Top Artificial Intelligence Stocks to Watch in January

Investors seeking opportunities in the artificial intelligence (AI) sector have a plethora of options, with companies integrating AI solutions into their operations. While “pure plays” might be limited, some companies with deeply embedded AI solutions offer substantial investment potential. Three standout AI stocks for consideration this January are Super Micro Computer (NASDAQ: SMCI), Taiwan Semiconductor (NYSE: TSM), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

Super Micro Computer (SMCI)

• Overview: Super Micro Computer, often referred to as Supermicro, stands out for its role in providing highly configurable servers crucial for running intensive workloads such as AI applications. The company enjoys a close partnership with Nvidia, optimizing the performance of Nvidia’s GPUs within its servers.
• Financial Outlook: Supermicro is projected to experience robust growth in fiscal year 2024, with estimated annual revenue reaching around $10.5 billion, marking a 47% increase over fiscal year 2023. Despite the impressive growth, the stock remains attractively priced at just 16 times forward earnings.
• Investment Perspective: With an affordable alternative to Nvidia, Super Micro Computer emerges as a compelling buy in January, benefitting from the increasing demand for AI-related equipment.

Taiwan Semiconductor (TSM)

• Overview: As a major player in the semiconductor foundry industry, Taiwan Semiconductor holds a dominant position due to its contract manufacturing model. It exclusively manufactures chips for clients, avoiding competition by producing chips for multiple clients, even if they are competitors.
• Technological Edge: Taiwan Semiconductor is renowned for its technological prowess, capable of producing the smallest chips globally. With the commencement of full-scale production for 3nm chips this year and plans for 2nm chips in 2025, the company maintains a competitive edge in semiconductor manufacturing.
• Recovery Potential: Despite facing a supply glut, TSMC anticipates the end of the downturn, positioning itself as an attractive choice for recovery in 2024.

Alphabet (GOOG, GOOGL)

• Overview: Alphabet, the parent company of Google, is a frontrunner in AI investments, showcasing its commitment to advancing AI technologies. The recent launch of its Gemini generative AI model, surpassing human experts in language understanding tests, highlights Alphabet’s cutting-edge capabilities.
• Cloud Computing Strength: Google Cloud, a part of Alphabet, boasts a robust AI cloud computing offering. With a significant presence, serving over 60% of the world’s top 1000 companies and more than 50% of AI start-ups, Alphabet holds a substantial position in cloud computing.
• Diversified Revenue Streams: While a significant portion of Alphabet’s revenue is derived from advertising, the company’s AI investments, including Gemini and Google Cloud, position it as a solid AI investment for 2024, especially with an anticipated improvement in the advertising market.

As investors navigate the AI landscape, these three companies present compelling opportunities for growth and innovation in the evolving AI sector.