Top Three AI Stocks Poised for Growth as Trade Tensions Ease

As trade tensions begin to ease, stocks have gained momentum, suggesting a potential new bull market is on the horizon. Following their significant role in the previous bull market, artificial intelligence (AI) stocks appear to be regaining their strength and may take the lead once more.

Investing in AI: Three Stocks to Watch

1. Nvidia (NASDAQ: NVDA): Nvidia is a central player in AI infrastructure spending, representing both a key risk and a significant opportunity for the company. After facing a pullback due to tighter export restrictions for AI chips to China during the Trump administration, optimism has returned as trade agreements with Middle Eastern nations involving AI investments have eased concerns. Government spending on AI could soon emerge as a key driver of demand.

In addition to this, spending from cloud computing firms and companies developing foundational AI models, such as OpenAI and Meta Platforms, remains robust. With over 80% of the graphics processing unit (GPU) market share, Nvidia is well-positioned to capitalize on ongoing AI infrastructure investments. Its CUDA software platform and range of AI-focused libraries create a strong competitive edge.

Currently, Nvidia trades at a forward price-to-earnings (P/E) ratio of 31 times this year’s analyst estimates, with a price/earnings-to-growth (PEG) ratio of 0.6—suggesting undervaluation.

Broadcom

Broadcom (NASDAQ: AVGO) stands to benefit significantly from the growing AI infrastructure expenditures. The company specializes in essential components for data center infrastructure and has established a robust presence in developing customized AI chips, known as ASICs (application-specific integrated circuits).

While GPUs are more flexible, custom AI chips can deliver optimal performance tailored to specific tasks and are more energy-efficient. Although the initial costs for designing these chips can be considerable, they promise lower overall ownership costs in the long run.

Broadcom’s prospects look promising, with a projected market opportunity of $60 billion to $90 billion by fiscal year 2027, primarily from clients who are making significant progress. New customers, including Apple, further enhance this revenue potential. Presently, Broadcom trades at a forward P/E of 29 times analysts’ fiscal 2026 projections, presenting an attractive valuation based on its future growth potential. However, a slowdown in AI infrastructure spending poses a risk.

Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (NYSE: TSM) serves a vital role in the AI chip landscape by manufacturing these crucial components. A leader in semiconductor contract manufacturing, TSMC counts Nvidia, Broadcom, and Apple among its major clients.

Manufacturing semiconductors is complex and requires both expertise and efficiency. Advanced packaging technologies and smaller chip sizes are essential for enhancing performance while reducing energy consumption. As TSMC continues to lead in advanced chip manufacturing, it also enjoys strong pricing power.

Recently, TSMC reported a 35% increase in revenue to $25.5 billion, coupled with a gross margin expansion of 190 basis points to 58.8%. Although its new U.S. facilities could pressure margins in the short term, plans to raise prices from its Arizona plant by 30% aim to counterbalance costs, along with an anticipated overall price hike of 10%.

Trading at a forward P/E of 21 times 2025 analyst estimates and a PEG of 0.6, TSMC also presents a compelling valuation. Like Nvidia and Broadcom, TSMC faces risks tied to a slowdown in AI infrastructure spending, which would likely decrease chip demand.

Conclusion

Investors looking for potential growth in AI should keep an eye on these three stocks—Nvidia, Broadcom, and Taiwan Semiconductor Manufacturing—as they navigate evolving market conditions and opportunities in the AI infrastructure spending landscape.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.