The price of many artificial intelligence (AI) stocks has dropped since the beginning of the year, creating a buying opportunity for investors looking to benefit from one of the largest tech trends in years.
There's no guarantee of specific returns, but buying shares of AI leaders could produce significant gains as the technology balloons into a $15.7 trillion market by 2030. Companies responsible for AI processing have some of the largest opportunities, which is why Nvidia (NVDA +1.67%), Broadcom (AVGO +2.02%), and Taiwan Semiconductor Manufacturing (TSM +1.97%) could supercharge your returns in the coming years. Here's how.
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1. Nvidia is an AI play for the ages
Nvidia has likely already minted millionaires, with its share price surging 2,000% over the past five years. Future returns of that magnitude are unlikely, but there's still plenty of room for the company to grow.
It already holds a commanding lead in the AI processor market (up to a 95% share by some estimates), and that has led to fantastic data center sales growth, up 93% in the most recent quarter to $35.6 billion.
NASDAQ: NVDA
Key Data Points
More growth is likely on the way. Nvidia recently released its new Blackwell AI processors, which are even more capable than previous generations. Strong demand for Blackwell pushed sales of the processors to $11 billion in the fourth quarter (which ended Jan. 26), 31% of total data center sales.
The long-term prospects for Nvidia come from an ever-increasing need for more powerful data centers. CEO Jensen Huang says current computing power is 100 times higher than before ChatGPT was released. Training more-advanced AI models and achieving artificial general intelligence (which can match human reasoning) will likely need much higher computing power as well.
2. Broadcom is benefiting from its AI processors
While Nvidia gets much of the attention in AI processors, another key player is Broadcom. The company makes application-specific integrated circuits (ASICs), which are custom chips used in some AI data centers. Customers include tech behemoths like Meta and Alphabet, and business is booming.
In the company's first quarter, AI revenue jumped 77% to $4.1 billion, and earnings of $1.14 per share under generally accepted accounting principles (GAAP) were impressive.
There could be brighter days still ahead, too. CEO Hock Tan estimates his company's total addressable market could be as high as $90 billion just two years from now.
NASDAQ: AVGO
Key Data Points
Just as with Nvidia, demand for AI data centers should fuel growth over the coming years as tech giants build massive AI infrastructure to keep pace with one another. That's great news for Broadcom because, besides its processors, it also makes networking software used for this infrastructure. Software revenue spiked 47% in the first quarter to $6.7 billion.
With data center spending estimated to reach up to $2 trillion over the next five years, Broadcom's processors and infrastructure networking businesses are sure to benefit.
3. Taiwan Semiconductor's manufacturing prowess is unmatched
Most companies don't actually manufacture their AI processors. Instead, the majority of them rely on Taiwan Semiconductor (often called TSMC) and its advanced production techniques to bring them to life.
NYSE: TSM
Key Data Points
TSMC manufactures an estimated 90% of the world's most advanced processors, and its top- and bottom-line growth reflects its dominance. Revenue increased 37% year over year in the fourth quarter (which ended Dec. 31) to $26.8 billion, and earnings popped by 57% to $2.24 per American depositary receipt.
Management said on the latest earnings call that AI demand will fuel more growth, with the company estimating AI sales will double in 2025. That anticipation likely isn't misplaced as tech giants like Oracle, OpenAI, Microsoft, and others have already announced hundreds of billions of dollars in data center spending.
TSMC's stock has fallen about 13% since the beginning of this year as investors have grown concerned about trade wars and an economic slowdown. The drop has opened up the opportunity for investors to grab shares of this dominant AI player at a discount as AI spending ramps up.
