Best AI Stocks to Buy Right Now

Artificial intelligence (AI) stocks have been some of the strongest drivers of the market this year. Given that the AI trend is still in its early stages, it looks like a number of them could help drive the market higher next year as well.

While a handful of technology names seem to dominate the space currently, investors looking to invest in AI may be wondering which companies are likely to do better as the field evolves. These AI stocks are all trading at reasonable valuations and look like smart buys right now.

Keep in mid this is only insight based on our technical background. Best to check with your financial advisor before investing.

Nvidia

NASDAQ: NVDA

Nvidia has been the biggest winner of the AI infrastructure build-out, as its graphic processing units (GPUs) are the go-to chips for data centers to use for their computing processing needs to train large language models (LLMs) and run AI inference. As AI models advance, they need more and more computing power.

It is this continuing need for exponentially more computing power as well as the wide moat the company created with the help of its CUDA software platform that make Nvidia a buy right now. CUDA was initially created to make it easier for developers to program its GPUs for other uses beyond speeding up graphics rendering in video games, the task for which they were originally designed. This led to CUDA becoming the standard platform upon which developers learned to program GPUs, which has contributed to the moat NVIDIA now enjoys.

With AI infrastructure spending only expected to increase in 2025 and beyond, Nvidia is set to continue being a huge player.

Taiwan Semiconductor Manufacturing

NYSE: TSM

TSMC is the world’s largest independent semiconductor foundry, and manufactures a variety of semiconductors. TSMC has become a leader in the semiconductor industry by focusing on research and development, and by being highly efficient. They’ve been able to fit more transistors onto smaller chips than their competitors.

Today, due to the costs, many chip companies design chips then outsource the manufacturing to third parties. With demand for cutting-edge AI chips soaring the demand for chip manufacturing services has been skyrocketing with Taiwan Semiconductor Manufacturing benefiting. Its two largest rivals, Intel and Samsung have struggled, leaving TSMC to become the dominant contract manufacturer of semiconductors in the world, benefiting from both scale and technological advantages.

TSMC is a key player in the artificial intelligence (AI) industry, producing chips for AI applications and using AI technologies to improve its manufacturing processes. TSMC manufactures chips for AI accelerators, GPUs (graphics processing units), and CPUs that perform training and inference functions.

The top chipmakers in the world are its customers, including Apple, Broadcom, and Nvidia. TSMC has enough dominance to raise its prices again next year. This is likely to lead to higher gross margins for the company.

Alphabet

NASDAQ: GOOGL

Alphabet is one of the biggest cloud computing infrastructure benefitting from AI. Google Cloud’s revenue growth accelerated to 35% last quarter as the unit’s top line hit $11.4 billion. Its operating income rose from $266 million a year ago and $1.2 billion in the second quarter to $1.95 billion in the third.Collapse

The company says its Gemini model has been gaining a lot of momentum and that customers are using its AI platform to build and customize models. Alphabet also credits the custom AI chip that it developed with Broadcom as being a key differentiator. In addition, earlier this month, Alphabet was showing off its newest AI innovations with Veo 2, its next-generation video AI generator, and Whisk, its new AI image generator.

Alphabet’s P/E ratio today was over 25.

Microsoft

NASDAQ: MSFT

Microsoft is one of the most solid AI stocks to buy, as it has a very well rounded group of products. As a behemoth software and cloud provider it’s now established a leading AI portfolio such as OpenAI, home to ChatGPT. Microsoft has consistent performance and a solid outlook.

Microsoft is one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.

We believe that Azure is the centerpiece of the new Microsoft. Even though we estimate it is already an approximately $75 billion business, it grew at an impressive 30% rate in fiscal 2024. Microsoft is also shifting its traditional on-premises products to become cloud-based SaaS solutions creating healthy margins and greater opportunities.

Advanced Micro Devices

NASDAQ: AMD

Advanced Micro Devices is a semiconductor producer with big AI dreams. Now partnering with chip manufacturing leader Taiwan Semiconductor Manufacturing, AMD has come to market with more formidable products quickly. And, although AMD’s stock performance has been disappointing this year (down over 5%) it’s still a solid investment that could see great things on the horizon.

Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers and artificial intelligence. We consider AMD to be one of two notable firms in graphics processing units, which are especially well suited for AI. The company may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.

AMD’s primary products include processors and GPUs tailored to PCs, game consoles, and servers. Industry analysts look for AMD’s data center business to boom over the next few years. AMD might also be the best positioned to emerge as a second source to Nvidia in AI.

Baidu

NASDAQ: BIDU

What happened to Baidu stocks this year? Down from a high of $118 in the beginning of the year, it’s now down in the $80’s. Could it be a great undervalued sleeper of the year?

Baidu is the largest internet search engine in China and is pursuing major growth initiatives in AI, video streaming, voice recognition technology, and autonomous driving.

Baidu’s online advertising business accounted for 72% of core revenue in 2023 and will be the main source of revenue in the medium term. Baidu is increasingly shifting its focus toward its cloud business and now also artificial intelligence, with its Ernie generative AI model becoming its flagship product.

While Baidu is transforming its identity by investing in generative AI, cloud, and autonomous driving, commercialized success remains to be seen. There are encouraging signs of its AI cloud monetization growing to 18% of core revenue in 2023 from 12% in 2020. However, Baidu will face competition in the cloud from industry leaders Alibaba, Huawei, and Tencent, which all have greater market share than Baidu.