One way to analyze investments in a particular industry or sector is by understanding the supply chain. Dig deep into a given industry and the power players will soon emerge. In the case of artificial intelligence (AI), there are a handful of best stocks that also currently appear to have long-term viability. Exposure to the best AI supply chain stocks is likely to be a winning strategy.
Each of these firms forms a vital link in the overall AI supply chain. The integral nature of these firms and their apparent long-term viability makes each an excellent choice for any investor seeking long-term exposure to the AI boom.
The long-term outlook for AI certainly looks strong. The overall value of the AI market rose from $50 billion in 2023 to $184 billion in 2024. It’s expected to surge to $826 billion by 2030. That projected growth should translate into massive opportunities in each of the stocks discussed below. Each of those companies has an incredible opportunity to grow at an unprecedented rate.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) stock has grown quickly in 2024, surging from $100 to $175 today. That would raise some eyebrows normally but for investors worried I would look to current target prices.
Target prices range from a low of $168 to a high of $200. That seems to be a reflection of Taiwan Semiconductor Manufacturing’s new reality. It is responsible for the manufacturing of 90% of the world’s cutting-edge logic chips. That means 90% of the AI chips that get stamped with names like Nvidia and Advanced Micro Devices (NASDAQ:AMD) are produced by TSM.
The company is one of the most integral links within the AI supply chain and it seems that more and more people are recognizing it these days.
It also looks like TSM is soon going to be charging many of its partners higher prices. The company has seen how much money Nvidia has been making and has suggested charging the company more. Nvidia seems to be on board with the reasoning, suggesting that price hikes will trickle down to other suppliers as well.
Nvidia (NVDA)
Mention AI and Nvidia (NASDAQ:NVDA) stock is almost certainly going to be the first name to come to mind. Nvidia has become synonymous with AI and for good reason. Over the past few years, the company has gone from one that derived most of its revenues from GPUs for computers to one driving the majority of its revenues from AI.
Approximately 80% of Nvidia’s $22.1 billion in first-quarter revenues were attributable to AI-related hardware. The shift has prompted not only massive overall growth at the company but also is indicative of Nvidia’s AI prowess.
Companies of all sizes continue to scramble to secure their portion of Nvidia’s chips. Those chips are in such high demand that Nvidia simply can’t keep up. That’s not such a bad place to be when it comes to pricing power but ultimately Nvidia would like to sell to all willing buyers I’m guessing.
Shares continue to test new highs following the forward stock split. It will be surprising to no one if Nvidia soon sneaks above $140 and stays there.
ASML (ASML)
ASML (NASDAQ:ASML) is another of the most important AI stocks and one all investors should consider. The company produces advanced semiconductor manufacturing equipment that is state of the art.
ASML’s extreme ultraviolet (EUV) lithography machines are essential for the manufacture of the most advanced chips. The bus-sized machines etch electronic pathways onto silicon wafers. ASML is the only company in the world that can make those machines. Other firms have mastered deep ultraviolet (DUV) lithography employing longer wavelengths of light but the result is wider wafer pathways.
Intel (NASDAQ:INTC) purchased all five of the High NA EUV lithography machines ASML is slated to produce this year. Those machines are each valued at $370 million. That should give readers an idea of the value of ASML’s technological capabilities.
The process of how patterns are etched onto silicon wafers it’s extremely technical and interesting and includes a step in which a droplet of tin is heated to 220,000° Celsius and optical systems that include the most accurate mirrors ever fabricated.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
