Advanced Micro Devices. Meanwhile, Nvidia's stock remains attractively valued, trading at a forward-price-to-earnings (P/E) ratio of 25 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.5, with PEGs under 1 usually viewed as undervalued. When it comes to AI, Alphabet owns one of the leading cloud computing companies, Google Cloud, which is benefiting from increasing AI demand. In Q4, Google Cloud's revenue jumped 30% to $12 billion, while the unit's operating income surged 142% to $2.1 billion. Like other cloud providers, the company's growth is being restrained by capacity constraints, which is why it is increasing its capital expenditures (capex) to keep up with demand. In addition to using Nvidia GPUs, the company developed its own custom AI chips with the help of Broadcom, called TPUs (tensor processing units), which it says help lower costs and inference times. This should help give the company some cost advantages and allow it to continue to improve its Google Cloud operating margins. Meanwhile, the company made its Gemini 2.0 AI model available to the public earlier this month and has begun incorporating it into its search and AI Overviews to be able to answer more complex questions, solve mathematical equations, and even help with coding. With the company historically only serving ads on about 20% of its search queries, monetizing its AI overviews and Gemini through ads could be an eventual big growth driver. The company has also developed a number of other strong AI products, including its Veo 2 text-to-video generator that looks vastly superior compared to OpenAI's Sora, which was launched around the same time. In addition, Alphabet has taken the lead in other cutting-edge technologies such as quantum computing and autonomous driving, with its Waymo unit the only company currently offering paid robotaxi rides in the U.S. The stock is also inexpensive, trading at a forward P/E of just 18 times. Customer relationship management (CRM) software company Salesforce (CRM -2.71%) is looking to be the leader in the next big evolution of AI with agentic AI. While users can create content through various prompts with generative AI, agentic AI takes it a step further, where AI agents can go out and perform tasks autonomously with little human supervision. For example, generative AI can provide you with a recipe and plan a meal, while with agentic AI it can go out and order all the ingredients needed for the meal. Salesforce entered the agentic AI market with its new Agentforce solution. Its platform offers both out-of-the-box AI agents that can handle specific tasks such as customer service, as well as low-code and no-code tools that can be used to customize its AI agents. Salesforce has said that if you can describe the job, Agentforce can create an AI agent for it. Agentforce is a consumption-based solution that costs $2 per conversation, so the more customers find its agents useful, the bigger the opportunity it is for the company. Thus far, the platform has seen strong demand from Salesforce customers. After being launched in October, Salesforce announced in mid-December that it already had more than 1,000 deals in place. Earlier, it projected that it would have 1 billion AI agents deployed by the end of its fiscal year 2026 (ending January 2026). Trading at a forward P/E of under 26 times with a PEG below 0.6, the stock is attractively valued given the big potential opportunity in front of the company.

Billionaire David Tepper Just Sold Shares of Amazon, Meta, and Oracle, and Bought Shares of Last Year's Top-Performing Dow Jones Stock and Big AI Winner | The Motley Fool

Artificial intelligence (AI) stocks have been major market movers in recent quarters -- and for good reason. AI promises to join many other discoveries and technologies that have been game changers. JPMorgan Chase Chairman Jamie Dimon has said AI could be as transformational as electricity and the internet. So, it's no surprise that investors have been piling into potential AI winners. But, there are so many AI stocks out there that you may be wondering how to choose those that will indeed score an AI victory. The good news is there's room for more than one success story in this space, and that means there are plenty of moves investors can make today that should lead to portfolio growth over the long term. You don't have to worry about making one key decision or investing in just one stock. Still, it's a great idea to consider what experts are doing these days, as sometimes we can add some of their ideas to our own investment plan. And with this in mind, I'm taking a look at recent moves by billionaire David Tepper. The founder of Appaloosa Management has proven his strengths over time with the fund delivering an annualized average return of 28% since its launch back in the early 1990s. How is Tepper investing right now to win in AI? Let's find out. The billionaire is a big investor in technology stocks, with a particular focus on well diversified e-commerce companies: Appaloosa Management's two biggest holdings as of the end of the latest quarter were Alibaba and Amazon (NASDAQ: AMZN). But in the quarter, the fund slightly lowered its positions in certain tech stocks -- including Amazon -- in favor of one stock that's been roaring ahead in the AI race and led gains in the Dow Jones Industrial Average last year. Here are the details of Tepper's sells, according to a summary of its trades in the fourth quarter of 2024: And here's the AI buy in the most recently reported quarter: Of course, Tepper's biggest AI bets remain Amazon and Oracle as they make up a larger part of his portfolio. But the move to increase his position in Nvidia signals he sees more potential ahead for this AI leader, even though the stock has soared about 800% over the past two years. So, should you follow Tepper's move and buy Nvdia shares? I think so. What I like about Tepper's AI strategy is that he's invested across many top players that already are benefiting from AI. For example, Amazon's cloud business recently reached a $115 billion revenue run rate thanks to its AI products and services. And Oracle says "record" AI demand drove its cloud infrastructure revenue up more than 50% in the latest quarter. Even though Tepper reduced some of these positions, he's still well diversified across these high-potential companies and isn't betting on just one player. But the move to increase the Nvidia stake was a smart one -- and the tech giant makes a great buy for any investor looking to potentially score an AI win. Nvidia dominates the AI chip market and also is a powerhouse across the industry as it offers a broad range of related products and services. This has been driving double- and triple-digit revenue growth quarter after quarter, and Nvidia's focus on innovation suggest this could continue well into the future. And right now, the stock is trading for a particularly low valuation, at only 29 times forward earnings estimates, offering investors a fantastic entry point. All of this means it's a great idea to follow billionaire David Tepper by holding a variety of strong AI players...and picking up more shares of Nvidia.

