AI stocks have significant potential for growth in the coming decade.
Over the last ten years, technology stocks have propelled market growth, and with AI still developing, it’s likely that this momentum will carry into the next decade.
Here’s a look at three AI stocks to consider buying and holding over the next decade.
1. Nvidia: Dominating AI Infrastructure
Nvidia (NVDA +2.98%) is at the forefront of the AI revolution and is well-positioned to maintain its leadership in AI infrastructure for years to come.
Its advantage starts with the CUDA software platform, where key AI tools are developed and optimized for GPUs. It extends to networking, with Nvidia’s proprietary NVLink system facilitating quick communication between chips, enabling them to function as a unified powerhouse. Additionally, combining CPUs, DPUs, and network components supports a comprehensive AI supercomputer solution.
Today’s changes
(2.98%) $5.31
current price
$183.38
Key data points
Market capitalization
$4.5 trillion
daily range
$178.43 -$185.37
52 week range
$86.62 -$212.19
volume
6.4M
average volume
186M
gross profit
70.05%
dividend yield
0.02%
As businesses and nations rush to harness AI, Nvidia stands out as a key resource provider. Investment in data center infrastructure is anticipated to remain robust for some time, positioning Nvidia as a long-term winner in the AI space. In contrast, the stock trades at a forward price-to-earnings ratio of about 24.5x, with a PEG below 0.7x, suggesting it’s relatively undervalued.
2. Alphabet: Benefits of Vertical Integration
Alphabet (Google +2.01%) (GOOG +1.93%) offers a comprehensive AI stack, positioning it well for long-term success in AI. The firm has created its own advanced custom AI chip, the Tensor Processing Unit (TPU), to enhance its flagship AI model, Gemini, which is now integrated across various products like Google Search.
Today’s changes
(2.01%) $6.46
current price
$328.46
Key data points
Market capitalization
$4.0 trillion
daily range
$319.37 -$332.44
52 week range
$140.53 -$340.49
volume
1.1M
average volume
36M
gross profit
59.18%
dividend yield
0.25%
Beyond this, Alphabet has leading AI software, including Vertex AI, and an established fiber network. They’re also acquiring cybersecurity firm Wiz and energy company Intersect, enhancing their capabilities. The partnership with Intersect should expedite the development of new data centers, addressing energy constraints in AI infrastructure. This vertical strategy enhances Alphabet’s appeal, trading at a forward P/E of 25x, which is considered fair.
3. Taiwanese Semiconductor Manufacturing: Near Monopoly
The AI surge heavily relies on Taiwan Semiconductor Manufacturing (TSM 0.21%), which holds a near-monopoly in producing advanced GPUs and TPUs. TSMC has consistently demonstrated its ability to manufacture these chips at scale and with high quality, making it a vital partner for chip designers.
Taiwan Semiconductor Manufacturing
Today’s changes
(-0.21%) $-0.69
current price
$326.47
Key data points
Market capitalization
$1.7 trillion
daily range
$325.72 -$333.66
52 week range
$134.25 -$351.33
volume
761K
average volume
13M
gross profit
59.02%
dividend yield
0.94%
The company has just announced plans to boost capital expenditures to add more manufacturing facilities as demand increases. TSMC’s position also offers it robust pricing power, with reports indicating price hikes are anticipated over the next four years. The combination of rising prices and high utilization rates contributes to strong profit margins.
TSMC is positioned to be a key player in the upcoming AI data center expansion. With plans to enhance capacity, increase prices, and quickly advance technology, it stands out as a noteworthy stock to consider for long-term investment.
