4 AI Stocks to Consider Amid the Tech Sell-Off

The recent downturn in the stock market has hit technology companies particularly hard. This presents a unique opportunity for investors looking for stocks that are now available at a more affordable price. Regardless of various economic uncertainties or trade tensions, the drive for advancements in artificial intelligence (AI) continues unabated. Companies are unlikely to reduce their AI investments in response to their competitors' actions, but rather will see it as a chance to outpace them.

This situation suggests that the long-term prospects for these companies remain strong, making the current market dip an excellent time to buy. Four standout companies that are worth considering are Nvidia, Taiwan Semiconductor Manufacturing (TSMC), Alphabet, and Amazon. Each of these companies is poised for success amid the ongoing market volatility.

Strong Demand for Chip Suppliers

What makes these four companies exceptional choices? Each of them plays a crucial role in the ongoing AI revolution.

Taiwan Semiconductor manufactures chips that are used in nearly every high-tech device. As a leading chip foundry, TSMC produces the chip designs brought to them by other companies, including Nvidia. Although some investors worried about potential tariffs affecting Taiwan, TSMC's recent announcement of a $100 billion investment in U.S. manufacturing indicates that the company is preparing for considerable chip demand in the U.S.

TSMC's CEO, C.C. Wei, explained that this expansion is driven by genuine demand rather than fears of tariffs. They forecast that revenue from AI-related chips will expand at a remarkable 45% compound annual growth rate (CAGR) over the next five years. Overall, the company expects nearly 20% growth across all its revenue streams throughout this period. Thus, despite the current market slump, the outlook for TSMC remains strong.

Nvidia, a significant customer of TSMC, utilizes these chips in its graphics processing units (GPUs). These GPUs have proven essential in developing AI, thanks to their remarkable parallel processing capabilities. Nvidia has enjoyed impressive growth over the past two years and shows no signs of slowing down. In the first quarter, the company anticipates a 65% revenue increase to reach $43 billion. Although full-year guidance was not provided, analysts are predicting a 56% growth, bringing the total to $204 billion.

When questioned about the impact of tariffs during its Q4 earnings call, Nvidia management noted uncertainty about U.S. government policies. Nevertheless, the demand for Nvidia's GPUs remains robust, and the stock is currently priced at a compelling 25 times forward earnings, making it an attractive buying opportunity.

The Ongoing Cloud Computing Expansion for AI

Both Amazon and Alphabet have solid business models that underlie their AI initiatives. They are working hard to expand their cloud computing services, which are vital for delivering computing power to numerous clients.

Cloud computing plays a significant role in the AI landscape, as many businesses prefer not to invest heavily in building data centers filled with expensive Nvidia GPUs. Instead, they opt for services from cloud computing providers like Amazon Web Services (AWS) and Google Cloud to manage their workloads. Essentially, clients rent computing power from these giants, and the demand for such services is still increasing.

Over the long term, cloud computing will become an essential aspect of both Amazon and Alphabet's operations. Each sector is expanding at a rate faster than the overall growth of the companies. In the fourth quarter, Google Cloud recorded a 30% year-over-year increase in revenue while the company's total revenue grew by only 12%. Similarly, AWS noted a 19% revenue growth compared to an overall growth rate of 10% for Amazon.

Both companies are also currently trading at attractive price-to-earnings ratios, making it an opportune time to invest in their stocks alongside those of Nvidia and TSMC.

AI, Stocks, Tech