Should You Forget Nvidia and Buy 2 Artificial Intelligence (AI) Stocks Instead? | The Motley Fool

Nvidia (NVDA -2.80%) has undoubtedly been the poster child of the artificial intelligence (AI) boom. This is evidenced by its share price, which absolutely skyrocketed, rising 1,800% in the past five years. Today, Nvidia is the second most valuable enterprise on Earth. Investors who want exposure in their portfolios to the AI trend probably have Nvidia at the top of their watch lists. However, it can be disconcerting knowing that you missed out on tremendous past gains. Maybe this is a sign that it's time to look elsewhere. Should you forget Nvidia and buy these two AI stocks instead? Investors should take a closer look at Alphabet (GOOGL -2.14%) (GOOG -2.11%) and Meta Platforms (META -1.59%). They own some of the world's most powerful internet properties, like Google Search, YouTube, Android, Google Cloud, Facebook, Instagram, and WhatsApp. There are billions of users on these platforms each day. Alphabet and Meta are uniquely positioned in the AI wars. They have a massive number of users and ad customers to whom they can introduce new AI features with instant adoption. This means rapid feedback that can inform product iterations. What's more, the success of various initiatives, like AI tools offered within the Google Cloud platform, AI responses in Google Search, or the Meta AI assistant, indicate a strategy that's working to improve utility for customers. They also have virtually unlimited data at their disposal to train their large language models. These companies are also in strong financial shape. They are extremely profitable, giving them the ability to invest aggressively. Alphabet plans to spend $75 billion on capital expenditures this year, while Meta estimates over $60 billion. This money will support expanding technical and networking infrastructure to bolster AI capabilities. There's been so much attention, excitement, and capital directed toward the AI race. As it's been more than two years since the launch of ChatGPT, I think it's safe to say that this revolutionary technology isn't going away anytime soon. The issue, however, is that investors might struggle to find value when putting money to work. Again, here's where Alphabet and Meta shine. Their valuations aren't unreasonable. Alphabet and Meta trade at price-to-earnings (P/E) ratios of 22 and 29. This makes them the two cheapest stocks of the exclusive "Magnificent Seven" group. I believe it's worth discussing why investors should pass on Nvidia right now. The valuation is one area that might cause some hesitation. As of this writing, shares trade at a P/E ratio of 53. This represents a substantial premium to both Alphabet and Meta. To be fair, though, Nvidia's impressive earnings trajectory might justify paying that valuation, which looks cheaper the further you extend the time horizon. But I don't think investors should ignore some red flags that challenge the company's rosy outlook. For starters, it faces extreme customer concentration. So-called hyperscalers like Alphabet, Meta, Microsoft, and Amazon are believed to be the top buyers of Nvidia chips. This setup has worked beautifully for Nvidia due to unbelievable demand, but it adds tremendous risk if an account lowers orders or drops off altogether one day. This is precisely what could happen in the future. Although they are currently spending lots of money with Nvidia, these tech giants are all developing their own graphics-processing units. Successfully integrating upstream would result in less dependence on Nvidia over time. I'll also point to a drastic scenario that could happen in an economic downturn. Should there be a recession that restricts the flow of capital, hurts the confidence of corporate executives, or leads to high unemployment, there could be a sharp decline in tech spending, especially since the return on these massive investments is still uncertain. Nvidia's rise has been spectacular, but perhaps it's time to consider buying Alphabet and Meta to gain exposure to the AI trend.

