It has been less than three years since OpenAI first released ChatGPT to the public, but many of us are using generative artificial intelligence tools on a near-daily basis at work and in our personal lives. Still, adoption of the technology has a long way to go: A recent survey by the U.S. Census Bureau found that less than 7% of businesses use AI regularly.
In other words, there's still plenty of room for AI to expand to more businesses, which could spur long-term growth in this massive trend that PricewaterhouseCoopers expects to contribute $15.7 trillion annually to the world economy by 2030. If you have $3,000 to invest, here are three great AI stocks to consider buying.
Image source: GETTY IMAGES.
1. Nvidia dominates the AI chip market
Semiconductor giant Nvidia (NVDA 1.56%) has had such an impressive run recently -- it's up 386% over the past three years -- that many investors wonder if it has anything left in the tank. Considering we're still at the very beginning of the artificial intelligence transition, I'd argue that Nvidia should continue to benefit and grow.
The company's AI accelerators have an estimated 70% to 95% share of the artificial intelligence chip market, and large tech companies could spend an estimated $2 trillion over the next few years building AI data centers. Nvidia has been benefiting from this demand, and its sales just keep expanding. In its fiscal fourth quarter (which ended Jan. 26), its data center revenue surged 95% year over year to $35.6 billion.
NASDAQ: NVDA
Key Data Points
No one knows when this data center spending surge will end, but it's crystal clear that it hasn't slowed yet. Meta Platforms, Microsoft (MSFT 1.57%), Apple, Alphabet, OpenAI, Oracle, and other tech leaders have collectively announced plans for hundreds of billions of dollars in AI data center investments.
In its efforts to supply the best GPUs to meet that demand, Nvidia recently released its new Blackwell AI processors. On the fourth-quarter earnings call, management said Blackwell sales have already "exceeded our expectations" and accounted for $11 billion in sales in the quarter -- "the fastest product ramp" in Nvidia's history.
After an extended price surge, Nvidia's stock has slumped recently along with other high-growth names, opening up a buying opportunity for investors at a forward price-to-earnings ratio of just 26.
2. Microsoft is still making big moves in AI cloud computing
Microsoft was a first-mover in generative AI with its early investment in ChatGPT creator OpenAI, and the tech giant continues to make big strides in the space. It has invested $13 billion in OpenAI and has integrated ChatGPT into many of its services and software titles, including its Microsoft 365 productivity suite and the Bing web browser.
But it's Microsoft's cloud computing business that may be the biggest winner from the growing use of AI over the long term. The company offers AI services via the Azure cloud computing platform and demand for artificial intelligence cloud products is expanding. Goldman Sachs estimates that global cloud computing revenue could reach $2 trillion by 2030 thanks to AI.
NASDAQ: MSFT
Key Data Points
Microsoft is investing in this success and recently announced plans for an $80 billion expansion of its AI data center operation to stay ahead of the curve. Microsoft's advantage in this competition is that it's already the world's second-largest cloud computing infrastructure company, with 21% of the market -- and it's gaining on Amazon, which has 30%. With such a strong cloud position already in place, Microsoft is well-positioned to benefit as AI cloud revenues expand.
Microsoft's stock trades at a forward P/E of 25.6, which is more expensive than the S&P 500's average multiple of 20. But with the company's access to OpenAI's tech and its strong position in AI cloud computing, it has more room to grow.
3. Taiwan Semiconductor is the leading AI chip manufacturer
The final AI stock you should consider adding to your portfolio is chipmaker Taiwan Semiconductor Manufacturing Company (TSM +0.42%), also known as TSMC. This formerly obscure company has gained widespread attention from investors because it's the third-party foundry that manufactures more than 90% of the world's most advanced processors.
Its massive advantages over other chip manufacturers have propelled its finances higher. In the fourth quarter alone, its revenue rose 37% year over year to $26.8 billion, and earnings popped by 57% to $2.24 per ADR. And as spending on data centers continues to grow, TSMC's management expects demand for high-end chips to stay strong.
NYSE: TSM
Key Data Points
"Even after more than tripling in 2024, we forecast our revenue from AI accelerators to double in 2025 as the strong surge in AI-related demand continues," CEO C.C. Wei said on the Q4 earnings call.
TSMC recently announced it would invest an additional $100 billion in advanced manufacturing facilities in the U.S. over the next four years -- expanding on the $65 billion investment plan it announced several years ago. Management says this should help TSMC deliver chips to U.S.-based customers such as Apple, Broadcom, Nvidia, and others.
TSMC's shares are reasonably priced even after their 70% surge over the past three years. The stock trades at a forward P/E multiple of just 20, on par with the S&P 500. That means investors can scoop up one of the best AI stocks on the market at a fantastic price right now.
