3 AI stocks that look like solid buys for any upcoming weakness

Artificial intelligence (AI) is a concept that has been around since 1950, when Alan Turing first coined the term. Although they have been around in various forms for decades, recent technological advances have finally made true artificial intelligence a reality. The launch of OpenAI’s ChatGPT in November 2022 reignited industry interest, sparking a rush among tech companies to harness the potential of AI. This surge in enthusiasm has driven the Nasdaq Composite’s impressive 68% return since the start of 2023.

In recent years, artificial intelligence (AI) has become a key investment theme. Although initial excitement around AI stocks has cooled, investing in solid companies with proven AI technologies remains wise as these tools drive efficiency and productivity. Despite the recent short-term declines seen among many AI stocks linked to macroeconomic concerns, tech giants continue to benefit from AI and could continue to see revenue and earnings growth over the long term if these technologies are successful.

For those looking to identify some of the top ways to play the rise of top AI stocks, here are three that I think are worth considering.

Key points about this article:

• Artificial intelligence technology has been around for a long time, but has grown in importance in recent years as investors flock to companies that can directly benefit from these trends.
• The following three AI stocks certainly represent some of the best growth opportunities for those optimistic about the future impact of this technological revolution.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Nvidia (NVDA)

Image of an Nvidia chip

Nvidia (NASDAQ:NVDA) shares surged nearly 30% in the two weeks before its earnings report, though shares were lower on that report Wednesday and fell another 6% in after-hours trading after its latest quarterly quarter beat-and-raise. The company also announced a $50 billion share buyback, but those factors simply weren’t enough to boost the stock price after the release.

Indeed, Nvidia remains among the top stocks that investors continue to focus on due to the company’s status as a top maker of AI chips. As far as shovel games go in the AI ​​race, Nvidia will likely remain the top option in this space for some time.

Bank of America’s Vivek Arya recently labeled Nvidia as a the top “rebound” stock.predicting a rebound in the fourth quarter as seasonal challenges ease. Scott Rubner of Goldman Sachs recommended buying on the decline, anticipating a market reversal by the end of August and new post-election highs. Shares of Nvidia and other chips fell in July on fears of US export controls to China and Trump’s comments on Taiwan. In addition, the company’s recent decline following its Q2 earnings report highlights concerns over the launch of Nvidia’s Blackwell series, margin pressures, and concerns about heavy AI investments from Nvidia’s major customers like Microsoft and Google.

That said, I think Nvidia stock is well positioned to continue to grow. If Wall Street analysts’ estimates of $5 in 2025 EPS are hit, at a multiple of 40 times earnings, this is a stock that could trade at $200 a share next year. Perhaps this is too optimistic a target. But given how Nvidia has performed in the past, I think a 40% drop from here is more likely.

Taiwan Semiconductor (TSM)

A Taiwan Semiconductor office building

Taiwan Semiconductor Manufacturing Company (NYSE:TSMC)the world’s largest chip producer, dominates this market with 60% of foundry spending due to its advanced chip manufacturing processes. This enables TSMC to produce powerful, energy-efficient chips crucial for AI and smartphones. Its vast scale and revenues enable significant investment in research and development, securing its position as the industry leader and making it difficult for competitors to challenge its dominance.

The high demand for TSMC’s services greatly benefits the company’s customer base and investors. In July, TSMC set a revenue record with 257 billion New Taiwan dollars ($8 billion), up 45% year-on-year. Last quarter, it saw revenue up 40% (33% in USD) and net income up 36%, with two-thirds of revenue coming from the most advanced chip processes.

TSMC broke ground on it the first European factory in Dresden, Germanyas part of the EU’s strategy to localize key supply chains. German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen attended the ceremony, with von der Leyen calling it a boost for Europe’s innovation position. TSMC is investing 3.5 billion euros ($3.9 billion) in the project, holding a 70 percent stake, while Dutch chipmaker NXP, Germany’s Infineon and Bosch each own 10 percent.

Advanced Micro Devices (AMD)

Image of an AMD Athon II chip

In Q2, Advanced microdevices (NASDAQ:AMD) have reported positive resultsbeating revenue and earnings forecasts. Adjusted EPS came in at 69 cents, beating estimates of 68 cents, and revenue came in at $5.84 billion, beating expectations for $5.72 billion. Following the announcement, AMD shares rose 4.36%. For Q3 2024, AMD expects revenue to reach $6.7 billion, reflecting an estimated 16% year-over-year growth.

AMD has announced acquisition of ZT Systems for $4.9 billion in cash and stock to improve data center AI and customer solutions. While some investors see this as a bid to compete with Nvidia, Wedbush sees it as a strategic move to strengthen AMD’s position in the $236 billion data center market. AMD is expected to focus on ZT design and services, shedding its manufacturing assets. The deal follows a 115% year-over-year increase in AMD’s data center revenue and could strengthen its market presence despite continued challenges in other areas such as gaming GPUs.

AMD CEO Lisa Su said the acquisition of ZT Systems would boost GPU sales. The company plans to sell the ZT server manufacturing unit after the acquisition, avoiding competition with firms such as Super Micro Computer. AMD remains focused on capturing market share in AI chips, currently dominated by Nvidia with 80% of the market.

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