Artificial intelligence (AI) is already a huge growth driver for many technology companies and will likely be a catalyst for years to come. IDC research estimates that AI spending will be close to contributing $20 trillion for the global economy in 2030.
But which companies will benefit from the rise of AI in the next decade? This is why Nvidia (NASDAQ: NVDA) And Taiwanese semiconductor manufacturing (NYSE: TSM) should be on your shortlist of AI stocks.
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While many companies are currently benefiting from artificial intelligence, Nvidia has the potential to capitalize on this huge trend for many years to come. Nvidia’s GPUs have long been a top choice among tech companies needing the best chips for their data centers, with the company estimated to hold 70% to 95% of the AI processor market.
That lead gives Nvidia a healthy lead in the AI chip race, and the company continues to release new semiconductors to ensure it doesn’t become flat-footed. The latest version is the company’s Blackwell GPU for AI, which Nvidia CEO Jensen Huang said during the third-quarter earnings call was already in the hands of top customers and is 2.2x faster than its Hopper GPUs.
Huang is preparing his company for an unprecedented wave of investment in AI data centers, which he estimates will increase $2 trillion in the next five years.
The good news for investors is that it won’t be years before Nvidia can benefit from AI. In the company’s third quarter (ended October 27), revenue rose 94% to $35.1 billion, and non-GAAP (generally accepted accounting principles) profits rose 118% to $0.81 per share. Much of the company’s growth is already being driven by Nvidia’s data center segment, which saw a 112% increase in revenue to $30.8 billion in the quarter.
The one thing to note about Nvidia stock is that it isn’t cheap. The company’s shares currently have a price-to-earnings ratio of 54.5, higher than the S&P500‘S (SNPINDEX: ^GSPC) 30.6. But with AI spending on the rise and Nvidia leading the way with its GPUs, there’s likely more room for this tech giant.
Taiwan Semiconductor is a unique AI investor because the company does not develop advanced software or powerful processes. Instead, it produces the semiconductors used in the world’s most advanced data centers.
The company produces about 90% of the world’s most advanced processors, and business is booming. In the third quarter (ended September 30), the company reported revenues of $23.5 billion, up 36% from the same quarter last year, and a 54% increase in profit to $1.94 per American certificate (ADR) .
