Best AI Stocks to Buy in August: Nvidia, AMD, and TSMC Leading the Way

The artificial intelligence (AI) market is just getting started, and some companies are already reaping the benefits. As the largest tech firms pour billions into developing AI products and services, discerning investors can identify leaders in the AI space worth adding to their portfolios. Here are three AI stocks that stand out as top picks for August.

1. Nvidia

Nvidia (NASDAQ: NVDA) is a well-known leader in the AI industry. The company was an early entrant into the AI market with its graphics processing units (GPUs), which are crucial for AI processing. Today, Nvidia holds an estimated 70% to 95% of the AI chip market and continues to innovate with new products like its H200 chip.

Nvidia's CEO, Jensen Huang, noted on a recent earnings call that demand for the H200 has already exceeded supply. This indicates a robust market presence and the critical role Nvidia plays in AI development. Tech companies worldwide are projected to spend over $1 trillion in the next five years on AI and data centers, doubling their current number. Nvidia's GPUs are at the heart of this transformation【CNBC】.

Despite a recent 10% dip in its share price, Nvidia remains a solid long-term investment. The company's chips are essential for AI-driven tech advancements, and the current price drop presents a buying opportunity for investors.

2. Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ: AMD) is another semiconductor giant making significant strides in AI. While Nvidia often steals the spotlight, AMD has proven its worth with impressive growth in its data center sales, which include AI chips. In its most recent quarter, AMD's data center revenue surged by 115% year-over-year to $2.8 billion, driven by demand for its Instinct GPUs【Yahoo Finance】.

AMD's management highlighted the "overwhelmingly positive" demand for its AI chips, prompting an increase in their 2024 data center revenue guidance to $4.5 billion from the previous $4 billion. Despite this growth, AMD's stock has underperformed compared to its AI peers, making it an attractive option for investors looking to capitalize on the company's recent successes.

With AMD shares down about 10% this year, now could be an opportune time to invest, especially considering the company's strong performance in the AI sector.

3. Taiwan Semiconductor Manufacturing (TSMC)

While companies that design AI chips often get the most attention, the manufacturers behind these chips are equally crucial. Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, is the leading manufacturer of advanced semiconductors, producing about 90% of the world's most sophisticated chips【Bloomberg】.

In the second quarter, TSMC's sales rose by 32.8%, and earnings per American depositary receipt were $1.48, surpassing Wall Street's estimate of $1.41. This growth was fueled by strong demand for AI chips, and TSMC expects this trend to continue in the third quarter. TSMC's CFO, Wendell Huang, stated that their business would be supported by robust demand for AI and smartphone semiconductors【MarketWatch】.

Despite geopolitical concerns, particularly the risk of China invading Taiwan, TSMC's recent stock price pullback offers a buying opportunity. The stock has dropped about 9% over the past month, providing a chance to invest in a crucial player in the AI supply chain at a discount.

Conclusion

The AI revolution is just beginning, and companies like Nvidia, AMD, and TSMC are leading the charge. With their innovative products and strong market positions, these stocks present compelling investment opportunities. As always, it's essential to conduct thorough research and consider the long-term potential of these companies within the rapidly evolving AI landscape.

Investing in AI stocks can be a strategic move to capitalize on one of the most transformative technologies of our time. By focusing on established leaders in the field, investors can position themselves to benefit from the ongoing advancements and growing demand for AI technologies.

For more insights on AI investments and market trends, visit CNBC and MarketWatch.