The price of many cryptocurrencies has soared lately as some investors anticipate a friendlier approach to crypto under the incoming Trump administration. While some cryptocurrencies offer a potential for big gains, tech stocks can have just as much, if not more, potential and are often more stable investments.
Here's why you might want to bypass crypto and opt for these three tech stocks: Nvidia (NVDA +2.59%), AppLovin (APP +3.23%), and Taiwan Semiconductor (TSM +1.40%) instead.
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1. Nvidia is the AI processor leader
Nvidia is one of the most popular tech stocks right now, thanks to the company's dominance in artificial intelligence (AI) processors. Nvidia's graphics processing units (GPUs) are used in an estimated 70% to 95% of AI data centers because their super processing power makes them the go-to choice for tech companies needing high-end processing.
That demand has fueled Nvidia's top- and bottom-line growth, with sales increasing 94% to $35.1 billion in the third quarter (ended Oct. 27) and non-GAAP (non-generally accepted accounting principles) earnings per share soaring 119% to $0.81.
NASDAQ: NVDA
Key Data Points
And there's likely more where that came from. Nvidia CEO Jensen Huang estimates companies expanding and upgrading their AI data centers could spend up to $2 trillion over the next five years. Nvidia won't get all of that, of course, but the company's early lead in AI processors means it likely has many more years of AI growth ahead.
Just keep in mind that you'll pay a hefty premium for Nvidia's shares right now. The company's shares have a forward price-to-earnings (P/E) ratio of 32.6 compared to the S&P 500's forward P/E ratio of about 24.
2. AppLovin is tapping into an expanding ad market
If you're unfamiliar with what AppLovin does, all you need to know is that it's an adtech platform that uses AI to allow companies to place ads on connected TVs and mobile apps. The company's stock has had a very good year, with its price rising 715% over the past 12 months.
AppLovin's third-quarter (ended Sept. 3) results impressed investors, with sales rising 39% to $1.2 billion and diluted earnings per share increasing by a stunning 317% to $1.25. The company is benefiting from an expanding advertising space, which became a $1 trillion market in 2024 (excluding political ads) -- one year earlier than estimated.
NASDAQ: APP
Key Data Points
Global ad sales are expected to grow by an estimated 7.7% in the upcoming year, according to the media investment company GroupM. AppLovin is in a great position to benefit from ad spending in the coming years, considering 81% of digital ads will come from programmatic ad platforms like AppLovin's by 2028, according to Statista.
AppLovin's massive share price gains over the past year mean the company's stock isn't cheap. AppLovin's forward P/E ratio is currently 47.6, a significant premium. But if you're looking for a tech stock benefiting from the growing advertising market, there aren't many better options than AppLovin.
3. Taiwan Semiconductor is a leading chip manufacturer
Another tech company with massive potential is Taiwan Semiconductor (also referred to as TSMC), the leading maker of artificial intelligence chips. The company holds an estimated 90% of the market for the world's most advanced processors.
NYSE: TSM
Key Data Points
That's quite an impressive position in the market, and it's even more amazing when you consider that tech companies across the globe are expected to dramatically increase their AI spending in the coming years. Goldman Sachs estimates AI spending will reach $1 trillion over the next few years, and TSMC is already benefiting.
TSMC's sales jumped 39% to $23.5 billion in the third quarter (ended Sept. 30), and earnings rose 54% to $1.94 per American depositary receipt (ADR). As tech companies try to outpace each other in the new AI race, TSMC's lead in producing 3-nanometer (nm) chips (and forthcoming 2nm in 2025) means the tech giants will be knocking on Taiwan Semiconductor's door to make them.
In contrast to the other companies on this list, TSMC is relatively inexpensive. The company's shares have a forward P/E ratio of 22.9, lower than the S&P 500's and far below Nvidia's and AppLovin's.
It's worth mentioning that there's no guarantee these tech stocks will outpace any specific cryptocurrency returns. However, with each of them tapping into the booming AI market and already having a lead in their respective markets, these tech stocks have a lot of potential to continue growing in the coming years.
