The widespread surge in interest in artificial intelligence (AI) can be traced back to OpenAI’s release of its ChatGPT chatbot in November 2022, driving stock markets higher for more than a year.
Since then, a few early leaders in AI technology have shot into the stratosphere. Powered by AI accelerator chip Nvidia‘s stock price is up more than 410% in 16 months.high performance computer system builder super microcomputer rose even faster, increasing by 1,100% over the same period.
I can understand the hesitancy to buy these rapidly rising AI stocks. What goes up doesn’t necessarily come back right away, but valuation risk is real.
But don’t worry. There are many ways to take advantage of the AI boom without relying on the most obvious (and perhaps overvalued) market darling.
At this point, Google’s parent company is poised for significant value and exciting AI-driven growth in the coming years. alphabet (GOOG 0.78%) (Google 0.77%) and chip manufacturers taiwan semiconductor manufacturing (TSM -1.90%).
Taiwan Semiconductor: Providing AI chips to a hungry world
Demand for AI-driven computing power is skyrocketing. Taiwan Semiconductor (abbreviated as TSMC) is at the center of this innovation.
During the fourth-quarter earnings call in January, CEO CC Wei said demand for faster, more energy-efficient chips will grow over time as more complex AI software requires more raw computing power. He pointed out that the number should continue to increase over time. As an industry-leading provider of advanced manufacturing technology, Wei’s company is poised to benefit from this massive surge in demand over the next few years.
“The value of TSMC’s technology position is increasing, and we are all well-positioned to capture a large portion of the market in terms of AI semiconductor components,” Wei said.
Wei’s analysis highlights TSMC’s strategic position to take full advantage of the explosion of AI applications. The company’s stock performance has been decent, up about 70% since November 2022, but TSMC’s critical role in enabling the next wave of AI advancements suggests the stock has room to grow. There is.
Every silicon-worthy chip designer wants to capitalize on the AI craze, and TSMC exists to turn clients’ visionary AI dreams into physical chips. For example, Nvidia is one of the company’s most important customers. TSMC allows you to invest in companies that are driving the future of technology, making it a smart behind-the-scenes choice during the AI boom.
Alphabet: It’s time to leverage decades of quiet AI leadership
Alphabet’s efforts to integrate AI across its suite of advertising products underscores its strategic vision.
Senior executives at Google’s parent company clearly understand the transformative potential of AI. During the fourth quarter conference call, Chief Business Officer Philipp Schindler highlighted the company’s long-standing commitment to AI-driven tools and platforms.
“AI has been at the core of our advertising products for a very long time,” Schindler said. “And recent advances have enabled us to deliver more value for advertisers in a variety of areas, including bidding, targeting and creative, as well as our core advertiser and publisher experience. ”
Alphabet’s cautious approach to AI integration should keep it near the absolute top of consumer online services for years to come. At the same time, the modest rise in stock prices during AI’s surge suggests that the upside is undervalued. Alphabet’s stock price, which has barely outpaced the broader market over the past 16 months and trades at a modest 23 times earnings, is not getting the recognition it deserves from AI-based market makers. do not have.
By making the company’s innovations, particularly its advanced AI tools, available to a wider range of advertisers, it is positioned to take advantage of the next wave of AI advancements. For investors, Alphabet is not only keeping up with the evolution of AI, but actively leading it. The company’s role in the digital economy is likely to become even more essential over time.
In other words, Alphabet currently looks like an undervalued AI giant. Next time you’re looking for your forever home and have investable cash, don’t hesitate to give this stock a serious look.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool’s board of directors. Anders Bylund has positions at Alphabet and he has positions at Nvidia. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Super Micro Computers. The Motley Fool has a disclosure policy.
