Just because an investment is obvious doesn't mean it's wrong. Here are three businesses that are clear leaders in the artificial intelligence (AI) market, which could eclipse $1.8 trillion by the end of the decade. That's up from roughly $280 billion today, according to Grand View Research.
With so much AI-fueled growth still to come, all three of these stocks are terrific buys right now.
No. 1 AI stock to buy: Nvidia
Astute investors have named Nvidia (NVDA -2.09%) as one of the prime beneficiaries of the AI gold rush, and they're right to do so. The semiconductor colossus designs state-of-the-art chips that make the most advanced AI applications possible. Nvidia's AI-related sales and profits, in turn, are growing like gangbusters.
Nvidia's growth is breathtaking. Its revenue rocketed 126% to $61 billion in its 2024 fiscal year, which ended on Jan. 28. That helped to drive its net profits higher by a dazzling 286% to $32 billion.
The market for AI chips is projected to grow rapidly in the coming years. Tech leaders like Alphabet are investing aggressively to expand their cloud computing networks. At the same time, companies like Tesla are buying massive amounts of Nvidia's latest chips to power their AI initiatives. Demand for chips that accelerate AI workloads in data centers could soar nearly ninefold to $400 billion by 2027, according to Advanced Micro Devices' CEO Lisa Su.
With its new Blackwell processors slated to provide more powerful performance gains, Nvidia's innovative chip designs should remain the first choice for AI-focused buyers.
No. 2 AI stock to buy: Taiwan Semiconductor
Chip designers like Nvidia and AMD rely on Taiwan Semiconductor Manufacturing (TSM -0.70%) to fabricate their designs. The global leader in semiconductor foundry services makes many of the crucial electronic components that are helping to power the AI revolution.
More than 500 companies asked TSMC to build nearly 12,000 different products in 2023. Key end markets include smartphones, automotive technology, and consumer electronics.
Yet, it's TSMC's AI-driven opportunities that have investors most excited. The company's net revenue in April surged by 60% year over year to 236 billion New Taiwan dollars, or roughly $7.3 billion, fueled by soaring demand for AI-related semiconductor technologies. That marked a sharp acceleration from TSMC's sales growth rates of 34% in March and 11% in February.
Investors can expect these strong growth trends to persist. Eager to ensure access to TSMC's advanced technology, governments are offering the chipmaker billions of dollars of tax breaks to erect new manufacturing plants within their borders. TSMC is thus planning to open additional facilities in the U.S., Japan, and Germany to expand its AI chipmaking empire.
No. 3 AI stock to buy: Microsoft
A multibillion-dollar investment in ChatGPT-creator OpenAI thrust Microsoft (MSFT -1.73%) to the forefront of the AI race. That's an extremely valuable position to be in, as evidenced by the tech behemoth's $3 trillion market value.
Microsoft is using OpenAI's technology to bolster its own AI offerings. Businesses can access ChatGPT and other large language models via Microsoft's Azure cloud computing platform. Revenue for Azure and the company's other cloud services leaped 31% in the quarter ended March 31, boosted by rising demand for AI tools.
Additionally, Microsoft is adding AI assistants called "copilots" to its popular productivity software. Users are reporting significant productivity and efficiency gains, including more than one hour of time savings per week on work-related tasks.
Microsoft is just beginning to monetize its AI copilots. Yet nearly 60% of the 500 biggest businesses in the U.S. are already testing these promising AI tools. With copilot subscription plans starting at $30 per month per user, the tech giant has an opportunity to enlarge its profits by selling these AI upgrades to the over 400 million commercial users of its Office 365 software suite.