5 Top AI Stocks I'm Buying on the Dip | The Motley Fool

Artificial intelligence (AI) stocks took a rare tumble last week, hit by a perfect storm of market pressures. Alarming inflation data, mounting geopolitical tensions, and growing concerns about valuation levels all contributed to the sell-off. The Consumer Price Index (CPI), which tracks the average price changes of common goods and services that Americans buy, showed prices rising 0.5% from December, the fastest monthly increase since August 2023, pushing the annual inflation rate to 3%. This unexpected jump in inflation rattled markets across the board last week. Add in escalating global tensions and questions about whether AI stocks have run too far, too fast, and you have a recipe for market jitters. While these multiple headwinds can feel overwhelming, especially when they send high-quality AI stocks into a tailspin, these pullbacks often create prime buying opportunities for long-term investors. Here are five AI stocks I'm planning to buy in the wake of this latest dip. Nvidia (NVDA -4.05%), the dominant force in AI computing infrastructure, fell 3.1% last week. The stock's forward price-to-earnings ratio of 31.4x represents a modest premium to the benchmark S&P 500 (^GSPC -1.71%), which trades at 24 times forward earnings. Nvidia's graphics processing units (GPUs) power most of today's AI applications, and its software ecosystem creates powerful network effects that competitors struggle to match. With growing investments in AI software applications, advanced robotics, and data center solutions, Nvidia has expanded well beyond its GPU roots. This dip offers a chance to buy into the one company that is arguably in the best position to capture value across multiple layers of the AI technology stack. Palantir Technologies (PLTR -4.63%), riding the accelerating AI platform adoption trend, fell 15% last week. Despite its incredible forward price-to-earnings (P/E) ratio of 178x, the company's Q4 2024 results showcase the blistering growth behind this staggering premium. Palantir's data analytics platforms have become essential tools for defense and intelligence operations, with commercial applications expanding rapidly. Speaking to this point, the company closed 129 deals worth at least $1 million in Q4 alone while generating $517 million in adjusted free cash flow, demonstrating both strong growth and improving profitability. With its proven technology now scaling rapidly across the commercial sector and margins expanding, this pullback offers a chance to buy into Palantir's accelerating AI-driven transformation at a more attractive price. Poet Technologies (POET -6.78%), which is developing next-generation AI infrastructure solutions, fell 10.6% last week. While the company's shares trade at a mind-bending 1,920x trailing sales, its optical interposer technology could fundamentally reshape data center interconnects, a fact that may justify this sizable premium. Poet's photonic integrated circuits address a critical bottleneck in AI computing: data center efficiency. The latest test results show significant performance gains, and major cloud providers are actively evaluating the technology. Thus, Poet seems to be at an inflection point. As a result, last week's double-digit drop may prove to be an attractive entry point into a company that could become essential to the next generation of AI infrastructure. SoundHound AI (SOUN -5.50%), a leader in voice AI technology, fell 6.3% last week. Although its trailing price-to-sales ratio of 46.8x is high for a small-cap tech stock, this premium valuation reflects the company's rapid revenue growth and expanding market presence. SoundHound's conversational intelligence platform outperforms traditional solutions in both accuracy and flexibility. This superior performance has helped the company secure strategic partnerships with leading automotive manufacturers and popular fast-food chains. As a result, its advanced voice AI technology is well-positioned to become an essential tool for major brands in the coming years. Last week's pullback presents an opportunity to invest in a pure-play voice AI company, as this technology is becoming increasingly critical to human-machine interaction. Serve Robotics (SERV -8.32%), a pioneer in autonomous last-mile delivery, dropped 13.2% last week. Its shares are currently trading at 306 times trailing sales -- a significant premium compared to the S&P 500 and most tech stocks. The company has rapidly expanded its autonomous delivery fleet, completing tens of thousands of deliveries in partnership with Uber and 7-Eleven. Additionally, a major expansion is underway, with an agreement to deploy up to 2,000 robots for the Uber Eats platform this year. With rising labor costs and growing demand for delivery services, major retailers and restaurant chains are accelerating their automation strategies. This recent dip thus presents a timely opportunity to invest in a leader in autonomous delivery before widespread commercial rollouts drive substantial revenue growth. Each company represents a different approach to profiting from the AI revolution, from established leaders to emerging innovators. While their valuations vary widely, all five stocks offer compelling opportunities for long-term investors willing to weather short-term volatility.

2 Hyper-Growth Tech Stocks to Buy in 2025 | The Motley Fool

Investors thinking capital spending to build artificial intelligence (AI) infrastructure will continue to soar were thrown a curveball earlier this year. China's privately held DeepSeek announced its new R1 large language model (LLM) cost only $6 million to build, and big AI tech stocks plunged. But it's unclear exactly what went into building DeepSeek's model, and large U.S.-based tech companies reiterated plans to continue to spend billions to grow data center and AI compute power in 2025. With those capital expenditure plans still on track, investors should look for the following two growing tech stocks to benefit. Amsterdam-based Nebius Group (NBIS -13.87%) grew out of the restructuring of Russian search engine giant Yandex. The Nasdaq stock exchange halted trading in Yandex after Russia invaded Ukraine. After a Russian consortium purchased its Russian assets, the restructured company resumed trading on the exchange last October as Nebius Group. The company is now made up of its core AI infrastructure business as well as three additional businesses. Those businesses include AI development data partner Toloka, educational technology business TripleTen, and autonomous driving and delivery robot maker Avride. Nebius' first full year trading on the Nasdaq exchange is off to a great start with a 67% gain year to date. That's because its business is growing quickly. Quarterly revenue has jumped from just $11.4 million in the first quarter to about $38 million in the just-reported fourth quarter. Full-year 2024 revenue reached $117.5 million, and management sees that continuing to accelerate. CEO Arkady Volozh called plans to achieve as much as a $1 billion annual revenue run rate by the end of 2025 "well within reach." Also, the restructuring left its balance sheet in pristine shape. The company ended the fourth quarter with $2.45 billion in cash and negligible debt. That's more than a quarter of the company's total $9.3 billion market cap. Investors aren't the only ones noticing. Leading AI chip and software company Nvidia (NVDA -4.05%) participated in a $700 million private funding round in December. Nvidia also owns more than 1 million shares of Nebius stock worth about $33 million. That investment was made in the fourth quarter, according to Nvidia's recently released Form 13F filing. Speaking of Nvidia, as large as it has become, the company still has great growth potential. Fears that capital spending on AI infrastructure would stall were premature. Several large growth tech companies have recently announced spending plans for 2025. Microsoft, Meta Platforms, Amazon, and Alphabet have confirmed plans to spend at least $300 billion combined in ongoing AI capital expenditures through this year. That helps support analyst views that DeepSeek excluded costs when announcing that it created its R1 LLM for just $6 million. Costs related to research, trial architectures, data, and algorithm work may not have been included. After the DeepSeek release, the state-owned Bank of China even announced it would be spending about $137 billion over the next several years to support the AI supply chain. While investments in Nvidia's AI hardware and software haven't stalled, the stock price has been range-bound over the past several months. That offers investors a chance to own shares before another surge in the company's business. Nvidia will report fiscal fourth-quarter results on Feb. 26. That's when the company should provide updates on sales of its Blackwell architecture and potentially the timing for its next-generation Rubin AI platform. While revenue growth rates might slow, any sign that sales can continue to increase over the next 12 months could be a catalyst for the stock. Nvidia also has other growing segments including gaming, automotive, and robotics. The latter helps explain its interest in owning shares of Nebius. Nebius' Avride business focuses on autonomous driving technologies for self-driving cars and delivery robots. The investment case for Nebius relies on management's predicted revenue run rate through 2025 as well as the almost $2.5 billion in cash on its balance sheet. If it achieves the high end of its 2025 revenue target run rate, it's currently trading at a forward enterprise value-to-sales ratio of less than 7. That's very reasonable for a high-growth tech stock. Both of these fast-growing AI companies should be considered for investments in the technology space in 2025.

