Two AI Stocks Worth Considering Following the Market Decline
Navigating Market Volatility in 2025: Investing in AI Stocks
The start of 2025 has been challenging for the stock market, leaving many investors concerned about declining portfolio values. While this situation is disheartening, it can also create opportunities to purchase shares of promising companies at more appealing prices. Focusing on sectors that are transforming the business landscape, particularly in artificial intelligence (AI), can be a smart strategy during these volatile times. Below are two AI stocks that could offer significant growth potential.
1. Taiwan Semiconductor Manufacturing Company (TSMC)
Leading Global Chipmaker
Taiwan Semiconductor Manufacturing Company (NYSE: TSM) stands out as a key player in the semiconductor industry. It is the largest independent chip manufacturer in the world, which puts it in a strong position to benefit from the growth of technology firms like Nvidia, Broadcom, and Advanced Micro Devices.
Major Market Influence
TSMC possesses a substantial market share, controlling approximately 67% of the global foundry market. This dominance is the result of years of investments in advanced manufacturing capabilities, allowing it to produce sophisticated chips that are crucial for today’s tech innovations. In 2024 alone, TSMC achieved a net profit of $36 billion from $90 billion in revenue.
Growth Prospects
While the semiconductor market is known for its cyclicality, the demand for cutting-edge chips used in high-performance computing and AI applications is on the rise. Even amidst a slowdown in 2023, TSMC’s revenue has more than doubled in the last five years, reflecting a 37% growth year-over-year in the last quarter of 2024. The increasing need for advanced chips across various sectors, including automotive and data centers, suggests that TSMC’s growth trajectory remains strong.
Investment Potential
TSMC plans to invest $165 billion to expand its production capacity in the United States, signaling confidence in long-term demand. With shares currently trading at a forward price-to-earnings (P/E) ratio of 16 and projected annual earnings growth of 32% over the next several years, TSMC appears poised for substantial returns.
2. Alphabet Inc.
Dominance in Digital Advertising
Alphabet (NASDAQ: GOOGL, NASDAQ: GOOG) is a leading provider of digital advertising, generating 75% of its revenue from ad sales. The company earned around $350 billion in total revenue last year, bolstered by its investments in AI technologies that enhance its advertising and cloud computing services.
Resilience Amid Economic Concerns
Despite fears of economic recession possibly impacting ad spending, Alphabet’s strong positioning allows it to weather downturns effectively. Historically, recessions in the U.S. tend to be shorter than periods of economic growth, making this a favorable time for long-term investors to consider buying shares.
AI Innovations and Growth
Alphabet has made notable advancements in AI, including enhancing Google Search with new features that improve user engagement and provide more opportunities for advertisements. The company’s revenue grew by 14% in 2024, thanks in part to these AI-driven enhancements. In addition, Google Cloud, which holds a 12% market share, experienced a remarkable 30% year-over-year revenue increase in the last quarter, driven by rising demand for AI services.
Future Investments
Looking ahead, Alphabet plans to allocate $75 billion to technology infrastructure in 2025 to further establish its capabilities. With notable developments in AI, including progress on its chatbot technology, Alphabet is well-positioned to capitalize on the growing AI market.
Strategic Considerations for Investors
Viewing Opportunities Amidst Volatility
Investors should remember that market pullbacks often present unique opportunities to purchase valuable stocks at discounted prices. Companies like TSMC and Alphabet are not only leaders in their fields but also positioned well for future growth, thanks to their commitment to innovation and technology.
Assessing Valuations
Both TSMC and Alphabet currently offer attractive investment opportunities with forward P/E ratios of 16. Analysts anticipate a robust earnings trajectory for both firms, making them intriguing candidates for anyone looking to invest in sectors poised for growth in an evolving economic landscape.
Investing during uncertain times can be daunting, yet it also opens doors to companies that are set to thrive in the future.
