2 AI Stocks to Buy in the Wake of the Market Sell-Off

The stock market is off to a rough start to 2025. It's never fun to see the value of your portfolio dwindle, and there's never any certainty about when a period of market volatility will end. But the upside is that market pullbacks present a window of opportunity to invest in growing companies at lower valuations, setting you up for more gains when the markets rebound.

No matter what happens to the markets in the near term, artificial intelligence (AI) will remain on course to forever change how businesses operate. Buying top AI stocks at their now-lower prices could be the smartest move you make this year. Here are two stocks to consider buying now.

1. Taiwan Semiconductor Manufacturing

As the world's leading third-party chipmaker, Taiwan Semiconductor Manufacturing (TSM 0.57%) is a compelling way to invest in the long-term growth of some of its customers, including Nvidia, Broadcom, and Advanced Micro Devices. TSMC continues to make significant capital investments to expand its manufacturing capacity, which points to great return prospects.

TSMC controls 67% of the global foundry market, according to Counterpoint research. The chip maker spent years investing in its manufacturing capabilities, which is why it's capable of producing the most advanced chips in the world.

The company's high profit margin shows there is not a substitute for the services it offers to the leading semiconductor designers. Last year, TSMC earned $36 billion in net profit on $90 billion of revenue.

The chip industry can be cyclical, but the growing demand for advanced chips used for high-performance computing, including AI, is a huge opportunity. Despite an industry slowdown in 2023, TSMC's revenue more than doubled over the last five years and grew by 37% year over year in Q4 2024.

TSMC is benefiting from the steadily increasing numbers of high-end chips needed for devices, cars, and data centers. An increasingly computerized world is the main reason the company will continue to grow in value for investors.

Management clearly sees a long runway of growth ahead, as reflected in its plan to spend $165 billion to expand its manufacturing capacity in the U.S. A business with TSMC's track record of earning high returns on capital doesn't invest that kind of money in infrastructure unless there is a big payoff down the road.

Taiwan Semiconductor shares trade at a forward price-to-earnings multiple of 16, yet analysts expect earnings to grow at an annualized rate of 32% over the next several years, which puts the shares on a path to deliver tremendous gains.

2. Alphabet (Google)

Alphabet (GOOGL 1.70%) (GOOG 1.52%) is one of the leading sellers of digital advertising space. It earns 75% of its revenue from ads, and last year brought in $350 billion in total revenue. The Google owner is using AI to fuel its advertising and cloud computing businesses, making it a no-brainer AI investment.

Concerns that President Donald Trump's tariffs could send the U.S. economy into a recession have weighed on the stock this year. Alphabet needs a growing economy to keep brands buying its digital advertising space, but since U.S. recessions have historically been comparatively short relative to the periods when the economy is expanding, buying shares when they're being dragged down due to recession fears should be a beneficial strategy for a long-term investor.

A growing digital ad market drove a strong year for Alphabet in 2024. New AI features like AI Overviews in Search are increasing the number of times people use Google Search. This gives the company more opportunities to show people ads, which helped it grow its revenue by 14% in 2024.

Alphabet is also continuing to show excellent growth potential in a cloud infrastructure market that was worth $330 billion last year, according to estimates from Synergy Research. With a 12% market share, Google Cloud is the No. 3 provider in the space, but its cloud revenue surged 30% year over year in Q4, driven by growing demand for Google's enterprise AI services.

The company is planning for $75 billion in capital expenditures in 2025 as it expands its technology infrastructure. On the large language model front, Google has made great progress in narrowing the gap between its AI chatbot offering and those of leaders like OpenAI. Its Gemini is currently ranked as the top-performing chatbot by the Chatbot Arena leaderboard, which points to Alphabet's prospects in the AI era.

While a slowdown in the advertising market will always be a near-term risk for the company, Alphabet stock is already attractively valued, trading at a forward P/E of 16. At that level, investors are getting a bargain for a company that analysts project will grow its earnings at an annualized rate of 16% in the coming years.