Prediction: 2 AI Stocks Will Be Worth More Than Apple Stock by the Year's End in 2025 | The Motley Fool

Among the 58 analysts following Microsoft, the average target price is $510 per share. That implies 25% upside from its current share price of $408. It also implies a market value of $3.8 trillion. Here is what investors should know about these artificial intelligence stocks. Nvidia dominates the market for data center graphics processing units (GPUs), semiconductors used to accelerate complex workloads like scientific computing and artificial intelligence (AI). Analysts estimate Nvidia GPUs account for more than 80% of AI accelerator sales. And AI accelerator spending is projected to increase at 29% annually through 2030, according to Grand View Research. Nvidia will likely concede some market share as companies explore custom AI solutions from Broadcom, but analysts generally expect the chipmaker to maintain its dominant position for many years. By 2030, Vivek Arya at Bank of America estimates Nvidia will still account for 75% of AI accelerator sales, and Christopher Rolland at Susquehanna puts that figure at 77%. Nvidia reported financial results for the third quarter of fiscal 2025 that exceeded estimates on the top and bottom lines. Revenue increased 94% to $35 billion, and non-GAAP (generally accepted accounting principles) earnings soared 103% to $0.81 per diluted share. That was the sixth straight quarter in which Nvidia recorded triple-digit earnings growth. "The age of AI is in full steam, propelling a global shift to Nvidia computing," said CEO Jensen Huang. Wall Street estimates Nvidia's earnings will increase 49% over the next year. That makes the current price-to-earnings (P/E) multiple of 53 looks relatively cheap, and it's well below the average P/E ratio of 62 in the past year. From that starting point, the average target price of $175 per share is very plausible, meaning Nvidia could easily top Apple's current market value before the end of 2025. Microsoft is the largest enterprise software company and the second-largest public cloud, as measured by revenue. The company is exploiting its strong presence in those markets to monetize artificial intelligence. For example, Microsoft 365 Copilot is a generative AI assistant embedded in applications like Word, Excel, and Teams, and Copilot Studio lets businesses design custom AI agents. Similarly, Microsoft Azure AI is a suite of cloud services that facilitates the development of AI applications. One component is particularly important. Through Azure OpenAI Service, the company provides access to large language models (LLMs) from OpenAI, including those that power ChatGPT. Developers can fine-tune those LLMs to build custom generative AI applications like customer service chatbots and sales assistants. Microsoft reported reasonably good financial results in the second quarter of fiscal 2025, beating estimates on the top and bottom lines. Revenue increased 12% to $69.6 billion, and GAAP earnings increased 10% to $3.23 per diluted share. "Our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year over year," said CEO Satya Nadella. Wall Street expects Microsoft's earnings to grow 13% during the next year. Comparatively, the current valuation of 33.5 times earnings is reasonable. In fact, shares have not been that cheap at any point during the previous 15 months, meaning investors have an unusually compelling opportunity to purchase a stock that typically trades at a premium. Additionally, from the current valuation, the average target price of $510 per share -- which puts Microsoft's market value at $3.8 trillion, above Apple's current market value of $3.6 trillion -- seems like a very plausible outcome if the company meets or exceeds Wall Street's earnings estimates in the next few quarters.

6 AI stocks that could 10X and one that might 100X

Artificial Intelligence (AI) is evolving as a transformative technology, prompting significant investment opportunities. Several companies are positioned to capitalize on this trend, making them attractive for long-term investment. Nvidia (NVDA) stands out as a leader in AI infrastructure spending, supplying essential graphic processing units (GPUs) that power AI model training and inference. The company is positioned favorably as major tech players, including Microsoft, Amazon, and Alphabet, increase their AI-related capital expenditures, collectively directing substantial funds toward AI infrastructure. Nvidia's GPUs hold a 90% market share in the mass-merchant GPU sector and maintain a competitive advantage through its CUDA software platform and associated libraries. The stock is valued with a forward price-to-earnings (P/E) ratio of 25 based on 2025 estimates and a price/earnings-to-growth (PEG) ratio of 0.5, indicating undervaluation. Alphabet, through its Google Cloud division, reported a 30% revenue increase to $12 billion in Q4, coupled with a 142% surge in operating income to $2.1 billion. The company is addressing capacity constraints by boosting capital expenditures. It utilizes Nvidia's GPUs while also developing its custom tensor processing units (TPUs) to enhance cost efficiency and operating margins. Alphabet has recently made its Gemini 2.0 AI model publicly available and integrated it into its search services. The stock trades at a forward P/E of 18. Salesforce (CRM) is innovating with its new Agentforce solution, which introduces agentic AI capable of performing tasks autonomously, enhancing the customer relationship management sector. The platform has demonstrated strong demand since its October launch, with over 1,000 deals established by mid-December. Agentforce operates on a consumption-based pricing model, charging $2 per conversation, with a goal of deploying 1 billion AI agents by the end of its fiscal year 2026. The stock has a forward P/E of under 26 and a PEG below 0.6. Palantir Technologies (PLTR) focuses on custom AI software development for government and enterprise clients. Its recent AIP platform has advanced its offerings significantly since 2023, generating $2.87 billion in revenue last year from only 711 clients. As AI technology becomes more cost-effective, Palantir aims to tap into the vast market of large corporations in the U.S. While the stock is currently at an aggressive valuation, it holds long-term potential for growth. Apple (AAPL) plans to leverage its extensive ecosystem, with over 2.35 billion active iOS devices, to deliver consumer-level AI technology. The company introduced Apple Intelligence, a suite of AI features and tools, though user reception has been mixed as the technology matures. Questions remain regarding Apple's valuation as growth has stagnated in recent years, compounded by Berkshire Hathaway reducing its stake in the company. Meta Platforms (META) is capitalizing on AI to extend its business beyond traditional boundaries. It has launched an open-source AI model, Llama, aiming to attract developers while boasting over 700 million monthly active users. Meta's AI initiatives are focused on enhancing its digital advertising capabilities and exploring new consumer devices. Following a difficult period when the stock dropped below $100 in 2022, it has rebounded, now trading over $700, reflecting both user growth and robust advertising performance. Unlike traditional technology cycles, AI is being embedded across multiple industries, from healthcare and finance to manufacturing and defense. The demand for AI-powered solutions is driving massive capital expenditures, with companies and governments pouring billions into AI infrastructure, cloud computing, and specialized chipsets. As AI models improve in accuracy, efficiency, and scalability, their adoption will only accelerate, fueling further investment and innovation. Historically, transformative technologies -- such as the internet, mobile computing, and cloud software -- have created trillion-dollar markets. AI has the potential to follow the same trajectory, if not exceed it. The combination of high-margin software, specialized hardware, and industry-wide integration suggests that we are still in the early innings of AI's economic impact. Investors who identify the right trends and companies early stand to benefit from outsized returns. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Roundtable: If I Could Only Own 1 Artificial Intelligence (AI) Stock, This Would Be It | The Motley Fool

