Artificial intelligence (AI) has the potential to disrupt many companies and industries, but predicting which ones will succeed is difficult. One way to play the AI boom is to focus on the pick-and-shovel stocks that benefit no matter who strikes it rich in the AI gold rush.
If you've got $1,000 or more to put toward a couple of AI stocks right now, here's why you should consider Taiwan Semiconductor (TSM 4.96%) and Micron Technology (MU 3.19%).
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Taiwan Semiconductor will be building AI processors for years to come
If you've been following the tech sector for a while, you likely know about Taiwan Semiconductor Manufacturing Company (TSMC), also known as TSMC. The company is a leader in manufacturing of the world's most advanced processors, with about 70% market share in advanced chip manufacturing.
That's even more important than it sounds, because TSMC continues to invest in newer and more advanced manufacturing processes that keep it ahead of rivals like Intel and Samsung. The continual investment in new manufacturing techniques and smaller processors has helped the company carve out a competitive advantage that could last for years.
In TSMC's fourth quarter, sales rose 26% to $33.7 billion while earnings rose 35% to $3.14 per American depositary receipt. More growth is likely on the way, too, with management issuing 2026 revenue guidance growth of 30% for the full year.
Adding to TSMC's appeal is that its shares look cheap right now. Taiwan Semiconductor stock has a price-to-earnings ratio of just 35 right now, which is cheaper than the average P/E ratio for the tech sector of 39.
NYSE: TSM
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Micron's got the memory processors AI companies can't get enough of
While graphics processing units understandably get most of the attention when we're talking about AI data centers, memory processors are also a critical part of AI infrastructure. Demand for memory chips has soared over the past few years, and Micron Technology -- which designs and manufacturers memory processors -- has reaped the benefits.
Micron's total sales rose 57% in the first quarter to $13.6 billion, and its diluted earnings per share jumped 175% to $4.60. Micron's CEO, Sanjay Mehrotra, said on the company's earnings call that the data center building is driving "a sharp increase" in demand for memory and storage and added, "We believe that the aggregate industry supply will remain substantially short of the demand for the foreseeable future."
In short, there's no end yet to the surging demand for Micron's processors. And to meet that demand, Micron is making some sizable investments. The company will spend over $200 billion over the next few years building new factories, including two new high-volume factories in Idaho.
And just as with TSMC, Micron's shares are relatively well priced right now. The company's stock has a P/E ratio of 39, putting it on par with the broader tech sector and making it cheaper than many AI stocks.
