Opportunities in AI Stocks

Broadcom is in a strong position regarding custom AI chips. There’s a significant demand for these products, which could really benefit the company. Similarly, TSMC is anticipating robust growth in the upcoming years, thanks to the rising need for AI chips.

Alphabet appears poised for substantial growth as well, driven by advancements in AI, cloud computing, and its Waymo Robotaxi initiative. These sectors may uniquely position the company for a bright future.

Stocks related to artificial intelligence (AI) are still gaining momentum. In fact, we’re only at the beginning stages of this trend. With the market nearing an all-time high, there’s still plenty of room for new stock picks.

Let’s consider three stocks that seem to have significant growth potential heading toward 2028.

Broadcom, particularly, stands to gain from AI’s evolution. Companies are increasingly looking to diversify away from Nvidia’s GPUs, leaning instead on Broadcom to develop tailored AI chips. This trend is particularly evident in inference processes, which are more straightforward and less costly to operate. Custom chips can significantly cut the expenses associated with inference workloads for large companies.

Broadcom is currently assisting Alphabet with designing their tensor processing units and is also expected to cater to Meta Platforms. The revenue from just these three clients could reach $60 billion to $90 billion by 2027. Additionally, there’s speculation that OpenAI, believed to be the fourth client, is gearing up for a $10 billion order next year. Both OpenAI and Oracle plan to invest around $300 billion in data centers over the next few years, and if Broadcom secures even a fraction of this business, the possibilities could be immense. Moreover, reports suggest that Apple is also in discussions with Broadcom regarding AI chips.

Given these opportunities in custom AI chips, Broadcom’s stock could see significant increases by 2028.

Another key player in the AI infrastructure scene is Taiwan Semiconductor Manufacturing (TSMC). The company has established itself as the go-to source for producing sophisticated chips consistently. Despite attempts by Intel to keep pace, they’ve not been quite as successful, suffering losses along the way. Meanwhile, Samsung faced challenges with chip yields and recently lost production contracts for Google’s tensor G5 to TSMC.

The secret to TSMC’s success lies in their ability to manufacture chips with smaller node sizes while maintaining excellent yields. This capability is crucial for advanced chips, as it allows more transistors to fit on each chip, enhancing power and efficiency. The company benefits from a higher yield percentage, which translates to lower costs and increased availability from each production run.

We expect the demand for AI chips to grow at a remarkable rate, over 40% annually until 2028. Because of this, TSMC is indispensable for all major chip designers—think of it as selling shovels during a gold rush. This means it’s likely a strong investment for the next few years.

Turning our attention to Alphabet, the company has managed to transform previous concerns into growth pathways. Initially, there were fears that AI chatbots could jeopardize Google’s search capabilities. However, they saw a resurgence in search growth last quarter, with AI features actually boosting search queries. Notably, the new Gemini AI chatbot has surged in popularity, recently becoming one of the most downloaded apps on the Apple App Store, overtaking ChatGPT.

Importantly, many of the risks surrounding Alphabet’s stocks appear to be subsiding. Despite some antitrust challenges, the courts have allowed the company to retain its Chrome browser and Android operating system, as well as maintain essential search transactions. This ensures that Alphabet continues to control access to the internet for billions.

One major growth driver for Google is, undoubtedly, cloud computing. Alphabet stands out as one of the few companies equipped with its own AI models, custom chips, and cloud infrastructure. This integrated approach should bolster profit margins in the long run. Additionally, the Waymo Robotaxi service is expanding rapidly across the U.S. It might not get as much attention from investors, but it could become a significant part of Alphabet’s revenue stream in the future.

All in all, Alphabet appears well-positioned for strong growth beyond 2028, with its stock showing much potential in the years to come.

But before diving into Broadcom stocks, consider this.

Analysts recently highlighted ten stocks they believe are better investment choices at the moment, and oddly, Broadcom didn’t make the cut. These stocks may offer more substantial returns within the next few years.

For context, looking back, an investment of $1,000 in Netflix back when it first appeared on their list could have grown to over $651,593 by now. Similarly, an investment in Nvidia could have turned into over a million dollars since its recommendation.

It’s crucial to carefully evaluate options on stocks like Broadcom, especially when there are potentially better opportunities elsewhere.