Three AI-focused companies with the potential to yield remarkable gains in 2023.
AI investing remains a buzzworthy trend, and by 2025, it's anticipated that this megatrend will continue to flourish. And with these three stocks, you could potentially see stunning returns: Nvidia (NVDA -12.11%), Alphabet (GOOG -2.75%, GOOGL -2.94%), and Taiwan Semiconductor Manufacturing (TSM -10.29%). Each of these companies plays a significant role in the AI field.
1. Nvidia
Sure, Nvidia is a favorite, and there's a good reason for that. They are the pioneers in graphics processing units (GPUs), providing the computing muscle that drives many AI innovations. Thanks to their dominance, they've been the primary beneficiary of AI investments, as witnessed in their remarkable revenue growth over the past few years.
While growth might not be as sky-high as in the past, the sheer increase of 94% year over year is anything but slow. And with Wall Street analysts projecting Nvidia’s revenue to reach an astounding $196 billion by the end of fiscal 2026—an impressive 52% increase from fiscal 2025—you can expect more impressive returns in 2025.
2. Alphabet
Alphabet, the parent company of Google, is also a significant player in the AI sphere. With its Gemini platform, Alphabet majorly contributes to AI-driven advancements in advertising, which accounts for 75% of its total revenue. But that's not all; its cloud computing division, Google Cloud, is seeing tremendous growth due to AI as well. As more companies rent computing power from providers like Google Cloud, its revenue soared 35% year over year in Q3 2024.
However, it's Alphabet's low-cost stock that could potentially stun investors. The tech giant trades at an affordable 22 times forward earnings, significantly less than many big tech peers, including Apple, which is valued at 30 times forward earnings.
3. Taiwan Semiconductor Manufacturing Company (TSMC)
None of the AI technology today would be possible without Taiwan Semiconductor, known as TSMC. As the leading manufacturer of cutting-edge chips, it plays a neutral role in the AI competition, with a stable track record of catering to every AI competitor out there. This investment strategy allows you to capitalize on the AI wave widely, without having to choose one winner.
TSMC's revenue tripled in 2024 due to AI, and management projects that AI-related revenue will double again in 2025 and show a compound annual growth rate (CAGR) of more than 40% for the next five years. Such explosive growth is something investors should keep their eyes on. Moreover, TSMC's total revenue is projected to grow at a steady 20% CAGR over the next five years, a rare feat in the industry.
- To maximize your investment in AI, consider diversifying your portfolio with TSMC. Their stable relationship with various AI competitors ensures they cater to the industry's growth, as evident by their 2024 revenue tripling due to AI and projected AI-related revenue doubling in 2025 with a CAGR of over 40%.
- Investing in finance can be challenging, but with low-cost stocks like Alphabet, you can achieve impressive returns. While Alphabet's revenue predominantly comes from advertising, its cloud computing division, Google Cloud, gains momentum from AI, having soared 35% year over year in Q3 2024.
