3 Tech Stocks to Buy Instead of Nvidia

With the attention artificial intelligence (AI) is getting, it’s easy to focus Nvidia as top tech stock. It’s a great pick and has performed incredibly well, but there are other stocks that look more attractive right now.

There are three that I have my eye on Taiwan Semiconductor Manufacturing (TSM -4.20%), Meta platforms (META -3.21%)and Procore Technologies (PCOR -2.08%). I think they all offer an excellent trade-off between growth and value and are much better buys than Nvidia today.

Taiwan Semiconductor Manufacturing

Taiwan Semiconductor, or TSMC for short, is the world’s largest contract chipmaker. It takes models from giants like Nvidia and Apple and produces them, making it a winner regardless of which company is leading the AI ​​race.

TSMC is at the cutting edge of technology. It has market-leading 3 nanometer (3nm) chips and is already working on its next-generation 2nm chips. These chips can be configured to provide more computing power or be more efficient.

With the computing power of existing technology already impressive, TSMC customers are more likely to choose more efficient versions, especially since entry costs for AI computing hardware are so high. That could generate even more demand for its chips, making the stock a strong buy.

Management projects compound annual earnings growth of 15% to 20%, which gives it the potential to be a market-shattering stock. With shares still down about 10% from their July highs, now is a good time to buy.

Meta platforms

Meta Platforms is the parent company of Facebook, Instagram, Threads, WhatsApp and Messenger. It also has the Reality Labs division, which offers products such as virtual reality headsets.

But all investors need to focus on is its social media advertising business, which accounts for 98% of its revenue. Meta investors just have to learn to balance the benefits of advertising with the high unprofitability of Reality Labs.

Holistically, Meta is truly an impressive business: operating margins of 38% with revenue growth of 22%. These are fantastic values, but the stock trades for 24 times forward earnings. Given that S&P 500 overall, it trades for 23 times forward earnings, it’s a real bargain because its business is much better than the average S&P 500 constituent.

Meta is set to continue its social media dominance, and if one of its Reality Labs products becomes a hit, the stock could be a massive winner.

Procore Technologies

Procore is a name you may not have heard of, but its construction management software is revolutionizing the industry. Unlike almost every other sector that has undergone a software revolution in the past decade, the construction industry has only recently benefited from widespread cellular connectivity.

Now that it’s possible, Procore software is incredibly popular because it allows contractors, subcontractors and project owners to all work from the same source of information, reducing additional costs due to fixing errors. So if an engineer makes a change to the wiring diagram, they can upload it to Procore and the electrical contractor can access the changes almost instantly on the job.

Despite its popularity, Procore has a long way to go in its target market. In its 2023 investor day presentation, it estimated that it captured less than 2% of the business, with about 12% of the construction monetary volume. Globally, it is even less, at around 1% and 2% respectively.

PCOR operating margin (quarterly); data by YCharts.

Given the size of the industry, Procore has the potential to become a massive business if it maintains its growth trajectory. In the second quarter, revenue was up 24% year over year. The business isn’t profitable, but it’s getting closer every quarter.

With its massive runway, it shouldn’t be long before Procore starts turning a profit and rewarding its shareholders.