Buying artificial intelligence (AI) stocks that trade at attractive valuations and are growing at an impressive pace is a good idea given that companies in a position to take advantage of this technology have seen their stock prices soar in the past. That may seem difficult at the moment. About a year.
NvidiaFor example, the company trades at a price-to-earnings multiple of 71, but the good news is that the chipmaker has been able to justify its premium valuation with outstanding growth.On the other hand, playing AI software Palantir Technologies is trading at a premium valuation, but its growth hasn't been enough to justify its rich multiple.
But for investors looking for a combination of growth and value in the AI niche, there's one company in luck. taiwan semiconductor manufacturing (NYSE:TSM), a company commonly known as TSMC. This is not only cheap at the moment, but also poised for impressive growth. Let's take a look at why investors should consider buying this stock before Q1 2024 earnings are released on April 18th.
TSMC is expected to grow faster than expected
When TSMC announced its fourth-quarter 2023 results in January, it expected first-quarter 2024 sales of $18.4 billion, the midpoint of the range.
However, monthly revenue statistics for the first three months of 2024 show it is well on its way to exceeding that goal. More importantly, revenue growth is accelerating month on month.
TSMC's monthly sales in January increased by 8% year-on-year. In February, he saw an 11% increase, and March was even better with a 34% year-over-year increase. Therefore, his first quarter revenue amounted to $18.86 billion, an increase of almost 14% year-over-year and surpassed the consensus estimate of $18.26 billion.
Full quarterly results will be released on April 18th, and it wouldn't be surprising to see the stock soar after the announcement. Demand for AI chips across a variety of applications is driving big changes for TSMC, as evidenced by March quarter sales.
Long-term growth in the AI chip market will be a tailwind for TSMC
apple is TSMC's largest customer, accounting for 25% of its sales. But the smartphone maker has struggled to grow, as recent results demonstrate.
Additionally, Apple has begun ramping up production of iPhones, for which TSMC supplies chips, starting in the second half of this year. So the sharp acceleration in chipmakers' earnings last month can be attributed to a surge in demand from the likes of Nvidia. AMD, intel, Qualcommand broadcomone of the top seven customers.
All of these chipmakers are focusing on delivering new AI chips as well as ramping up production of existing products to meet strong customer demand. Therefore, TSMC is rapidly increasing its manufacturing capacity. The company's advanced chip packaging capacity is expected to double from 120,000 wafers last year to 240,000 wafers this year, driven primarily by demand from Nvidia, which accounts for an estimated 60% of the company's advanced chip packaging capacity. ing.
Meanwhile, Intel recently announced a new AI accelerator called “Gaudi 3” based on TSMC's 5-nanometer manufacturing process. Intel has already begun shipping samples of this chip, and plans to move to full-scale mass production in the third quarter of 2024. Meanwhile, interest in Broadcom's custom AI processors is growing, and the company recently won a new customer.
Similarly, Qualcomm is on track to capitalize on the growing adoption of AI within smartphones and personal computers. Overall, TSMC is well-positioned to capitalize on long-term growth in the AI chip market, especially considering that it is one of the world's leading semiconductor foundries with an estimated market share of 61%. This far exceeds second place Samsung's share of 11%.
Considering the global AI chip market is projected to grow at 38% annually through 2032, there's a good chance TSMC will maintain its impressive momentum. The following graph shows that analysts expect solid revenue growth for him from 2024 onwards, up from last year's high of his $69.3 billion.
That's why this semiconductor stock seems like a no-brainer to buy now, given its attractive valuation. TSMC trades at a price-to-earnings multiple of 29 times, which is a discount to its stock price. Nasdaq 100has an earnings multiple of 30x (using the index as a proxy for tech stocks). The forward earnings multiple of 24x is also lower than the Nasdaq 100's number.
Additionally, TSMC stock is significantly cheaper than Nvidia, making it a cheaper way to ride the AI chip boom.
The evidence above also shows that TSMC appears to be built for long-term growth from its important role in the AI chip market, which is why investors are expecting the stock to soar over 40%. It would be a good idea to buy this AI stock before it gets expensive (and expensive). By 2024, record the growth recorded so far.
Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?
Before buying Taiwan Semiconductor Manufacturing stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Investors should buy now…and Taiwan Semiconductor Manufacturing was not among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $540,321!*
stock advisor We provide investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks every month.of stock advisor For the service more than 4 times The resurgence of the S&P 500 since 2002*.
See 10 stocks »
*Stock Advisor will return as of April 8, 2024
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Palantir Technologies, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: A long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, and a short May 2024 $47 call on Intel. The Motley Fool has a disclosure policy.
The post 1 Cheap Artificial Intelligence (AI) Stocks to Buy Hand Over Fist by April 18 appeared first on The Motley Fool
