Investing in artificial intelligence (AI) stocks isn't just about setting yourself up for 2025, but also positioning yourself for the next decade. AI innovations won't stop in 2025, and with the stock market being a forward-looking machine, you're better off taking the long-term view rather than just narrowing in on what will happen in 2025.
With that in mind, I have two AI picks that are set to dominate the next decade: Taiwan Semiconductor Manufacturing (TSM 2.82%) and Amazon (AMZN 1.66%). Both are strong long-term picks and solid buys right now.
Taiwan Semiconductor Manufacturing
Without Taiwan Semi, also called TSMC, AI technology wouldn't be where it is today. TSMC is the world's leading chip manufacturer and acts as a fabrication shop for any company that needs chips. So whether that's Nvidia's (NVDA 3.17%) GPUs or Apple's (AAPL 0.38%) iPhones, TSMC has chips in nearly every cutting-edge electronic device, which likely won't change in the coming decade.
It's also at the forefront of innovation. It can produce 3-nanometer (nm) chips, which is the current best technology. But it's already working on 2nm chips that are set to launch later this year. This cycle of continuous innovation has kept Taiwan Semiconductor on top, and there's no reason to doubt that it will stay atop the semiconductor throne.
NYSE: TSM
Key Data Points
AI demand has also been a huge part of its recent growth. For 2024, management expects AI revenue to triple year over year, and it shows no signs of slowing down anytime soon. For 2025, Wall Street analysts expect revenue and earnings-per-share (EPS) growth of 26% and 27%, respectively. The stock is a solid bargain, too, considering that Taiwan Semiconductor trades for 23 times forward earnings. This makes it a great buy now, as well.
Amazon
Amazon may seem like an odd pick for an AI investment, but its cloud computing division, Amazon Web Services (AWS), is a critical part of the computing infrastructure. Cloud computing platforms like AWS give clients access to the computing power necessary to train and run AI models that would be too expensive to justify purchasing themselves. Furthermore, the client doesn't have to worry about maintenance or the hardware going obsolete, as that falls onto Amazon's shoulders.
AWS is the largest cloud computing player by market share, but there is plenty of opportunity for growth over the next decade. AI demand continues to bring in new workloads, and AWS' partnership with Anthropic, the maker of the Claude generative AI model, should pay off, as Claude is often seen as one of the top generative AI models. In 2024, the cloud computing market was valued at around $752 billion, according to Grand View Research. That figure is expected to expand to $2.39 trillion by 2030, making it an extremely fast-growing industry relative to its size.
NASDAQ: AMZN
Key Data Points
However, AWS only made up 17% of Amazon's total revenue over the past 12 months, so can it really affect the stock? That's the wrong metric to use, as cloud computing and commerce have very different margin profiles.
AWS made up only 17% of revenue over the past 12 months, but it comprised 60% of operating profits. With AWS having better operating profit margin than the commerce business, an argument could be made that Amazon is more of a cloud computing company than an e-commerce company.
Regardless, with the massive growth expected to come from cloud computing over the next decade, Amazon makes for a solid stock pick in 2025.
