Top AI stocks span a broad range of companies from chipmakers to software firms, cloud players, and a range of other tech giants. Indeed, most of the popular Magnificent 7 tech names are riding high on AI in one way or another. I’ve got one such Magnificent 7 stock on this list, with two others that could certainly be in contention for a seat at the table.

R&D spending on innovation and growth (ahem, artificial intelligence) isn’t slowing down, and many expect will continue no matter the macro backdrop. That said, recessionary forces do appear to be getting stronger, so it’s unclear just how robust spending will be on capital products from these same customers, relative to what we’re seeing in 2024.

Uncertainty will always exist, so the best we can do is try to gauge which companies may have the best shot at continuing to dominate in this space moving forward. Here are my three top picks right now.

Key Points About This Article:

• The growth investors have seen from the artificial intelligence revolution appears to be real, and disproportionately affecting a few companies.
• Here are three names that have seen some of the greatest benefits from this trend thus far, and which could continue to see similar strong demand moving forward.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Super Micro Computer (SMCI)

Super Micro Computer (NASDAQ:SMCI) saw strong performance in 2024, nearly doubling on a year-to-date basis, recently surpassing the key $1,200 level in March. However, the stock has since been hammered, losing around 60% of its value from its peak, now trading below the $500 level.

Once a candidate for a stock split, Super Micro’s valuation has clearly become a cause for concern among some growth investors who are questioning the company’s sustainability. Most analysts still foresee strong demand for the company’s servers and storage solutions products, with Super Micro’s direct liquid cooling solutions a differentiator in this space.

While Super Micro’s valuation may well have been untenable above $1,200 per share, at the $500 level with a forward price-earnings ratio of around 13-times, there’s a lot to like about the fundamental case supporting this stock here. Analysts believe Super Micro could reach $5.5 billion in revenue in short order. If such growth materializes, and margins remain near where they are, this is a stock that’s looking cheap on a relative basis for long-term investors.

Gains from new, limited-competition products could drive a strong September quarter and FY25 revenue. That’s to say nothing of upcoming Nvidia and AMD product launches. With strong AI server demand driving Super Micro Computer’s impressive year-to-date gain, a stock split still seems like it could be in the cards, though I’d be banking more on a fundamental move higher at this point before those discussions heat up again. 

Nvidia (NVDA)

 

Holding dominant AI chip market share, Nvidia (NASDAQ:NVDA) is intently focused on supporting AI research and expanding data centers. The company rallied in 2024, surging more than 167%. Tech investor James Anderson predicted Nvidia’s market cap could reach $50 trillion in a decade. However, DNB Asset Management reduced its Nvidia holdings in the second quarter despite strong performance.

Over the last three years, Nvidia’s free cash flow grew by nearly 500%, now approaching $40 billion. This substantial cash reserve allows Nvidia to invest in future innovations, defend its market share, repurchase stock, and strengthen its business.

The company also has strong financial resources that can support its market share. The company’s AI segment is expected to reach $15 trillion by 2030, adding even more growth potential for Nvidia (as if the company needed it). And at a reasonable forward price-earnings ratio of less than 40-times (considering its triple-digit growth rate), there’s still plenty of optimism that Nvidia can continue to run among those bullish on the future prospects of this sector. 

Taiwan Semiconductor (TSM)

One promising AI stock to own is Taiwan Semiconductor (NYSE:TSM), currently priced around the $155 per share level. The stock has seen strong technical support from its 100-day moving average, and strong fundamental support from impressive earnings. Analysts suggest that TSM stock can certainly rebound to $180, with bullish sentiment continuing to build around this name as a potential buy the dip options in the market.

Much of this recent optimism comes from revenue projects, with analysts suggesting the company could bring in $23.3 billion in Q3 2024 revenue and $85.26 billion for the full-year.  In its recent earnings report, the company’s advanced tech boostedwafer revenue by 67%. High performing computing solutions also soared 2% quarter-over-quarter, making up to 52% of total revenue. TSM’s strong and diverse tech portfolio makes it a great stock to own long-term. For those betting on a picks-and-shovels play in the chips space, TSM stock may be the best way to go right now. At least, that’s my view.

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