With the market starting to settle down as U.S.-China trade tensions ease, now could be a great time to add some leading tech stocks to your portfolio.
Let's look at three top tech stocks to buy this month.
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1. Nvidia
When it comes to artificial intelligence (AI), Nvidia (NVDA 0.28%) remains one of the best-positioned companies. The company's graphics processing units (GPUs) have become the backbone of AI infrastructure, providing the processing power necessary to run AI workloads.
The company is the dominant player in the GPU space, with a market share exceeding 80%. This dominance stems from its CUDA software platform, which allows developers to easily program its chips, as well as its collection of AI-specific libraries and tools that improve its chips' performance running AI workloads.
AI-related data center spending continues to surge. The three major cloud providers -- Amazon, Microsoft, and Google -- are expected to spend a combined $250 billion this year to expand capacity and meet growing demand from customers running AI workloads. At the same time, tech giants like Meta Platforms and OpenAI are racing to build more powerful AI models, which require increasingly more computing power. Enterprises are also ramping up their infrastructure investments, adopting hybrid cloud strategies to support internal AI deployment.
For its part, Nvidia expects these tailwinds to continue, predicting that data center capital expenditures (capex) will surpass $1 trillion in 2028. If it does, the company will be a prime beneficiary given its position in the market.
At the same time, the stock remains attractively priced, trading at a forward price-to-earnings ratio (P/E) of 28 times this year's analyst estimates and a 0.56 price/earnings-to-growth (PEG) ratio, with numbers below 1 considered undervalued.
2. Advanced Micro Devices
While a distant second in the GPU market to Nvidia, Advanced Micro Devices (AMD 1.91%) is still seeing strong data center growth. The company has been making some inroads in the GPU space, particularly in the AI inference market. While training has been the early focus of AI infrastructure investment, inference is eventually expected to become a much larger market. That is good news for AMD.
In fact, on its last earnings call, the company said that one of the largest AI model companies is now using its GPUs to process a meaningful percentage of its daily inference traffic. AMD added that several major cloud providers are using more of its GPUs to handle generative AI tasks like search, rankings, and recommendations.
The company has also become the leader in providing central processing units (CPUs) for data centers, where it has been gaining market share. While GPUs provide the processing power, CPUs are the brains behind the operation. It's not nearly as big as the GPU market, but it is an important and strongly growing market.
Between its leadership in the data center CPU space and the opportunity it will have with AI inference, AMD is another solid AI infrastructure play. With a forward P/E of 27.5 times, the stock holds a lot of upside potential at a reasonable price.
3. Taiwan Semiconductor Manufacturing
Another company set to benefit nicely from the ongoing AI infrastructure buildout is Taiwan Semiconductor Manufacturing (TSM -0.13%), or TSMC for short. The company is the leading semiconductor contract manufacturer in the world, and, as such, is benefiting from the increased demand for GPUs and other advanced chips.
Today, most leading semiconductor companies focus on designing chips while outsourcing their manufacturing to foundries like TSMC. The reason is quite simple: Chip fabrication is extremely capital-intensive, requiring billions of dollars to build and operate a chip manufacturing facility. To be profitable, these facilities must also run at or near full capacity. On top of that, manufacturing cutting-edge chips requires strong technical expertise and constant investment. Foundries are continually pushing the limits to shrink chip sizes to deliver more powerful and energy-efficient chips.
TSMC's scale and technological expertise have helped separate the company from its competitors and allowed it to become a valuable partner to leading chip designers such as Nvidia. It has also given the company solid pricing power, which led to steady gross margin improvement.
Currently, the company is working closely with its largest customers to build manufacturing capacity to help them meet future needs, while broadening its geographic footprint. This includes a big investment in new facilities in the U.S.
The stock is also attractively valued with a forward P/E of 20.5 and a PEG of 0.62.
