During the first half of 2025, the S&P 500 and Nasdaq Composite indexes both rose by roughly 5.5%. At first glance, these gains might not inspire much enthusiasm from growth investors.
However, considering these indexes declined by up to 15% and 21% at the low points earlier this year, their respective recoveries into positive territory help underscore the idea that the stock market is a resilient vehicle.
With the capital markets beginning to finally show some signs of strength, investors are surely wondering what investments could be poised for a bounce throughout the second half of the year.
Let's explore two artificial intelligence (AI) stocks beyond the usual suspects of the "Magnificent Seven" that look well-positioned for growth over the next six months -- and longer.
Image source: Getty Images.
1. Advanced Micro Devices
Advanced Micro Devices (AMD +1.70%) has received quite a bit of attention throughout the AI revolution, but it hasn't all been glorious. Although the company's AI data center business has been posting impressive financial results, AMD's market presence is completely overshadowed by its top rival, Nvidia.
While Wall Street analysts continue to be enamored with Nvidia's dominance in the chip realm, smart investors aren't sleeping on AMD. The second half of 2025 will feature the launch of AMD's next GPU architecture, MI350.
The MI350 chipsets are reportedly more energy efficient and possess faster processing speeds than Nvidia's newest Blackwell GPUs. Perhaps even more encouraging is that AMD is expected to follow up the MI350 launch with successor architectures, called MI400, next year.
NASDAQ: AMD
Key Data Points
Although Nvidia may have a first-mover advantage in the GPU landscape, AMD's new designs should help give the company a competitive edge as it seeks to gain ground on the competition. Not only am I encouraged by AMD's growth potential over the next couple of quarters, but the company's aggressive investments in innovation are helping it build a foundation for longer-term growth.
During the first six months of 2025, shares of AMD rose by 17% -- nearly triple that of the S&P 500 and Nasdaq Composite. It's important to note that the entirety of the company's first-half gains occurred over the last two months. Some of this can be attributed to macro gains across the broader technology industry during the same time frame.
However, shares of AMD really started kicking into gear following the company's Advancing AI event in early June. During this showcase, investors learned how the likes of Oracle, Meta Platforms, OpenAI, xAI, and more are leveraging AMD's ecosystem.
AMD PS Ratio data by YCharts
Per the chart above, AMD trades at a considerable discount to its semiconductor peers on a price-to-sales (P/S) basis. I don't think this valuation disparity will last much longer, though.
Given the company's deep roster of new AI accelerators and its ability to win over some of AI's biggest developers as partners, I'm optimistic that AMD is poised for a strong second-half performance that could very well carry into longer-term share price appreciation.
2. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM 1.86%) -- also known as TSMC -- might just be the most underrated opportunity in the AI chip market. What most investors might not understand is that Nvidia, AMD, Broadcom, and many more companies outsource their manufacturing needs to Taiwan Semi. This is an important concept to understand, as rising demand for chips from Nvidia, AMD, and others serves as a direct tailwind for TSMC.
These dynamics provide Taiwan Semiconductor with enormous leverage, as the company is able to command a premium for its fabrication and foundry services. Moreover, Taiwan Semi represents a more agnostic approach to investing in the AI chip space. Said differently, TSMC stands to benefit from more secular trends fueling chip demand as opposed to a specific company's products being in demand over the competition.
NYSE: TSM
Key Data Points
Through the first half of 2025, TSMC's revenue soared by 40% year over year. That level of growth is astonishing, and the company might actually have a path to sustain it.
According to a study from management consulting firm McKinsey & Company, investment in AI infrastructure could reach $6.7 trillion by next decade. Nearly half of this spending is projected to be allocated toward hardware for AI data centers. Not only does this imply that demand for chips is strong, but the subtle idea is that foundry services such as those offered by Taiwan Semi aren't going away anytime soon.
Given AMD's new chip architectures, combined with Nvidia's competing products and the rise of custom silicon from cloud hyperscalers, I'm confident that Taiwan Semi will be operating from a position of strength for years to come.
TSM PE Ratio (Forward) data by YCharts
Nevertheless, at 24 times forward earnings, TSMC stock trades for a discount compared to historical valuation levels -- and that's including the recent rebound in the stock price over the last month or so. To me, Taiwan Semi is a bargain opportunity right now and I think the stock could be a surprise winner during the second half of the year.
