Although there are some fears circulating in the market about a potential artificial intelligence (AI) bubble, investors must realize this isn't a repeat of what happened in the early 2000s during the dot-com bubble. Many of those companies weren't making any money, and were valuing each other off of inflated and lofty valuations that didn't make sense.
We're nowhere near that level right now, and several stocks look like great buys, especially if the AI hyperscalers continue spending at the rapid pace they are. If you've got $1,000 ready to invest, these stocks are a great place to begin.
Image source: Getty Images.
Nvidia
Nvidia (NVDA +0.59%) has been the top stock to buy in the market for a few years now, and I see nothing that changes that perception. Nvidia makes graphics processing units (GPUs), which are accelerated computing units that have produced much of the artificial intelligence technology we enjoy today. There's still high demand for AI computing power, and Nvidia is slated to capitalize on this growth.
During its Washington, D.C., GTC event, CEO Jensen Huang announced the company had about $300 billion in orders of its most advanced computing chips over the next five quarters. That's huge growth, especially considering Nvidia has generated $165 billion in revenue over the past 12 months.
Nvidia trades at about 29 times next year's earnings, which isn't a bad price to pay considering the massive growth it's experiencing.
NVDA PE Ratio (Forward 1y) data by YCharts
With many other big tech companies trading at a similar price tag (Apple is actually more expensive despite much slower growth), Nvidia makes for a great buy now.
Taiwan Semiconductor Manufacturing
Nvidia is known as a fabulous chip company, which means it designs the chips and then outsources the manufacturing work to several other businesses. One of the most important is Taiwan Semiconductor Manufacturing (TSM 1.39%), which is the world's leading semiconductor manufacturing company. Nearly every chip being used in the AI race (regardless of whether it's in an Nvidia device or not) originated from a TSMC factory, showcasing its dominance.
NYSE: TSM
Key Data Points
While Nvidia is the industry leader in GPUs, competitors like AMD (AMD +8.26%) and Broadcom (AVGO +1.15%) are rising. Regardless of which computing unit becomes the most popular option over the next few years, it's likely that Taiwan Semiconductor will be supplying the chips. This makes Taiwan Semiconductor an excellent neutral investment in the AI megatrend, as it's a bet that we're going to need more advanced chips in greater quantities.
It's also not very expensive, trading for 24 times next year's earnings. TSMC is also posting incredibly high growth rates (up 41% in U.S. dollars during Q3), indicating that there is still a ton of growth out there for Taiwan Semi to capture.
Alphabet
Last is Alphabet (GOOG +0.40%) (GOOGL 0.62%). Alphabet was supposed to be a casualty of AI when it first became mainstream, as everyone assumed generative AI would replace its primary business: the Google Search engine. However, Google integrated AI search overviews into the platform, which bridges the gap between a full generative AI experience and a more traditional one. This has been a great integration and has allowed Google to maintain its place at the top.
NASDAQ: GOOGL
Key Data Points
Additionally, Alphabet has a growing cloud computing division that provides computing power to many clients. When Alphabet announced massive capital expenditure figures, some of this is going to building out cloud computing capacity, which it will directly benefit from. This makes the risk of Alphabet overbuilding its AI infrastructure relatively small, as it will always be able to rent this computing power out to other clients that may be running AI or traditional workloads.
Regardless, Alphabet isn't horribly priced at 26 times next year's earnings, although this certainly isn't cheap, especially when Nvidia's and Taiwan Semiconductor's growth rates are factored in. Still, I think Alphabet is an excellent investment now, and it should be at the top of everyone's shopping lists heading into 2026.