Investing, especially in the artificial intelligence (AI) field, is fraught with uncertainty. Some stocks have returned 1,000% or more in a relatively short time, while others with potentially promising growth prospects ended up losing money for investors. Such possibilities make investing in just one AI stock too risky to consider. Since no rules limit the number of AI stocks that an average investor can own, no shareholders should consider such a strategy. Nonetheless, investors can often find high-quality choices by pondering what stock they might choose if they could only buy one AI stock. After considering this question, Motley Fool contributors have ideas on the stock each of them would choose under such limitations. Jake Lerch (Amazon): My choice is Amazon (AMZN -2.83%). The reason I would choose Amazon above many other AI-related stocks like Nvidia, Palantir, and CrowdStrike Holdings -- which I still think are excellent investments -- is that Amazon's massive reach will allow it to put AI-powered tools to work at scale, driving tremendous amounts of profit for the company. For example, let's put Amazon's size into perspective. Over the last 12 months, the company generated about $638 billion in revenue. That ranks second among American companies, trailing only Walmart. Indeed, Amazon is so big that its total sales are roughly equal to those of Microsoft (MSFT -1.90%), Nvidia, Tesla, and Meta Platforms -- combined. That's important because advances in AI are likely to drive enormous gains in productivity throughout the entire economy. Higher productivity means higher profits, and therefore, the companies with the highest amounts of revenue stand to benefit the most from these gains. Amazon has invested -- and is continuing to invest -- tens of billions of dollars into AI infrastructure. And those investments are already paying off. In its most recent quarter (for the three months ending on Dec. 31, 2024), Amazon's operating margin hit 11.3%, the highest in the company's history. Undeniably, much of the credit for the company's rising profitability goes to AI. Amazon now uses AI in numerous ways, including: What's more, many of these tools become more effective as they scale, meaning that Amazon can hope to generate even more profit over time. That's great news for Amazon shareholders, and it's why Amazon is the company I would choose if I could only own one AI stock. Will Healy (Advanced Micro Devices): Investors have several excellent options when it comes to AI investing, but at this particular time and place, I choose AMD (AMD -2.92%). At first glance, this choice may seem counterintuitive. AMD's MI325X AI accelerator may not be as advanced as Nvidia's Blackwell GPU. Moreover, it has significantly trailed Nvidia in revenue growth and stock performance. That underperformance has contributed to a significant decline in the semiconductor stock. Now, it sells at close to a 50% discount from its peak last March. However, despite such challenges, conditions may soon begin to go AMD's way. For one, the DeepSeek breakthrough, which can run AI models on significantly less computing power, could stoke demand for AMD's lower-cost processors. The data center segment, which designs its AI accelerators, now accounts for about half of the company's revenue. The company has other chip-related segments as well, and it should also benefit from its growing AI capabilities. AMD's client segment, which makes PC chips, has benefited from its technical lead over struggling PC giant Intel. Also, revenue declines have dramatically slowed in its embedded segment, and its long-suffering gaming segment should eventually recover from its cyclical downturn. In 2024, AMD's revenue of $26 billion rose 13% compared to year-ago levels. Still, with Q4 revenue up 24%, the accelerating revenue growth should bode well for its stock performance. Additionally, the factor that arguably makes AMD the choice for today is its valuation. Although its 2024 net income of $1.6 billion helped lead to a 116 P/E ratio, the prospects for improved profit growth have taken its forward P/E ratio down to 24. Few fast-growing AI stocks sell for such a low valuation, meaning that buying now could boost investor returns amid a recovery. As mentioned before, investors should avoid owning one AI stock if possible. Still, if one wants a diversified AI-driven business at a reasonable price, AMD stock is an excellent option. Justin Pope (Microsoft): Sometimes, swinging for a home run isn't necessary. If AI is as big a deal as it looks, investors don't need to overcomplicate the investing angle. Technology conglomerate Microsoft is already one of the world's most prominent companies, making it an easy winner for AI. Its consumer and enterprise software has dominated the computer market for decades, with a deeply embedded user base perfect for deploying AI features. Then there's the cloud business. Azure is the world's second-largest cloud platform, and Microsoft's massive balance sheet and deep pockets make it a leading AI hyperscaler. Microsoft is spending billions of dollars building data centers to support global AI adoption. Analysts believe AI demand will fuel 22% annualized revenue growth in the worldwide cloud services market through 2030, pushing the market to over $2 trillion. It's a tremendous growth opportunity that will directly benefit Microsoft. That's the meat and potatoes of today's AI opportunity. Like the internet, AI will probably lead to new markets and innovations. Investors can reasonably expect Microsoft to participate in emerging growth trends. For example, it's already researching quantum computing and recently announced a breakthrough in chip design. That's the beauty of Microsoft; you get a proven winner with a fantastic existing business, plus the upside of the company's future projects. There will be smaller, emerging stocks that outperform Microsoft. However, you might have a winner for every few stocks that lose money. You will likely make money with Microsoft if you give the stock time. The company generates tens of billions of dollars of cash profits annually, pays a growing dividend, and has its fingerprints across the entire technology sector. Plus, it has a higher credit rating than the U.S. government. Sometimes, a bird in hand is worth two in the bush. That's why Microsoft is the best AI stock to own.

