The stock market gave back some gains over the last month, as Wall Street weighs the effect of President Donald Trump's tariff policies on the economy. But no matter what happens in 2025, the adoption of artificial intelligence (AI) will continue.
AI is anticipated to add trillions to the global economy through labor productivity increases alone. Investors can take advantage of the market sell-off to build positions in leading chip companies that are enabling this generational shift. Here are two great stocks to buy now.
1. Nvidia
Nvidia's (NVDA +2.33%) chips have almost become the backbone of the economy. Cloud services can't operate without data centers, and Nvidia's graphics processing units (GPUs) are found in every major cloud company's infrastructure.
NASDAQ: NVDA
Key Data Points
Nvidia has led the GPU market for 20 years, but it has continued to expand its offering to be a complete end-to-end solution for building data centers, or what Nvidia calls AI factories. In addition to its widely used H100 GPU and Blackwell computing hardware, it offers software, networking equipment, and services that have widened its competitive moat.
The company's financial performance shows how vital its technology has become for data center operators. Its total revenue doubled last year to $130 billion, with 88% coming from sales to data centers. The company expects to report roughly $43 billion in revenue for the fiscal first quarter of 2025, representing 10% growth over the previous quarter.
There have been concerns that AI researchers may start adopting lower-cost methods of training AI models, which could pressure Nvidia's revenue. This is one reason the stock is currently down 9% year to date. But Nvidia's new Blackwell computing platform just brought in $11 billion of revenue last quarter, and the company's Q1 revenue guidance indicates that demand for its products remains robust.
Analysts expect Nvidia to post revenue growth of 56% this year, while earnings are anticipated to increase 50%, according to Yahoo! Finance, yet the stock is trading at just 27 times forward earnings. That is a bargain for a company that's growing this fast and serving a vital role in the global AI infrastructure supply chain.
2. Taiwan Semiconductor Manufacturing
The surging demand for high-powered chips for AI workloads is playing right into the hands of the leading chip foundry. Taiwan Semiconductor Manufacturing (TSM +0.65%) has spent years perfecting the process of testing and manufacturing the most advanced chip technologies, so companies like Nvidia, Broadcom, and other leading semiconductor producers can focus on chip innovation.
NYSE: TSM
Key Data Points
Without TSMC, the global economy would collapse. Counterpoint Research estimated TSMC's market share at 64% of the global foundry market as of third-quarter 2024, over five times the share of its next closest competitor. TSMC's chips are used in everything from phones to data centers. Its manufacturing capacity was capable of making 16 million 12-inch equivalent silicon wafers in 2024, which translates to billions of chips depending on the size.
TSMC is currently experiencing strong momentum. Revenue grew 37% year over year in the fourth quarter, driven by high-performance chips used for AI. The expertise it has in manufacturing is also translating to sky-high margins, where it converted 43% of revenue into a profit last quarter.
The company earns high returns on capital, so it's a positive sign for long-term growth that management has been on offense, investing more capital to expand capacity. It recently announced a $100 billion investment to build new chip-making facilities in the U.S., along with other plans, including a facility in Germany specifically focused on the automotive and industrial markets.
It expects chips used for AI to drive most of its growth in the coming years. And the company expects long-term revenue growth to grow at a 20% annualized rate. Investors can bank on it, given TSMC's record of delivering a compound annual growth rate in revenue and earnings of 18% since 1994. Taiwan Semiconductor is a no-brainer buy with the stock trading at a reasonable forward price-to-earnings of 19.
