Putting all your eggs in one basket is a recipe for disaster because you could be wrong. This also applies to the investment theme of artificial intelligence (AI). While you did a fantastic job if it was your only choice Nvidia (NASDAQ: NVDA)it’s been the opposite if it was your choice C3.ai (NYSE: AI) (and if you take April 2023 as a starting point).
Being diversified is an important part of a well-balanced portfolio these days. If you want to dedicate part of your portfolio to AI, I recommend that you consider a balanced approach, such as investing in these three companies.
1. Taiwanese semiconductor
AI has generated such high stock returns over the past year because of its widespread effects. There are hardware companies, AI tool providers, and companies that provide the software needed to implement AI in a business. I’m choosing one from each of these categories because I think it offers a balanced AI investing approach.
Starting with the hardware side, I chose Taiwanese semiconductor (NYSE: TSM). While some will be shocked that I didn’t pick Nvidia, I think TSMC has a great investment thesis as well. Taiwan Semi is a chip foundry, meaning it’s an expert in making chips designed by others. With a client list that includes Nvidia, AMD, Appleand others, it’s safe to say that TSMC is one (if not the) top dog in his industry.
AI is expected to have a major impact on the company as management believes AI-related products will grow at a compound annual growth rate (CAGR) of 50% over the next five years. By then, AI revenues should account for at least 20% of total revenues. Additionally, about a quarter of TSMC’s revenue goes toward making Apple products. The iPhone market has been bad lately, but Apple’s latest announcement that the Apple Intelligence features will only be available on newer models should boost sales. This is great news for TSMC and further serves as a reason to buy the stock.
2. Alphabet
I chose AI tools Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Alphabet is primarily an advertising company, but the integration of AI into this product line is the reason for me to invest. While the rollout of its generative AI platform, Gemini, has been far from smooth, it is becoming a respected force in its field. Gemini can be used for virtually unlimited purposes, but has already been deployed to help clients create ads and summarize results for Google search users.
Alphabet also has a strong cloud computing offering with Google Cloud. Cloud computing is critical in AI because many companies do not have the financial resources to purchase an AI-specific server. So they rent that computing power from a cloud computing provider like Google Cloud. Google Cloud is a top choice for AI companies and has acquired 60% of funded generative AI startups and 90% of generative AI unicorns (private companies with a valuation of more than $1 billion) as customers.
3. UiPath
Finally, I chose software UiPath (NYSE: PAD)UiPath shareholders have had a tough time lately with the departure of its CEO and lower immediate revenue expectations, but the product the company delivers is still incredibly useful.
UiPath’s robotic process automation (RPA) software allows users to automate repetitive tasks, improving productivity. While not an AI technology per se, it encompasses multiple facets of AI, including generative AI. This further expands the number of tasks the software can automate, expanding the use cases.
Moreover, UiPath integrates with Microsoft Copilot for Microsoft 365, which is an important partnership as it is one of the most widely used business tools. With many executives pushing their companies for practical AI use cases, UiPath’s product stands out from the rest.
While UiPath may have stumbled, the long-term prospects for the RPA industry are bright. Grand View Research expects compound annual growth of nearly 40% in the RPA industry from now through 2030. Since UiPath is one of the top names in this space, it plans to benefit from this boom.
Should You Invest $1,000 in Semiconductor Manufacturing in Taiwan Now?
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury holds positions in Alphabet, Taiwan Semiconductor Manufacturing and UiPath. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Apple, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and UiPath. The Motley Fool recommends C3.ai and recommends the following options: long calls in January 2026 for $395 at Microsoft and short calls in January 2026 for $405 at Microsoft. The Motley Fool has a disclosure policy.
Forget Just One AI Stock: This Trio Could Boost Your Portfolio’s Future Originally published by The Motley Fool