2 Top Artificial Intelligence (AI) Stocks Ready for a Bull Run | The Motley Fool

Artificial intelligence (AI) has started moving the needle for many companies that have been integrating this technology into their businesses or are offering AI-focused solutions to their customers, and that's not surprising as AI is expected to drive productivity gains in the industries where it is being deployed. Meta Platforms (META -1.62%) and Snowflake (SNOW -3.82%) are two companies that have embraced AI and are witnessing an increase in spending by customers on their offerings. While Meta is offering AI-focused advertising tools to its customers to help them automate and optimize ad campaigns, Snowflake is providing data center infrastructure to its customers so that they can build generative AI applications using their proprietary data. What's worth noting is that both stocks have started 2025 on a solid note, clocking 20%-plus gains already as of this writing. The good part is that the growing demand for their AI-based solutions could help them sustain their bull run in the future as well. Let's look at the reasons why. Meta Platforms has been gaining a bigger share of the digital advertising market thanks to AI. This is evident from the 22% increase in the company's revenue in 2024, which was double the growth in the global digital ad market last year. Japanese advertising and public relations company Dentsu is projecting $513 billion in digital ad revenue in 2027, and it won't be surprising to see Meta capturing a major share of this lucrative opportunity. That's because Meta's AI-specific ad solutions, such as automated audience targeting, creative enhancements to make ads more appealing, and generative AI tools that help create images and text for ad campaigns, are resonating with customers. That's not surprising as Meta estimated that advertisers using generative AI features are likely to save five or more hours a week on creative tasks, which they can direct toward strategy tasks. The tech giant claimed last year that the integration of AI tools discussed above led to an impressive jump of 32% in returns on investment (ROI) for advertisers and brands using the technology to launch and manage ad campaigns. What's more, Meta points out that AI has reportedly enabled advertisers to reduce the cost of customer acquisition by an impressive 17%. All this explains why Meta has seen a significant jump in the number of advertisers using its AI tools. CFO Susan Li pointed out on the company's January earnings conference call that it has seen a 4 times jump in the number of advertisers using generative AI tools in just six months. More importantly, Meta is launching more AI tools, such as a video generator, suggesting that it could attract more advertisers to its platform. Moreover, advertisers are willing to pay more to advertise on Meta's platform. It witnessed a 14% year-over-year increase in the average price per ad in the fourth quarter, indicating that the stronger returns that it is delivering to advertisers thanks to AI have improved its pricing power. So, it is easy to see why analysts have increased their growth expectations from Meta. But then, the company could deliver stronger growth than analysts' expectations if it continues to grow at a faster pace than the digital ad market and encourages advertisers to spend more money across its properties thanks to higher ROI and a huge user base. As such, there is a solid chance that this "Magnificent Seven" stock could deliver more upside and continue its bull run. Snowflake's cloud-based data platform was originally meant to help customers securely consolidate and analyze data to help them build applications and generate relevant insights from their data, but now the company has started offering AI tools to its customers so that they can do more with their data. The company is offering multiple services such as Cortex AI and Snowpark Container which allow customers to build generative AI applications using their unstructured data. Snowflake's platform now gives customers access to popular large language models (LLMs), along with compute infrastructure powered by graphics processing units (GPUs) so that they can process AI workloads in the cloud without having to invest in expensive hardware. And now, Snowflake has launched a new service called Cortex Agents. This service is going to help customers retrieve data insights from their structured and unstructured datasets, which can be used by AI agents to make decisions autonomously. These AI-related offerings have helped Snowflake land more customer contracts. This is evident from the 55% year-over-year jump in the company's remaining performance obligations (RPO) in fiscal 2025's Q3 to $5.7 billion. That was nearly double the company's revenue growth rate during the quarter, and the sharp jump in this metric means that Snowflake is setting itself up for impressive long-term growth. That's because RPO is the contracted future revenue that has not been recognized yet. Given that the company is bringing in more AI-related services, there is a solid chance that it could witness higher spending by existing customers while also bringing new customers on board. The size of the huge cross-selling opportunity that Snowflake is sitting on thanks to AI can be judged from the fact that 3,200 of its 10,600-plus customers are currently using its AI features. As more of these customers expand their adoption of Snowflake's AI services, the company's revenue pipeline could continue to improve along with a stronger bottom-line performance from fiscal 2025's estimated earnings of $0.70 per share. Snowflake could be rewarded handsomely in the market thanks to its improving earnings power, which is why investors can consider buying this AI stock before its bull run gathers more momentum.

