3 AI Smart Stock Strategies for the Savvy Beginner

Introduction

Did you know that the AI market is expected to surge to a staggering $190.61 billion by 2025? Amidst this booming tech revolution, savvy investors are turning their gaze to the stock market, where AI's golden children – Nvidia, TSMC, and Intel – beckon with promises of untold riches. But how does one navigate these waters with no compass in hand? Fear not, for this guide is your North Star to investing in AI stocks.

Overview

In this comprehensive journey, we'll unveil the secrets to making smart investment choices in the AI sector. From understanding the market dynamics to identifying the stocks that are poised for a rebound, we'll equip you with the knowledge to invest with confidence and a dash of flair.

1. TSMC: The Hidden Champion Behind AI’s Throne

Taiwan Semiconductor Manufacturing Company Limited (TSMC) may not make headlines like its flashy counterparts, but make no mistake – it's the silent giant crafting the semiconductors that fuel AI's core. We'll delve into why TSMC's stock is the dark horse you might want to bet on.

Regarding the high-stakes arena of fabricating high-performance chips that are the backbone of AI and accelerated computing applications, TSMC stands as a colossus. With a staggering market share that hovers around 54% globally, TSMC is not just leading the race; it's defining it. The company's prowess is underscored by its financial muscle, boasting a price-to-earnings ratio of 29.73, signalling robust investor confidence.

However, geopolitical tremors are sending ripples through the semiconductor landscape. With China's gaze firmly fixed on Taiwan, the potential for increased control over the island—and by extension, TSMC—within the next decade is more than a mere spectre; it's a looming reality. This scenario paints a stark picture of economic and national security threats, not just for the U.S. but for the entire Western bloc. The semiconductor supply chain, long taken for granted, now emerges as a strategic chess piece in a game of international power politics

2 Intel’s Comeback: A Sleeping Giant Awakens

Intel Corporation (INTC -1.01%) has been navigating a tumultuous market in 2024. The tech behemoth, once a titan in the semiconductor industry, has seen its share price plummet by approximately 40% throughout the year, now sitting 60% below its peak. This stark decline has prompted investors to question the viability of Intel's much-anticipated turnaround.

Q1 Performance: A Mixed Bag

Despite the gloomy stock performance, Intel's core business units have demonstrated resilience. The first quarter of 2024 saw the company's revenue climb by 9% year-over-year, reaching $12.7 billion. This uptick can be attributed to a favourable comparison against the previous year's dismal quarter. However, the optimism was short-lived as the stock took a hit post-earnings report, reflecting investor scepticism about the company's growth strategies and their execution over the past decade.

Geopolitical Headwinds: A Double-Edged Sword

Intel's challenges are not confined to market dynamics alone. The geopolitical landscape has added to the company's woes. China's recent move to prohibit the use of Intel processors in government computers, coupled with the revocation of Intel's license to sell to Huawei, has cast a shadow over the company's sales outlook. Yet, these very tensions between the U.S. and China could potentially position Intel as a key player in the semiconductor space, given its unique capability to both design and manufacture its chips in-house—a rarity in an industry that heavily relies on third-party fabrication services.

Financial Snapshot: The Numbers Speak

Intel's stock performance in 2024 paints a grim picture. The price has dipped to $30.08, marking a significant 4.26% decline. The company's market capitalization stands at $128.05 billion, a far cry from its competitors like Nvidia, which boasts a market cap representing 95% more than Intel's. The price-to-earnings ratio hovers around 31.57, suggesting that investors may be expecting higher earnings growth in the future to justify the current stock price.

The Road Ahead: Manufacturing Might

Intel's commitment to in-house manufacturing could be its ace in the hole. As geopolitical tensions escalate, particularly concerning the semiconductor supply chain's reliance on China and Taiwan, Intel's expansion of manufacturing facilities in the U.S. and Europe positions it as a strategic asset in the global tech landscape. This move not only diversifies the supply chain but also aligns with governmental efforts to bolster domestic chip production, potentially easing geopolitical pressures.

3. Arm Holdings: A Promising Contender in the Volatile AI Market

Arm Holdings (ARM -2.04%) has been a public entity for less than a year, yet it has experienced a rollercoaster ride in the stock market. Debuting at $51 per share last September, the company's stock price skyrocketed to $164 after its fiscal third-quarter earnings report in February. However, mirroring the broader AI sector's downturn, Arm's shares have since retreated, now sitting 27% below their peak.

Despite the turbulence, Arm Holdings stands out as a potential market outperformer. The company's strategic alliance with Nvidia, which utilizes Arm's CPU architecture for its cutting-edge Blackwell platform, is particularly noteworthy. Nvidia's recent financial results have been nothing short of stellar, with a record quarterly revenue of $22.1 billion, marking a 22% increase from the previous quarter and a staggering 265% rise from the previous year. This bodes well for Arm, given the symbiotic nature of their partnership.

The tech giants Tesla and Amazon have publicly endorsed their collaborations with Nvidia, emphasizing the surging demand for GPUs. Arm's legacy of crafting power-efficient chip designs aligns perfectly with the energy-intensive requirements of AI models like ChatGPT, further cementing its position in the industry.

The AI market's trajectory remains robust, with the global AI market size expected to reach $407 billion by 2027. Super Micro Computer's recent announcement of a 200% revenue growth in its fiscal third quarter underscores the sustained demand for AI products. Although Arm's growth may not mirror Supermicro's explosive trajectory, its diversified portfolio, energy-saving chip architecture, and lucrative licensing model position it well for recovery and long-term success. While Arm Holdings has navigated through market volatility, its strategic partnerships, technological prowess, and strong foothold in the AI industry paint a promising picture for its future performance.

Conclusion:

Throughout this blog, we've navigated the intricate maze of AI stock investing. From the dominance of TSMC to the potential resurgence of Intel, the landscape is ripe with opportunities for beginner investors willing to take the plunge.

With so many options, choosing the right stock can be daunting. We'll provide a beginner-friendly framework to evaluate potential investments and reveal why TSMC, Intel and Arms should be on your radar.

The AI revolution is not just about technology; it's about the opportunity. We'll discuss how investing in these beaten-down chip stocks could be your ticket to profiting from the AI revolution.

Final Thought:

Remember, investing in AI stocks is not just about following trends; it's about understanding the technology and its impact on the future. TSMC, Intel and Arms are more than just companies; they are the architects of tomorrow

As you stand at the precipice of your investing journey, ask yourself – are you ready to be part of the AI revolution that's reshaping our world?

Additional Notes:

This blog is a starting point for your investment journey. Always conduct thorough research or consult with a financial advisor before making any investment decisions. Happy Reading and Investing 🚀📈 .