Each of these companies plays a critical role in the AI pipeline.
As artificial intelligence (AI) continues to establish its presence in the world, it’s unrealistic to assume that all current AI-centric companies will thrive in the long run. Some may prove to be too specialized to stay independent and will likely be acquired, while others may not endure at all.
When considering AI stocks suitable for long-term investment, I focus on companies that are fundamental players in various stages of the AI pipeline. The following three companies meet this criterion and look promising for enduring investments.
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1. Taiwan Semiconductor Manufacturing Company
Taiwan Semiconductor Manufacturing Company (TSM 3.44%) is not an AI stock in the typical sense, but it is a vital entity in this sector. As the top third-party semiconductor foundry globally, TSMC produces chips for “fabless” firms lacking their own manufacturing plants.
Taiwan Semiconductor Manufacturing
Today’s Change
(-3.44%) $-9.88
Current Price
$276.99
Key Data Points
Market Cap
$1.5T
Day’s Range
$275.08 – $288.91
52wk Range
$134.25 – $313.98
Volume
975K
Avg Vol
13M
Gross Margin
57.75%
Dividend Yield
1.07%
For the production of advanced AI chips used in data centers, TSMC virtually dominates the market. With its advanced technology and operational efficiency, it stands unrivaled.
While firms like Intel and Samsung also have foundries capable of producing high-end chips, they suffer from issues such as delays and low yields, making them less dependable. This has allowed TSMC to capitalize on the AI chip market significantly, giving it more pricing power.
Over recent years, TSMC has shown impressive growth in both revenue and operating income, with its leadership in AI chips driving even faster profit increases.
2. Nvidia
Nvidia (NVDA 3.81%) is the designer essential to the AI framework, in contrast to TSMC, which manufacturers. Nvidia’s lead in the parallel processor market has been a major driver in the company’s stock price soaring, making it the world’s most valuable public company with a market capitalization nearing $4.2 trillion.
Today’s Change
(-3.81%) $-6.78
Current Price
$170.94
Key Data Points
Market Cap
$4.3T
Day’s Range
$170.31 – $176.13
52wk Range
$86.62 – $212.19
Volume
223M
Avg Vol
192M
Gross Margin
70.05%
Dividend Yield
0.02%
Nvidia, once known primarily for its graphics processing units (GPUs) for gaming, has shifted focus due to the realization that its parallel processors are suitable for various computing tasks. With the rise of AI, the need for hardware capable of managing enormous datasets has surged, with many AI systems utilizing Nvidia chips.
In the third quarter, Nvidia’s revenue reached $57 billion, a year-over-year increase of 62%, with $51.2 billion (up 66%) stemming from its data center segment.
Although Nvidia’s GPUs are well-known, its CUDA platform, enabling tailored programming of its chips for distinct tasks, is equally crucial. Developers familiar with CUDA contribute to the company’s competitive edge, as CUDA programs can only run on Nvidia chips, increasing switching costs for buyers of AI accelerator chips from other providers.
3. Microsoft
Microsoft (MSFT +0.02%) has two primary advantages in AI. First, Microsoft Azure ranks as the second-largest cloud infrastructure platform, favored by many for developing and hosting AI applications. Its AI enhancements have allowed it to narrow the gap with the segment leader, Amazon Web Services.
Today’s Change
(0.02%) $0.08
Current Price
$476.47
Key Data Points
Market Cap
$3.5T
Day’s Range
$475.00 – $479.88
52wk Range
$344.79 – $555.45
Volume
840K
Avg Vol
23M
Gross Margin
68.76%
Dividend Yield
0.71%
Additionally, Microsoft’s comprehensive software suite, featuring popular platforms like Microsoft 365 (Excel, Word, Teams, etc.), LinkedIn, GitHub, and the Windows OS, positions it as a seamless distributor of AI. This enables the quick integration of AI technology into existing software, leading to straightforward monetization opportunities. For many users and corporations, opting for a modest fee for Microsoft 365 Copilot is an easy choice, contributing to a reliable revenue stream for Microsoft that is likely to grow.
Unlike dedicated AI companies that depend solely on AI for their income, for Microsoft, AI serves as an additional advantage. Its diversified business portfolio spans software, tech hardware, gaming, cloud services, and professional networking, ensuring resilience and strong profitability for Microsoft, regardless of any fluctuations in AI enthusiasm over the next several years.
