Like it or not, artificial intelligence (AI) is likely going to be the driving theme of this market over the coming years. As such, let's look at two AI stocks to hold for the next two years.
Taiwan Semiconductor Manufacturing
One of the best ways to play the AI infrastructure boom, in my opinion, is through an investment in Taiwan Semiconductor Manufacturing (TSM 4.26%). Making logic chips is not easy, as foundries need to continually work to shrink nodes (make chips denser) to improve chip performance, and fabs (chip factories) need to run at nearly full utilization to typically be profitable. As such, most chip companies today outsource their manufacturing to independent foundries like TSMC.
Image source: Getty Images.
The company has become the clear market leader for manufacturing advanced chips at small nodes due to its technological expertise and scale. As competitors have struggled to achieve high yields (few defects) for smaller-sized nodes at a large scale, TSMC has established itself as a virtual monopoly for manufacturing advanced chips.
As such, the company will continue to be a huge winner from the AI data center boom because it will be the main manufacturer of graphics processing units (GPUs) and other AI chips. Meanwhile, it will also have an opportunity with advanced central processing units (CPUs), which will become increasingly necessary with the advent of agentic AI. This makes it a stock to own over the next two years and beyond.
NYSE: TSM
Key Data Points
ServiceNow
The market has deemed infrastructure stocks winners and software-as-a-service (SaaS) stocks as losers when it comes to AI, but don't be surprised if the beaten-down SaaS sector outperforms over the next couple of years. One of my favorites in the space is ServiceNow (NOW 1.50%), which provides one of the main systems of record for organizations.
The company's platform is the glue that unifies customers' data with their workflow, and it is not something that can be easily ripped out and replaced. Years of tightly integrated custom business logic, audit trails, and security protocols make the product invaluable.
NYSE: NOW
Key Data Points
The same thing that makes ServiceNow's platform sticky is also what makes it a great launching pad for agentic AI. Its generative AI suite, Now Assist, has been a hit with customers. And with its new Control Tower, ServiceNow is looking to be an agentic AI orchestration layer.
The recent acquisitions of Armis and Veza add extra security measures, setting up ServiceNow to be an agentic AI leader in the coming years. Given its beaten-down valuation and the AI growth opportunity, this is a stock to own for the coming years.
