After taking a breather in August, tech stocks look to be rallying again, led by artificial intelligence (AI) companies. Although some of the hype around AI has cooled, the sector remains the hottest area of tech right now, with just about every company scrambling to gain exposure to it. The market remains potentially massive. Fortune Business Insights projects that global revenue generated from AI will reach $2 trillion by 2030. While some companies have established themselves as clear winners in the AI race, others are catching up, and other concerns are just starting to emerge as threats in the space. With the rally in AI stocks showing no signs of ending anytime soon, we offer the following for consideration. Think a September rally is coming? Here are three AI stocks to buy before liftoff.
Advanced Micro Devices (AMD)
Don’t lose sight of Advanced Micro Devices (NASDAQ:AMD). The Nvidia (NASDAQ:NVDA) rival is working overtime to make its mark in the AI space. In June of this year, AMD announced a new advanced AI microchip — MI300X — which some analysts say could be a game-changer for the industry. Executives at AMD have said that the new microchip, which they plan to begin shipping by year-end, is a direct challenge to Nvidia’s current dominance with AI chips.
The biggest foray yet into AI for AMD, the MI300X chip was designed for large language models and other generative AI applications and could help to usher in next-generation versions of chatbots such as ChatGPT. The MI300X uses up to 192 gigabits of memory, meaning it can accommodate larger and more advanced AI models than other chips. That includes Nvidia’s H100 chip that supports 120 gigabits of memory. AMD has also developed its own software for its AI chips called Radeon Open Compute (ROCm).
AMD stock is up 71% year to date and has gained 300% over the last five years.
Taiwan Semiconductor Manufacturing (TSM)
If it wasn’t for global politics and the threat China poses to Taiwan, microchip and semiconductor foundry Taiwan Semiconductor Manufacturing (NYSE:TSM) stock would likely skyrocket right now. That’s because the company produces more than half (60%) of the world’s supply of chips and semiconductors. Nvidia, AMD and just about every other technology company on earth are clients of TSMC. That gives the company a sizable moat around its business — even with China looming over it.
Year to date, TSM stock has gained 25%. Over five years, the share price has advanced 108%. The stock held up well lately, considering its most recent earnings report was underwhelming. TSM posted its first profit decline in four years as demand for consumer electronics weakened worldwide. The company’s second-quarter revenue of $15.68 billion was down 10% from a year earlier and below Wall Street expectations. Still, many analysts remain bullish on TSM stock and see big growth ahead as AI demand accelerates.
C3.ai (AI)
For a more speculative venture, there’s C3.ai (NYSE:AI). The company, whose ticker symbol is literally AI, saw its share price rally 182% so far this year, giving Nvidia’s stock a run for its money. While a lot of the gain could be hype and retail investor enthusiasm, C3.ai is a legitimate company specializing in enterprise AI. However, C3.ai is a smaller start-up company that only went public in 2020 and is not yet profitable.
Still, C3.ai is making some interesting moves in the AI sector, and its earnings prints this year have been strong, helping to fuel the share price rally. AI stock jumped nearly 20% in one day earlier this year after the company reported better-than-expected financial results. While C3.ai remains unprofitable, company executives have said they are on track to become profitable by the end of 2024. That growth is accelerating due to rising demand for its enterprise AI products. The company next reports earnings in September.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
