The tech-laden Nasdaq Composite index has been under pressure this year and is slightly in the red as of this writing. This is due to weakness in technology stocks on account of the tariff-fueled turmoil and other factors such as questions surrounding the viability of huge investments being made in artificial intelligence (AI) infrastructure.
But a closer look at the recent action indicates the index has made a strong comeback. The Nasdaq has bounced 18% higher in the past month. This solid turnaround can be attributed to a string of robust quarterly reports from companies making the most of the proliferation of AI, as well as positive developments on the tariff front that indicate the trade war could be cooling off.
Image source: Getty Images.
That's why now would be a good time for investors to consider buying shares of Taiwan Semiconductor Manufacturing (TSM 2.82%) and The Trade Desk (TTD +2.47%), two AI stocks that have surged impressively in the past month and seem well placed to deliver more upside amid the Nasdaq's recovery. Let's see why these two names have the potential to soar even higher.
1. Taiwan Semiconductor Manufacturing
Popularly known as TSMC, Taiwan Semiconductor Manufacturing is the world's largest semiconductor foundry. It manufactures chips for the leading fabless chipmakers such as Nvidia, Advanced Micro Devices, Broadcom, Marvell Technology, Qualcomm, and MediaTek, among others. Consumer electronics giants such as Sony and Apple also tap TSMC's fabrication facilities for manufacturing chips.
This puts TSMC right in the middle of the AI boom. The Taiwan-based foundry giant manufactures chips that go into a variety of AI applications, ranging from data centers to smartphones to personal computers (PCs) to cars. Moreover, its status as the world's biggest semiconductor foundry with a market share of 67% -- miles ahead of the 11% share that second-placed Samsung has -- illustrates
TSMC has a very wide moat that should allow it to make the most of the growing demand for AI chips from multiple verticals.
NYSE: TSM
Key Data Points
Not surprisingly, TSMC's growth has been breathtaking so far in 2025. Its revenue in the first quarter shot up 35% year over year to $25.5 billion, exceeding consensus estimates. The earnings growth was even better as an increase of 5 percentage points in its net profit margin led to a year-over-year jump of 54% in its bottom line to $2.12 per share.
Even better, TSMC's revenue jumped 48% in April, the highest that it has reported so far this year. This clearly indicates that the company's Q2 performance could turn out to be ahead of Wall Street's expectations as analysts are forecasting a 37% spike in its revenue in the current quarter. Moreover, TSMC is forecasting that its revenue from manufacturing AI accelerators such as graphics processing units (GPUs), custom AI processors, server processors, and high-bandwidth memory chips is likely to double.
As a result, the company is focused on doubling its advanced chip packaging capacity in 2025 to meet the rapidly growing demand for chips deployed in AI data centers for training and inference purposes. The company gets almost 60% of its revenue from supplying chips deployed for high-performance computing (HPC) in data centers, so its projection for impressive growth in sales of AI accelerators should move the needle in a bigger way for TSMC.
Meanwhile, TSMC is looking to push the envelope on the product development front in a bid to maintain its wide moat. It is worth noting that 3-nanometer (nm) chips accounted for 22% of TSMC's revenue in Q1, up from just 9% in the year-ago period. The company's 5nm chips produced 36% of its top line, almost flat from the year-ago quarter.
These advanced chip processes are being used for manufacturing AI chips because of their stronger performance and lower power consumption. This explains why TSMC is aiming to offer an even more advanced 2nm process node to customers later this year, which is expected to deliver a 10% to 15% improvement in performance along with a 25% to 30% drop in power consumption.
TSMC, therefore, should be able to maintain its dominant position in the foundry space and make the most of the secular growth of the AI chip market. Investors would do well to buy this semiconductor stock before it flies higher following the 27% gains it has clocked in the past month. It is trading at an attractive 23 times earnings right now, a nice discount to tech-laden Nasdaq-100 index's earnings multiple of 31.
2. The Trade Desk
Shares of programmatic advertising company The Trade Desk have shot up a remarkable 52% in the past month, driven by the company's solid first-quarter 2025 results released earlier in May. The company is witnessing healthy demand for its AI-powered programmatic ad platform that's allowing advertisers to increase their returns on ad dollars spent, which allowed it to crush Wall Street's expectations.
Management pointed out on the company's recent earnings conference call that a third of its clients are using its AI-enabled digital advertising platform known as Kokai, which uses deep learning algorithms to make the ad-buying process more efficient. This platform was launched a couple of years ago and uses over 17 million advertising impressions each second "to help advertisers buy the right ad impressions, at the right price, to reach the target audience at the best time."
NASDAQ: TTD
Key Data Points
The Trade Desk believes that all of its customers will shift to using Kokai by the end of the year. That won't be surprising considering that the clients who have started using this platform "have seen a 42% reduction in cost per unique reach" as per management. The Trade Desk points out that the cost savings that its customers are achieving by using Kokai will allow them to reinvest more money into programmatic advertising, and this could lead to more revenue for the company.
So, there is a good chance that The Trade Desk's growth could accelerate in the future. Analysts are expecting the company's top line to jump 17% in 2025 to $2.86 billion. However, its revenue grew by 25% year over year in Q1, suggesting that it could end up outpacing Wall Street's expectations. Additionally, the size of the programmatic ad market is expected to jump by almost $100 billion in 2025 and 2026, generating $436 billion in annual revenue next year.
The Trade Desk's move to integrate AI into its programmatic ad platform could help it corner a nice chunk of this opportunity, and that could turn out to be a long-term catalyst for this tech stock. As such, growth investors looking to capitalize on the growing adoption of AI within the digital ad market can consider The Trade Desk for their portfolios before it soars even higher.
Of course, the stock is expensively valued right now with a forward earnings multiple of 72, but the multibillion-dollar opportunity in the programmatic ad market could help justify its rich valuation as more advertisers turn toward integrating AI tools into their campaigns.
