2 AI Stocks That Could Help You Make a Fortune

Artificial intelligence (AI) has brought huge gains to stocks over the past two years, starting with the launch of OpenAI’s ChatGPT. Investors are now well aware of such breakout stories Nvidia And Palantir Technologies They took advantage of the boom early, but there will probably be many other winners from the new technology.

Some CEOs believe AI could be as big as the Internet, and major tech companies are already spending billions on this evolving technology to take the lead on what is expected to be the next big computing platform.

However, there are other ways to benefit from the growth of AI. Let’s take a look at two of them.

1.TSMC

Taiwan semiconductor manufacturing (TSM -0.70%) hasn’t received as much attention as chip stocks like Nvidia, but TSMC, as the company is also known, could be the most important company in the AI ​​revolution. TSMC is the company that Nvidia and other fabless chip makers like Advanced micro devices, BroadcomAnd Qualcomm as well as large technology companies like Apple, AmazonAnd alphabet contact us for chip production.

In other words, it is a linchpin in the supply chain for both the semiconductor industry and artificial intelligence because so many companies rely on it to make their products.

TSMC has already started benefiting from AI-driven demand, with revenue rising 39% year-over-year to $23.5 billion in the most recent reported quarter, and TSMC is also generating revenue with an operating margin of 47.6% in the third quarter impressive margins, proving this huge economic gap in the industry.

The company appears poised to benefit from continued demand for AI chips because it handles around 90% of advanced chip manufacturing through third parties and works closely with companies like Nvidia on production. TSMC itself touts its “cutting-edge logic, memory and packaging technologies,” and its chips are used in a variety of devices, including data center servers and edge devices such as smartphones and home appliances.

Even though the AI ​​boom is still fraught with uncertainty, demand is expected to increase in the next few years. TSMC appears better positioned to capitalize than other AI stocks on the market. The stock has almost doubled in 2024 but has more room to run as it trades at a reasonable price-to-earnings ratio of just 33.

2. Upstart

upstart (UPST -5.62%) is still well below its peak during the pandemic, meaning the stock has largely fallen into obscurity even though it started rising again this year.

Upstart uses proprietary AI technology to determine creditworthiness when issuing consumer loans and claims its technology is significantly better than traditional FICO scores. The company also saw a recovery in its business, which it attributes to improvements in its model. Management noted that Model 18, its latest update, drove significant conversion improvements in the third quarter, meaning more applicants ultimately received loans.

Upstart’s business model is also a reminder that there are opportunities in AI that go beyond pure generative AI. Beyond its own competitive advantage in lending, Upstart has significant upside potential as interest rates are expected to fall at some point, which could lead to more borrowing and potentially bring the business back to its previous peak as demand for loans has surged during the pandemic.

Although the company is sensitive to the macroeconomic environment, AI remains key to unlocking business potential, disrupting the broader credit ecosystem and acting as the de facto credit score measure for Upstart, which is valued at just $6.5 billion , would generate enormous returns.

The company is back on track for growth with revenue up 20% to $162 million in the third quarter, although Upstart is not currently profitable. However, there is great potential for margin expansion as the company grows.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has held positions at Amazon, Broadcom and Upstart. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Nvidia, Palantir Technologies, Qualcomm, Taiwan Semiconductor Manufacturing, and Upstart. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.