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3 Diverse Stocks Riding High on the AI Wave, Should You Buy?

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TL;DR Breakdown

  • Unstoppable Growth – GE, TSMC, and Nvidia thrive on the AI wave, offering attractive investment options.
  • Diverse revenue streams, GE, TSMC, and Nvidia, sustain growth beyond AI with diverse earnings.
  • Nvidia drives AI systems, TSMC excels in chip manufacturing, and GE gains momentum in aerospace, power, and renewable energy.

Chip and industrial stocks ride high on the AI gold rush, promising boundless growth opportunities. Their upside potential is immense, fueled by the accelerating demand for AI technology. 

The three well-known stocks that are currently experiencing significant growth and are potentially attractive investment options are General Electric (GE 1.20%), Taiwan Semiconductor Manufacturing (TSM 2.24%), and Nvidia (NVDA 2.54%). Despite their recent surges in value, these stocks may still be worth considering for investment due to their strong market positions, promising growth prospects, and potential for continued advancement.

Remarkable gains in the stock market are often achieved over a multi-year time frame by adopting a strategy that allows winning positions to accumulate. This approach focuses on investing in companies with strong potential for long-term growth and improvement. The best companies in the market have a track record of consistently enhancing their fundamentals, thereby increasing their value over time and potentially justifying their premium valuation. 

Ride the AI surge with Nvidia – a smart investment opportunity

Nvidia has emerged as a smart investment choice in the realm of AI. Its stock has experienced a remarkable surge of around 160% since the beginning of the year. Considering Nvidia’s recent surge, the stock is currently trading at a premium. Its shares are valued at 68 times forward earnings, reflecting the market’s high expectations. While the stock’s steady climb throughout the early months of the year contributed to its growth, the primary catalyst behind its recent rise was a robust first-quarter 2024 earnings report and promising guidance for Q2 2024. Despite its meteoric ascent in 2023, there are indications that Nvidia’s shares may continue to soar higher. After plummeting by over 50% in 2022, the company has made a strong comeback.

Although Nvidia is widely recognized for its dominance in graphics processing units (GPUs), its involvement in artificial intelligence (AI) extends far beyond its contributions to ChatGPT. The company has played a pivotal role in the development of ChatGPT, which has gained significant popularity. With its industry-leading GPUs, which are crucial components in AI training, Nvidia has become highly sought after by companies engaged in the development of AI systems.

Nvidia stands as a key partner for industry leaders in their AI platforms, including AT&T, Microsoft, Oracle, Motorola, Tesla, and Adobe. Through these collaborations, Nvidia’s technology is harnessed to enhance network infrastructure, optimize cloud computing capabilities, accelerate AI and machine learning applications, incorporate AI features into devices, enable AI-driven computer vision and deep learning algorithms for autonomous driving, and optimize software tools for AI-powered workflows.

It’s worth noting that Nvidia’s success is not solely reliant on its AI solutions; the company has a diverse range of revenue streams to sustain its growth. As a result, investors have recognized Nvidia as an attractive investment opportunity due to its strong presence in the AI sector and its ability to capitalize on other market segments.

Taiwan Semi (TSMC) – the AI powerhouse in semiconductors

After a challenging year in 2022, shares of Taiwan Semiconductor Manufacturing (TSMC), also known as TSMC, have rebounded significantly, and the reasons behind this resurgence are apparent. In the first quarter, TSMC reported revenue of approximately $16.65 billion, marking a 3.6% increase. The company’s net income also experienced growth, reaching around $6.78 billion, a 2% increase. This resulted in diluted earnings per American depositary share of approximately $1.31. The reported results exceeded analysts’ consensus estimates, with revenue expected to be $16.6 billion and earnings per share (EPS) projected at $1.21. Consequently, TSMC’s performance surpassed expectations.

Another factor that contributed to the boost in TSMC’s shares was the outstanding performance of Nvidia, which exceeded expectations and achieved a new all-time high. TSMC’s role as a significant player in the chip industry, catering to renowned customers, positions it as a viable option for investors seeking exposure to the flourishing AI and robotics sectors.

TSMC operates as a third-party foundry business, manufacturing chips based on the specific requirements of prominent customers like Apple and Nvidia. By serving as a vital player in the chip industry, TSMC provides investors with a straightforward way to indirectly capitalize on the industry’s growth.

GE continues to witness upward momentum

General Electric (GE) has shifted its focus to the aerospace, power, and renewable energy sectors. GE Healthcare has become an independent entity, operating as a standalone company separate from its parent company, General Electric. Following the spinoff, it is now publicly traded on Nasdaq. Despite the spinoff, GE has maintained its prior guidance for 2023, projecting high single-digit revenue growth, adjusted earnings per share (EPS) between $1.60 and $2, and free cash flow (FCF) ranging from $3.4 billion to $4.2 billion.

GE has also backed its 2023 revenue growth and FCF outlooks for the aviation and energy segments. For the aviation segment, the company expects a profit of $5.3 billion to $5.7 billion, indicating a strong performance. However, for the energy segment, GE anticipates a loss ranging from $200 million to $600 million. Despite this loss, GE Power is poised for another solid year, with management forecasting low-single-digit revenue growth and a potentially “slightly better” operating profit than in 2022.

The decline in natural gas prices over the past year, dropping by 74 percent, and a further 33 percent decrease this year may have a positive impact on GE Power’s gas turbine usage. With lower gas prices, it is likely that the demand for gas turbines will increase, leading to additional service revenue and a potential rise in investment in gas turbines. This development could contribute to the overall growth of GE Power and its financial performance.

In the renewable energy sector, GE Renewable Energy experienced a significant surge in orders during the first quarter, with a remarkable 94% increase to $5.4 billion. This substantial growth indicates strong market demand and a positive outlook for GE’s renewable energy segment. With momentum building in its end markets, there is optimism that GE could surpass its earnings guidance, further bolstering its position as an industrial company.

Overall, GE’s strategic focus on aerospace, power, and renewable energy, coupled with its continued guidance and positive performance in key segments, bodes well for the company’s future prospects. With growing orders and a favorable market outlook, GE has the potential to exceed its earnings projections and continue its momentum in the industrial sector.

High-flying stocks capitalizing on the AI boom

General Electric (GE), Taiwan Semiconductor Manufacturing (TSMC), and Nvidia (NVDA) are experiencing significant growth as the demand for AI technology skyrockets. These stocks, with their strong market positions and promising growth prospects, continue to surge ahead. Nvidia’s dominance in AI, TSMC’s role in the chip industry, and GE’s focus on aerospace, power, and renewable energy contribute to their upward momentum. These stocks offer attractive investment opportunities for those seeking to capitalize on the AI revolution.

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