The artificial intelligence (AI) trade is alive and kicking. Companies tied to AI are rallying to start 2024 after a brief pullback. The continued upsurge in AI stocks comes as companies make announcements about increased production, new consumer products, and enhanced capabilities related to generative AI.
The focus among analysts and investors this year centers on the monetization of AI products and the boosts it can provide to companies’ bottom lines. The global market for AI is forecast in excess of $305 billion this year. And, by 2030, it could more than double to nearly $740 billion, according to market research firm Statista.
With a lot of money at stake, some companies will fare better than others in the race for leadership in the AI space. Let’s explore three stocks to buy for a future fueled by AI.
Taiwan Semiconductor Manufacturing Co. (TSM)
Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) remains the world’s largest microchip manufacturer. Also, it’s Asia’s most valuable publicly traded company with a market capitalization of nearly $500 billion. TSMC just reported an 8.4% year-over-year (YOY) decline in its revenue for December. That was released as part of the company’s preliminary Q4 earnings report. It is scheduled to report full Q4 earnings on Jan. 18.
While the December sales dip isn’t great news, TSMC said that it is seeing demand recover as it manufactures more AI microchips, notably for Nvidia (NASDAQ:NVDA). Also, the December figures suggest that TSMC beat Wall Street forecasts in Q4, with quarterly sales of 625.5 billion Taiwanese dollars ($20.1 billion U.S. dollars). The company has struggled to meet demand for AI chips in recent months but plans to double manufacturing capacity this year.
TSM stock has gained 24% in the last 12 months yet has trailed other semiconductor stocks, such as Nvidia, whose share prices doubled and even tripled during 2023.
Applied Materials (AMAT)
Analysts at Citigroup (NYSE:C) just named Applied Materials (NASDAQ:AMAT) one of their top semiconductor equipment stocks for 2024. Citigroup believes AMAT should continue benefitting from strong AI demand.
The bullish report is welcome news as AMAT stock slides 7% lower to begin 2024. Applied Material’s share price has softened ever since the company acknowledged late last year the investigation by the U.S. Justice Department over sales made to China.
However, most analysts don’t see the Justice Department probe as being a long-term headwind for Applied Materials, which continues to report stellar financial results. The company’s latest print (Q3 2023) showed earnings per share (EPS) of $2.12, topping Wall Street consensus estimates of $1.99. Revenue totaled $6.70 billion, which was also above analysts’ expectations of $6.50 billion. AMAT stock is up 38% over the last 12 months and up 330% over five years.
Alphabet (GOOG / GOOGL)
Alphabet (NASDAQ:GOOG NASDAQ:GOOGL) remains a leader when it comes to making AI products for consumers and businesses. Just before Christmas, the company introduced “Gemini,” its largest and most sophisticated AI model yet.
The company has made it clear that monetizing AI is its priority. To be sure, Gemini pushes AI technology forward quite a bit. It is reportedly the first AI model to outperform humans on subjects such as math and physics. Also, it can understand nuance and reason.
Alphabet said it plans to integrate Gemini into its Bard chatbot to help advance its reasoning and planning capabilities. Expect the company to begin charging users for the Gemini suite of AI product later this year. Beyond Gemini, Alphabet is integrating generative AI into Gmail and Google Docs, as well as its Pixel phones and smart home devices. GOOGL stock has gained 60% over the last 12 months, including a 2% increase so far in 2024.
On the date of publication, Joel Baglole held long positions in AMAT, NVDA and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
