TSM and ASML Are AI Stocks That Look Like Screaming Buys Now

As the AI boom continues to reshape industries and will continue to do so in the years to come. I think of the AI revolution as similar in many ways to the changes the internet brought to our overall economy. Today, a significant amount of value is created and transferred online, and these trends continue to this day.

Just how artificial intelligence technologies are rolled out and permeate our society is a whole different discussion. But it’s clear that companies in all parts of the market are scrambling to add compute, as the key limitation to growth many companies are having right now is their ability to spend on AI chips.

As such, it should be no surprise to readers that I’ve picked two top chip-related companies benefiting from the AI revolution that are worth considering right now. These are companies that should have plenty of upside potential over the long-term, if the growth we’ve seen materialize in the world of AI can continue at a rate that’s even close to where it is right now. 

Taiwan Semiconductor (TSM)

A leading semiconductor manufacturer, Taiwan Semiconductor Manufacturing (NYSE:TSM) is among the top AI chip players for investors looking for a true picks and shovels way to play this space. Producing chips for the likes of Nvidia, Apple and AMD, Taiwan Semi remains an integral player in this high-growth space, and one investors may feel the need to own in order to maintain relatively broad exposure to the growth AI provides. 

In my view, Taiwan Semi remains among the more undervalued names in this sector, with a price-earnings ratio of 25-times despite the company’s roles as the cornerstone of the entire chip making world. Given the rather sharp decline in TSM stock since the start of the year, this is one particular name I think could be due for a nice reversion rally, as investors step back into companies with industry leadership in attractive areas of the market. 

Despite a 200% surge over five years, Taiwan Semi remains attractively valued and could catch a bid, particularly if the ongoing geopolitical issues that have plagued China/Taiwan relations simmer down. We’ll have to see – nothing seems to be simmering down these days. But as the picture on tariffs and other key factors becomes clearer and more capital flows into Asian stocks, this is one name that could have meaningful upside if these trends continue. 

ASML Holdings (ASML)

ASML Holdings (NASDAQ:ASML) is another top chip-related company I’ve long thought has a significant growth runway ahead. 

The company’s status as an effective monopoly in extreme ultraviolet (EUV) lithography makes this Dutch company one worth considering. That’s because EUV lithography is the process by which next-generation chips are produced. In other words, ASML makes the machines that make the chips that power our lives. 

Again, this company is yet another picks-and-shovels play on the overall AI chip sector. With strong pricing power due to the company’s monopoly status (and sky-high demand being seen by ASML’s customer base), one can hope that this demand growth will bleed through to a larger backlog of EUV machines. 

Such a situation hasn’t really materialized of late, and there are actually some concerns brewing with some investors that backlog growth may actually be slowing. But with strong revenue growth of more than 16% in recent years, this is a company that’s continuing to grow despite export curbs, tariffs and other headwinds the market has been pricing in over the past year. For those with a long enough investing time horizon, ASML stock looks like a decent pick here. 

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