The big surge in interest in artificial intelligence (AI) has been driving the stock market for over a year now, dating back to OpenAI release of ChatGPT chatbot in November 2022.
Since then, a handful of AI technology leaders have soared into the stratosphere. AI accelerator chips were used Nvidia‘s stock is up more than 410% in 16 months. Builder of high-performance IT systems Super microcomputer grew even faster with a gain of 1,100% over the same period.
I understand if you’re hesitant to buy shares of these booming AI stocks. What goes up does not necessarily have to come down quickly, but the valuation risk is real.
Don’t worry, though. There are plenty of ways to take advantage of the AI boom without relying on the most obvious (and perhaps overvalued) market darlings.
Right now, I see strong value and exciting AI-driven growth in the coming years for Google’s parent company. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and chip maker Semiconductor manufacturing in Taiwan (NYSE:TSM).
Taiwan Semiconductor: Delivering AI Chips to a Hungry World
The demand for AI-driven computing power is skyrocketing. Taiwan Semiconductor, or TSMC for short, is at the heart of this technological shift.
In January Q4 Earnings Call, CEO CC Wei pointed out that more complex AI software requires more raw computing power, so demand for faster, more power-efficient chips is expected to continue to increase over time. As a leading provider of advanced manufacturing technologies, Wei’s company is poised to benefit from this massive increase in demand in the years to come.
“The value of TSMC’s technology position is increasing and we are all well positioned to capture the majority of the market in terms of semiconductor components for AI,” Wei said.
Wei’s analysis highlights TSMC’s strategic position to make the most of the current explosion of AI applications. While its stock performance has been decent, up about 70% since November 2022, TSMC’s crucial role in delivering the next wave of AI advancements suggests the stock has a room for growth.
Every chip designer worth their salt wants to harness the AI frenzy, and TSMC is here to turn its customers’ visionary AI dreams into physical chips. For example, Nvidia is one of the company’s largest customers. TSMC lets you invest in a company that’s powering the future of technology, making it a prudent behind-the-scenes choice amid the AI boom.
Alphabet: It’s time to capitalize on decades of quiet leadership in AI
Alphabet’s commitment to integrating AI into its suite of advertising products underscores its strategic vision.
Senior management at Google’s parent company is clear on the transformative potential of AI. During its fourth quarter call, Philipp Schindler, Chief Commercial Officer, highlighted the company’s long-standing commitment to AI-based tools and platforms.
“AI has been at the heart of our advertising products for a long, long time,” Schindler said. “And recent advancements really allow us to drive more value for advertisers across a wide range of different areas: bidding, targeting, creative, as well as our core advertiser and publisher experiences.”
Alphabet’s measured approach to AI integration should keep the company at the absolute top of consumer online services for years to come. At the same time, the stock’s modest gains during the AI surge suggest underappreciated upside potential. Trading at a modest 23 times earnings, with stock gains barely outpacing the broader market over the past 16 months, Alphabet’s stock doesn’t get the AI-based respect it deserves from the share of market makers.
The company’s innovations, including making advanced AI tools accessible to a broader range of advertisers, position it to take advantage of the next wave of AI advancements. For investors, Alphabet is not just following the evolution of AI, but actively leading it. This company’s role in the digital economy could become even more indispensable over time.
In other words, Alphabet looks like an undervalued AI titan today. Be sure to take a serious look at this stock the next time you have some money to invest in the search for a forever home.
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Anders Bylund holds positions at Alphabet and Nvidia. The Motley Fool holds positions and recommends Alphabet, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Super Micro Computer. The Motley Fool has a disclosure policy.
Ready to invest in artificial intelligence (AI)? 2 Nvidia alternatives was originally published by The Motley Fool
