Artificial intelligence (AI) stocks have been the must-own stocks over the past few years, but we're still a long way away from full AI deployment, so many AI stocks are still worth buying, even at their current levels.
At the top of my shopping list are Nvidia (NVDA 0.87%), Taiwan Semiconductor Manufacturing (TSM -0.17%), and Meta Platforms (META -0.29%). These three each tackle AI in their own way and could be excellent long-term investments.
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Nvidia
Nvidia makes graphics processing units (GPUs), which are widely deployed to train and run AI workloads. Its market share dominance in this industry is impressive, with most estimates pegging it at around 90%. Due to unprecedented AI demand, the GPU market has grown massively, and Nvidia's growth has been nothing short of jaw-dropping.
Nvidia put up impressive growth figures over the past few years, and although the growth rate is "slowing," it's hard to say that seriously when Nvidia grew revenue 69% year over year to $44 billion in Q1. It also projects it to grow by 50% in Q2, underscoring its strength.
As long as there's huge AI demand, Nvidia will be a successful investment. Even with shares trading at 33 times forward earnings, it's about in line with other big tech stocks. However, Nvidia's growth and potential are far greater than many of its big tech peers, which makes it a solid stock to scoop up in June.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor is a huge beneficiary of the massive demand that Nvidia experienced. Nvidia doesn't have the ability to produce its own chips, so it outsources that work to Taiwan Semiconductor. Nvidia isn't the only company that does this; nearly every big tech company that makes hardware uses chips from Taiwan Semiconductor's factories. This allows Taiwan Semi to stay neutral in the AI arms race, while benefiting from the massive spending.
Investing in TSMC isn't picking a winner in the AI arms race; it's a bet that there will be increased AI spending in the future. That seems like a surefire take, so the stock will stay at the top of my buy list for the foreseeable future.
Another reason I'm a Taiwan Semi bull is its stock price. Despite benefiting from multiple tailwinds, its stock hasn't achieved a premium valuation. It trades at 22.9 times forward earnings -- the same as the broader market, as measured by the S&P 500.
With big growth ahead for Taiwan Semi and a cheap starting price, it's a no-brainer AI stock to scoop up in June.
Meta Platforms
Meta Platforms is likely better known by its former name: Facebook. Meta's social media platforms (like Facebook, Instagram, Threads, WhatsApp, and Messenger) are the business's cash cow, with 98% of revenue coming from advertising on these platforms.
However, Meta is also massively investing in AI. Part of the focus with AI is improving the advertising on these platforms, which will boost existing revenue and profits. It's also developing AI capabilities internally to supplement its engineering team with AI agents, which will help save on operating expenses.
However, Meta's most aspirational investments involve its AI glasses and other gadgets that will bring AI into the real world rather than just behind a computer screen. CEO and founder Mark Zuckerberg believes that AI glasses are the ideal form factor for deploying AI to the real world and that they will see widespread use in the next five to 10 years. While the verdict remains to be reached on these developments, Meta's stock only trades on its legacy ad business.
At 27 times forward earnings, the market hasn't priced in any upside from one of Meta's ancillary bets paying off.
META PE Ratio (Forward) data by YCharts
That's a fair price to buy for Meta's legacy business, but if one of its other investments works out, Meta's stock could turn into a massive winner in short order. As a result, it's one of my top AI picks for June.
