Investing in the thriving artificial intelligence (AI) market doesn’t have to break the bank. While Nvidia (NASDAQ: NVDA) remains a prominent player, there are other promising options available at more attractive valuations. This article explores three such AI stocks—Super Micro Computer (NASDAQ: SMCI), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)—that offer compelling investment opportunities.
Super Micro Computer: Super Micro Computer, known as Supermicro, specializes in high-performance servers and has established itself as a key player in the AI server market. Despite holding a smaller market share compared to competitors like Hewlett Packard Enterprise and Dell Technologies, Supermicro’s focus on dedicated AI servers has driven significant growth.
Key Points:
- Supermicro’s partnership with Nvidia grants it early access to top-tier data center GPUs, fueling sales of pre-built AI servers amid the expanding AI market.
- The company’s revenue surged by 46% in fiscal 2022 and continued to rise by 37% in fiscal 2023, with analysts projecting 103% growth in fiscal 2024.
- With an adjusted EPS that more than doubled in recent years and anticipated 70% growth in fiscal 2024, Supermicro presents a compelling investment opportunity at 27 times this year’s earnings.
- Taiwan Semiconductor Manufacturing: Taiwan Semiconductor Manufacturing, or TSMC, stands as the world’s largest and most advanced contract chipmaker, catering to leading tech companies such as Nvidia, Advanced Micro Devices, and Apple. As a critical component of the semiconductor and AI markets, TSMC’s outsourced chip production services are indispensable.
Key Points:
- TSMC’s foundries manufacture cutting-edge chips for various chipmakers, including Nvidia, which designs its GPUs.
- Despite cyclical growth patterns, TSMC remains a pivotal player in semiconductor and AI markets, with analysts forecasting 23% revenue and 10% earnings growth in the current year.
- Trading at just 18 times forward earnings, TSMC offers investors a cost-effective avenue to capitalize on the AI market expansion.
- Alphabet: Alphabet, Google’s parent company, boasts a diverse ecosystem comprising the world’s leading search engine, online advertising platform, and cloud infrastructure services. Leveraging its AI algorithms, Alphabet has made significant strides in the AI space, bolstered by initiatives such as the development of AI accelerators.
Key Points:
- Google’s expansive portfolio, including YouTube, Android, and Gmail, integrates AI algorithms across various services.
- With investments in generative AI through projects like the Bard chatbot and Gemini language models, Alphabet aims to reduce reliance on external GPU providers like Nvidia.
- Despite modest revenue growth in 2023, Alphabet’s stable growth trajectory and attractive valuation—trading at just 21 times forward earnings—position it as an appealing investment in the AI sector.
While Nvidia remains a prominent choice for AI investments, other alternatives offer compelling prospects at more attractive valuations. Super Micro Computer, Taiwan Semiconductor Manufacturing, and Alphabet present investors with diverse opportunities to capitalize on the burgeoning AI market, making them worth considering in any investment portfolio.
