Artificial intelligence (AI) continues be one of the driving factors of the market. With spending on AI infrastructure booming, let's look at three of the best AI stocks to buy now. These are all stocks that should see strong growth from the current AI data center buildout.
Nvidia
Nvidia (NVDA 1.53%) once again showed why it is the dominant player in AI infrastructure, reporting another stellar quarter of growth. With its stock down following its results (most likely just needing a breather following its huge run the past few years), this opens up a nice opportunity for investors to grab shares off their highs.
In fact, the stock's valuation is quite cheap today, trading at a forward price-to-earnings (P/E) ratio below 22 based on the current-year consensus and a forward price/earnings-to-growth (PEG) ratio of just over 0.3 (with positive PEG ratios below 1 considered undervalued).
NASDAQ: NVDA
Key Data Points
Despite its massive size, Nvidia continues grow briskly, with its revenue soaring 73% to $68.1 billion in the fourth quarter. Demand for its graphics processing units (GPUs) remains insatiable, while the company has evolved into a complete AI infrastructure solution player.
This could be seen in the growth of its networking portfolio, which saw its Q4 revenue surge 3.5 fold to $11 billion. Meanwhile, with its new Rubin Vera platform, Nvidia is looking to get ahead of the growth in agentic AI, which will require more central processing units (CPUs), as high-performance CPUs are needed for AI agent orchestration.
Image source: Getty Images.
AMD
Picking up on that last theme, Advanced Micro Devices (AMD 3.46%) finds itself in a strong position as we embark on the age of agentic AI. With more AI agents will come the need for more CPUs, and the company is the market leader in the data center CPU space. Its revenue growth has already been strong in this area, but it has the chance to see it start accelerating in the coming years.
Meanwhile, the company has struck two large GPU deals with OpenAI and Meta Platforms to supply each of them with 6 gigawatts worth of chips. According to reports, each deal is worth more than $100 million. Meanwhile, AMD also offered both companies warrants to take a stake in it based on both their deployments and AMD's stock price. This gives both OpenAI and Meta a reason to help AMD succeed, which isn't a bad move as it looks to take some share in the GPU space dominated by Nvidia.
NASDAQ: AMD
Key Data Points
AMD has talked about achieving a 35% annualized revenue growth rate over the next three to five years, with its EPS surpassing $20 per share. These deals and the rise of agentic AI help set it up to reach this goal.
While its forward P/E is 30, given its expected growth, it drops to only 18 based on 2027 analysts' estimates, making it an attractive stock to own.
Taiwan Semiconductor Manufacturing
More advanced chips means more money for Taiwan Semiconductor Manufacturing (TSM 5.03%). The company is the world's largest manufacturer of advanced logic chips, like GPUs and high-performance CPUs, so the company is right at the heart of the trends in the AI infrastructure space.
NYSE: TSM
Key Data Points
Meanwhile, because competitors have struggled to achieve high yields at small node sizes, it has become a virtual monopoly in the manufacturing of advanced chips. This has also given it strong pricing power, with the company reportedly already laying out a four-year price increase schedule to its customers. Given the huge need for chips, TSMC is also working closely with customers on their roadmaps to increase supply. It is looking for its AI revenue to grow at an over 50% annual rate over the next few years.
Currently, the stock is attractively valued, trading at a forward P/E ratio of 26 and a PEG of 0.75.