2 Stock-Split AI Stocks to Buy Before They Soar in 2025, According to Certain Wall Street Analysts (Hint: Not Nvidia or Broadcom) | The Motley Fool

Nvidia and Broadcom conducted 10-for-1 stock splits in 2024 to make shares more affordable. Their stock prices had appreciated substantially in the preceding years because both companies play a key role in the burgeoning artificial intelligence (AI) economy. Lesser known AI infrastructure companies Lam Research (LRCX 1.55%) and Arista Networks (ANET -0.50%) are in a similar position. They completed stock splits last year to reset their soaring share prices, but certain Wall Street analysts still anticipate significant gains for shareholders in the coming year. The analysts above are among the most bullish on Wall Street where Lam Research and Arista are concerned, so investors should treat their forecasts skeptically. But the stocks still warrant consideration given that both companies should benefit as AI infrastructure spending increases. The first step in semiconductor manufacturing is called deposition, which involves layering a silicon wafer with conducting and insulating materials. A light-sensitive coating is then applied to the silicon, and lithography machines print complex circuitry patterns on the wafer surface. Finally, etch systems are used to selectively remove materials added during deposition to reveal the pattern. Lam has a strong presence in two wafer fabrication equipment (WFE) categories. It is the leading supplier of etch systems, and it ranks second behind Applied Materials in deposition systems. Lam products are heavily used in memory chip production, but foundry customers like Taiwan Semiconductor also use its systems to make logic chips like central processing units (CPUs) and graphics processing units (GPUs). In all cases, Lam should benefit as artificial intelligence (AI) increases demand for semiconductors. Lam reported reasonably good financial results in the second quarter of fiscal 2025, which ended in December 2024. Revenue increased 5% to $4.3 billion, and non-GAAP net income increased 6% to $0.91 per diluted share. Importantly, AI is driving demand for more sophisticated semiconductor designs at the chip and packaging level. Lam is leaning into those opportunities, and management told analysts the company is on pace to gain WFE market share this year. Wall Street estimates Lam's adjusted earnings will increase at 10% annually through fiscal 2026, which ends in June 2026. That makes the present valuation of 26 times adjusted earnings a little expensive. But analysts in the past have regularly underestimated earnings. Lam beat the consensus by an average of 7% in the last six quarters. If that continues, the current price would look sensible. As a warning, Chinese customers accounted for about one-third of revenue in the recent quarter, making it Lam's most important geographic region. Trade tensions between the U.S. and Chinese governments could put downward pressure on that figure. Personally, I would feel more comfortable buying the stock if its price dropped 10% or so. But investors should definitely keep Lam on their watchlists. Arista provides high-performance networking solutions for enterprise and cloud data centers. The company complements its hardware portfolio, which includes switches and routers, with adjacent software for network automation, monitoring, and security. Arista is the leader in high-speed categories of the Ethernet switch market (i.e., 100+ Gigabit), with more than twice as much share as the closest contender, Cisco. Arista says two key innovations let it disrupt the market. First, it provides a single version of its Extensible Operating System (EOS) that runs across all its hardware and simplifies network management. Second, it relies entirely on merchant silicon (chips built by third parties) rather than designing its own chips. That lets Arista focus R&D spending on software development and affords customers flexibility in selecting chips. Arista reported fourth-quarter results that beat expectations on the top and bottom lines. Revenue rose 19% to $7 billion, and non-GAAP net income increased 31% to $2.27 per diluted share. The stock declined following the report because management said Meta Platforms accounted for 15% of revenue, down from 21% in the previous year. But Apple, Microsoft, and Oracle represented a greater percentage of total revenue. Data centers in the future will need to modernize their network infrastructure to keep pace with advancements in artificial intelligence. Arista is ideally positioned to capitalize on demand for faster networking equipment given its leadership position in high-speed Ethernet switches. Wall Street expects the company's adjusted earnings to increase at 14% annually through 2026. That makes the current valuation of 44 times adjusted earnings look a little pricey, but Wall Street has regularly underestimated its earnings. Arista beat the consensus forecast by an average of 15% in the last six quarters. If that continues, its current valuation would look quite reasonable in hindsight. Investors with a time horizon of at least three years should consider buying a small position today.

