Investors can expose themselves to the 47% annual growth expected from the generative AI market by 2030 through three stocks. The names probably won’t surprise many investors. Simplicity is king, and the AI leaders of today are highly likely to be in control throughout the 2020s.
This article advocates for a long-term perspective that is simple yet highly likely to produce strong results. Artificial intelligence truly emerged in 2023. In 2024, investors will look for the next best way to cash in on any missed returns. However, rather than finding the next needle in the haystack, why not stick with what works?
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) started 2024 with bullish news regarding its growth potential, which continues to boost its stock. A few weeks back, the company projected 20% growth or greater based on strong expectations of high-end AI high chip growth.
Roughly 3 weeks later, the company released its January revenue report. That report showed a 22% increase in revenues from December. Investors are broadly aware of the reach Taiwan Semiconductor Manufacturing has within the chip industry. It is, of course, the largest foundry globally and produces roughly half of all chips.
Investors should also note that the sites rating TSM are wildly in favor of it as an investment. One believes it is better than 94% of all competitors in the semiconductor industry, While another puts that figure at a slightly higher 97%. The more important idea is that both believe Taiwan Semiconductor possesses excellent potential to outperform in 2024. The company’s bullish outlook and January sales figures greatly substantiate that notion.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is an obvious choice as one of the only three generative AI stocks investors need. The argument of whether Nvidia is overpriced or still undervalued will continue throughout 2024. Yet, investors should consider several factors and take a bullish stance.
Many investors remain on the fence about Nvidia at the moment. One commonly cited bearish argument is that Nvidia is simply overvalued. Is it? Its P/E ratio of 92.48 today has been almost three times as high in the past decade.
There’s a great case to be made, and its valuation is very well justified. Investors can pretty much take their pick of profitability metrics to make that case. Whether it’s gross margin, operating margin, return on equity, or return on invested capital, Nvidia scores highly. Further, the company has grown its revenues over the past three years at 34.5%.
Nvidia is a hyper-growth firm with a market capitalization of $1.7 trillion. There are few comparables, so it makes sense that investors have questions. Yet, AI is emerging rapidly, and Nvidia is a clear leader with strong moats, so investors should push their trepidations aside.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) established a dominant position in generative AI early in 2023. The story of its OpenAI investment has been told and retold so that I won’t belabor it again. Consider that MSFT stock should continue to Boom in 2024 for a simple reason.
Microsoft is a leader in the North American generative AI industry, which dominates globally. North American firms control roughly 50% of the market share for generative AI. Microsoft and Nvidia contain a large portion of that market—for example, Microsoft and OpenAI control 69% of the models and platform segment market share.
Microsoft’s cloud computing segment is a particular bright spot. Cloud revenue grew by 24% in the most recent earnings, reaching $33.7 billion. The company has implemented AI throughout its various businesses and for its various partners. Microsoft has an extensive partner network, and that exposes the company to growth in AI at scale.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
