Since late 2022, Artificial intelligence (AI) stocks have overperformed the market. Due to the potential to dramatically change the life of the average consumer, many investors have flocked to these stocks, resulting in elevated valuations for many AI stocks.
Nonetheless, the spotlight hasn’t been equal. Knowing that, investors might want to consider these three stocks before the market becomes more aware of their AI prowess.
1. Alphabet
The emergence of ChatGPT seemed to cast doubt on AI stock Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), the Google parent, which was an early AI innovator and marketed itself as an “AI-first” company for the last eight years. Nonetheless, the sentiment seemed to shift from Alphabet amid the emergence of ChatGPT, whose parent, OpenAI, has a working relationship with Microsoft. However, Alphabet has answered with its own generative AI product, called Gemini, and claims approximately $111 billion in liquidity, indicating its potential to overcome competitors and rise over time.
2. Taiwan Semiconductor Manufacturing
Stocks like Nvidia and Advanced Micro Devices depend on Taiwan Semiconductor Manufacturing (NYSE: TSM) to manufacture their advanced chips. Despite suffering amid a slump in the semiconductor industry, forecasts of a 23% revenue increase for 2024 make this a potential investment. Moreover, they can buy TSM stock at a recent P/E ratio of about 25.
3. IBM
After years of stagnation, IBM is finally making a comeback in part due to AI. Its purchase of Red Hat and other cloud companies made it a leading company in the cloud space, giving it a significant support role in AI. IBM has also developed AI-specific services and despite its mid-single-digit revenue growth, its P/E ratio has remained relatively low at about 23.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
3 Artificial Intelligence (AI) Stocks That Are Screaming Buys in February was originally published by The Motley Fool
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