2 No-Brainer Chip Companies to Ride the Artificial Intelligence (AI) Investing Wave | The Motley Fool

When you hear about artificial intelligence (AI) investing, you may think of the software powered by the technology or the hardware that trains the model. However, investors should also think of the chips that go into these devices to power the AI models. The chip market is a huge investment opportunity, as these companies make chips for all competitors in the AI arms race, making them a neutral way to invest in the trend. Two of my favorite companies in this space are Taiwan Semiconductor (TSM -0.93%) and ASML (ASML -0.79%). Without these two, none of the technologies seen today would be possible, and both companies are vital suppliers in the AI arms race. Taiwan Semiconductor is a contract chip manufacturer, which means that companies like Apple and Nvidia design the chip, and then TSMC fabricates it. This is a great position to be in, as it allows TSMC to focus on being a top-notch manufacturer and not have to worry about marketing its products. Additionally, TSMC has the unique position of being able to sell to both sides of the competition, as TSMC manufactures chips for AMD as well as other custom AI accelerators that are competing against Nvidia for market share. As a neutral party, TSMC also has a great view of the future demand for AI chips. Over the next five years, Taiwan Semi's management is extremely bullish on the prospects of its AI-related chips. They project these chips will grow revenue at a 45% compound annual growth rate (CAGR) over that five-year period. That's rapid growth, and it all flows into the company's overall projected revenue growth rate of 20% for the next five years. Clearly, TSMC has some massive tailwinds blowing in its favor, and thanks to its culture of continuous improvement, it will continue to be a top chipmaker for some time. While ASML doesn't manufacture chips, it produces the machines required to make these cutting-edge chips. Its extreme ultraviolet lithography machines allow clients to lay the microscopic electrical traces on a chip, and it is the only company in the world with the technology to do so. This technological monopoly is unlikely to be overtaken, as it took decades of research and billions of investment dollars to get ASML where it is today. Because ASML's machines are essentially a gateway to producing the world's most powerful chips, its machines are highly regulated. There are many machines that ASML cannot sell to China, as the Netherlands (where ASML is based) and the U.S. do not want the devices to fall into China's hands, which could allow them to gain an advantage over Western countries in many important fields. While ASML is still allowed to sell some of its lower-powered models, the list of what it is allowed to sell to China is continuously shrinking. This caused ASML to tweak its 2025 revenue guidance from a range of 30 billion to 40 billion euros to 30 billion to 35 billion euros. However, this still indicates solid growth, as ASML generated 28.2 billion euros in sales during 2024. Regardless, ASML's machines are required in this high-end chip manufacturing process, so as the industry grows, so will its sales. TSMC's overall growth pace for the next five years (20% CAGR) is a good clue into the general direction of the chip market, and any growth there will help ASML's sales rise. Both stocks look attractively priced at their current levels. Taiwan Semiconductor is the cheaper of the two, trading for 22 times forward earnings. Considering that the S&P 500 (^GSPC -1.71%) trades at 22.5 times forward earnings, this shows that most investors value TSMC as a market-average stock. With how quickly Taiwan Semiconductor is expected to grow over the next five years, this seems like an error, and investors should use this cheap stock price now to their advantage to load up. ASML isn't as cheap as Taiwan Semi, but its technological monopoly status is also priced into its stock. At 30 times forward earnings, the stock is the cheapest it has been since the start of 2024, and this price isn't all that high when you factor in ASML's likely unassailable moat. With both stocks trading at a discount to their normal valuations, I think right now is an excellent time to scoop up both companies and let them sit in your portfolio for at least five years. With the substantial growth expected in the chip market during that time, these two will likely crush the market and make you a solid profit along the way.

3 Artificial Intelligence (AI) Stocks That I'm Buying and Holding Forever | The Motley Fool

Whenever I buy a stock, I intend to hold it for three to five years and then analyze whether it's worth holding for even longer. Over a time frame of that length, business results should take over as the key factor for stock performance rather than short-term market sentiment. However, there are a few stocks in my portfolio that I don't ever intend to sell, unless something drastic changes with their investment theses. Three of the stocks on this "hold forever" list look like fairly strong buys today. They are also heavily involved in the artificial intelligence (AI) arms race, and well positioned to take advantage of the massive technological shift that we're undergoing. Amazon (AMZN -2.83%) is a key part of most U.S. consumers' lives. Nearly everyone has purchased something on its marketplace before, and many people (including myself) do a significant amount of their shopping through its e-commerce platform. However, I'm more excited about its cloud computing business, Amazon Web Services (AWS), which provides computing power that clients can use to host websites, process data, or train AI models. Cloud computing allows clients to run their businesses in a more asset-light manner, as they can easily scale up or down the amount of processing power they use, and they don't have to buy or maintain the hardware themselves. AWS provided 50% of Amazon's operating income in Q4 despite accounting for just 15% of its revenue. Grand View Research forecasts that between now and 2030, the cloud computing market will grow at an annualized rate of 21% to $2.39 trillion. Amazon is perfectly positioned to take advantage of this massive growth trend. With Amazon having a firm grip on the consumer goods and cloud computing markets, it's a great stock to buy and hold. The investment thesis for Alphabet (GOOG -2.71%) (GOOGL -2.65%) shares many similarities to the thesis for Amazon. While Amazon dominates U.S. e-commerce, Alphabet rules search with the Google search engine. This legacy business generates a massive amount of money from advertising. Alphabet also has a cloud computing segment, and in Q4, Google Cloud's revenue rose by 30% year over year versus AWS's 19% growth. AWS remains much larger, generating $28.8 billion in revenue compared to Google Cloud, which generated $12 billion. Still, the same tailwinds apply to both. Alphabet also has made significant investments in AI, and its Gemini generative AI model has become a top performer in this space. While some investors were worried that Alphabet's tight grip on the search market would be weakened as AI was integrated into its competitors' products, Google has made similar changes, and thus far has largely maintained its wide lead in the space. Right now, you can scoop up Alphabet shares at a bargain valuation of 20.6 times expected forward earnings. Taiwan Semiconductor Manufacturing (TSM -0.93%) is on my buy-and-hold-forever list mainly because of its dominance in the chip foundry market. It is by far the largest player in this space and has the most advanced manufacturing capabilities. Tech giants like Nvidia and Apple task TSMC with manufacturing the chips that they design. All of those attributes put it at the heart of the AI arms race, and that position is having a massive effect on its financial results. Over the next five years, management expects its revenues from AI-related chips to grow at a compound annual percentage rate in the mid-40s. Companywide, they expect the compound annual revenue growth rate to approach 20%, which is particularly impressive considering TSMC's massive size. An investment in Taiwan Semiconductor is a bet that the world will continue to need a growing number of more technologically advanced chips. I think that's a no-brainer prediction, making Taiwan Semiconductor a fantastic stock to buy now and hold forever. With the stock trading at 22.6 times forward earnings, it looks like a good deal right now.