It’s been nearly four years since artificial intelligence (AI) became an investing trend that swept over the stock market. The launch of ChatGPT in November 2022 exposed the world to generative AI. Nvidia followed that up in its May 2023 earnings report by announcing “surging demand” for its AI chips, which triggered an explosion in AI stocks that continues today.
AI is still the major theme, but the focus is much broader than which company can make the best chip. Investors also need to consider companies that provide power systems, computing capacity, storage and memory, land, connectivity, and cooling systems that keep AI operational.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
There are dozens of ways to invest in AI today, but my three favorite picks each play an important role in the AI ecosystem. And all have significant tailwinds right now that are worth considering.
Image source: Getty Images.
AI stock to buy No. 1: Taiwan Semiconductor Manufacturing
Whether it’s Nvidia or one of its competitors designing a chip, Taiwan Semiconductor Manufacturing (NYSE: TSM) is likely to be the company fabricating them. TSMC, as the company is best known, is the world’s largest chip foundry, with an estimated 73% of the global market.
The company has started selling chips made with its new 2-nanometer process, which offers higher density and energy efficiency. TSMC’s 2 nm processing technology accounted for 3% of TSMC’s total revenue in the second quarter, but it’s expected to become a major moneymaker for TSMC.
TSMC also announced it would invest an additional $100 billion in its Arizona facilities to support advanced packaging fabs and its 2 nm processing technology. The investment brings TSMC’s total commitment to its Arizona sites to $265 billion.
“We believe this investment will help to further foster the development of the U.S. semiconductor ecosystem, strengthen the supply chain, and support an increasing number of high-tech, high-paying jobs in the United States,” CEO C.C. Wei said.
AI stock to buy No. 2: Micron Technology
Micron Technology (NASDAQ: MU) is one of the biggest winners so far this year, posting a gain of 240%, which is the second highest of any company in the S&P 500.
Micron makes high-performance memory and storage drives that are used in data centers, personal computers, mobile devices, and vehicles. It makes both NAND long-term storage, which allows devices to retain data even when they’re powered off, and DRAM, which is semiconductor memory that temporarily stores active data. It’s DRAM that is in high demand right now, driven by the growing number of data centers needed to train and run AI programs.
Micron reported $41.45 billion in revenue for its fiscal 2026’s third quarter (ended May 28), a whopping gain of 345% from a year ago. Net income was up 1,400% to $28.24 billion, and earnings per share increased from $1.68 to $24.67 per share.
Micron and other memory and storage stocks have slipped in recent weeks, but Wedbush Securities analyst Matt Bryson points to a catalyst — the recent solid earnings performance of Dutch company ASML Holding, which makes commercial lithography systems for chipmakers. ASML noted it plans to increase its capacity by 30% in 2027, and Bryson takes that as a positive development for storage and memory stocks.
AI stock to buy No. 3: Nebius Group
We’ve talked about chipmakers, storage and memory, and foundries. But my No. 3 favorite AI stock right now is Nebius Group (NASDAQ: NBIS), the former Russian internet company (now based in the Netherlands) that rebranded itself as an AI cloud services company.
The company provides cloud computing and GPU capacity for training and running AI workloads, serving as a strategic partner to Nvidia to scale its full-stack AI cloud platform. Nvidia invested $2 billion in Nebius to help the cloud services company deploy more than 5 gigawatts of capacity by the end of 2030. The deal calls for Nvidia and Nebius to collaborate on AI factory designs, the creation of an inference and agentic AI stack, AI infrastructure deployment, and fleet management.
Nebius also signed an infrastructure agreement with Meta Platforms to provide $12 billion worth of dedicated capacity starting in 2027, and up to $15 billion in additional capacity — essentially ensuring that Meta will be a backup buyer if Nebius is unable to sell its computing capacity.
Nebius’ revenue in the first quarter was $399 million, up 684% from a year ago. The company spent an incredible $2.5 billion in capital expenditures, primarily GPUs and related hardware, in the first quarter. That’s a huge number for a company with a market cap of only $53 billion. However, Nebius remains in a solid financial position, having raised $6.3 billion in the first quarter, and has a cash position of $9.3 billion.
Should you buy stock in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $369,577!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,301,557!*
That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul.
Patrick Sanders has positions in Nebius Group and Nvidia. The Motley Fool has positions in and recommends ASML, Meta Platforms, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
