Three High-Potential Stocks to Consider for Investment

Despite a strong market week, several stocks remain outstanding buying opportunities. Currently, attention is directed toward three companies: Nvidia (NASDAQ: NVDA), Taiwan Semiconductor (NYSE: TSM), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

Even though these stocks have seen recent gains, their long-term performance potential suggests far greater growth ahead.

1. Nvidia

Nvidia specializes in graphics processing units (GPUs), critical for applications requiring substantial computing power, such as artificial intelligence (AI) model training. It dominates the data center GPU market, with estimates indicating over 90% market share.

Over the past year, Nvidia’s data center division generated $115 billion in sales, contributing significantly to its total revenue of $130.5 billion. This indicates a strong correlation between Nvidia’s performance and data center expansion.

Although some investors express concern over potential slowdowns in data center builds, major tech companies are committing to substantial capital expenditures for 2025, primarily targeting data centers.

According to third-party estimates, data center investments are projected to rise from $400 billion in 2024 to $1 trillion by 2028. Assuming Nvidia maintains its market dominance, these trends could translate into significant growth opportunities.

The current phase of AI implementation and cloud migration creates further demand for data center capacity. Thus, Nvidia appears to be a strong candidate for long-term investment.

2. Taiwan Semiconductor

Taiwan Semiconductor Manufacturing Company (TSMC) is a key chip provider for Nvidia and many other leading tech firms. Clients rely on TSMC to fabricate semiconductors, as they often do not have the capability to produce them in-house. TSMC has a proven track record of innovation and efficiency, reinforcing its role as a crucial partner for tech companies.

Company management anticipates AI-related revenue to grow by 45% per year over the next five years, with overall revenue expected to rise close to 20% annually. Given that many companies place chip orders well in advance, investor attention is warranted.

However, TSMC faces challenges, particularly due to its fabrication facilities being predominantly located outside the U.S. This raises concerns about potential tariffs, particularly under the Trump administration. Despite this, there are mitigating factors to consider.

First, semiconductors are currently exempt from tariffs. Additionally, TSMC plans to invest $100 billion in U.S. production facilities, which could reduce tariff risks by bolstering domestic manufacturing capabilities.

The expected growth for TSMC is substantial, and with a focus on expanding U.S. operations, investors might find comfort in its long-term prospects.

3. Alphabet

Alphabet is currently valued at an attractively low price, trading at just 17 times projected earnings, making it one of the more affordable stocks available.

GOOGL PE Ratio data by YCharts

Several factors contribute to Alphabet’s low valuation. Firstly, the company’s primary revenue stream relies on advertising, which often sees declines during economic downturns. Secondly, concerns linger that generative AI could disrupt Alphabet’s core business, the Google search engine. Compounding these issues, Alphabet has been found guilty of monopolistic practices related to its search and advertising operations.

These circumstances create a challenging environment for Alphabet, leading the market to portray a pessimistic outlook. However, historical trends suggest that advertising revenues typically recover following downturns.

Alphabet has started incorporating AI-driven features into its search results, and legal issues could take years to resolve. When evaluating these aspects, the market’s negativity appears overstated; Alphabet continues to grow at a double-digit rate.

This presents a compelling opportunity for investors to acquire shares in Alphabet before potential turnaround scenarios unfold.

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