Why Tech Stocks Are Winning Over Cryptocurrencies Right Now

Recently, cryptocurrency prices have surged as investors expect a more positive regulatory environment with the entrance of the Trump administration. However, while some view cryptocurrencies as high-risk investments with potential for dramatic returns, tech stocks can offer similar, if not greater, potential for growth and often come with more stability.

Consider investing in three notable tech stocks: Nvidia (NASDAQ: NVDA), AppLovin (NASDAQ: APP), and Taiwan Semiconductor (NYSE: TSM) as alternatives to crypto.

Start Your Mornings Smarter! Get essential market news delivered straight to your inbox every trading day. Sign Up For Free »

Image source: Getty Images.

1. Nvidia Rises as the Leader in AI Processors

Nvidia has emerged as a frontrunner in tech stocks due to its dominance in artificial intelligence (AI) processors. Its graphics processing units (GPUs) are utilized in 70% to 95% of AI data centers. This strong demand has driven significant financial growth, with Nvidia’s sales soaring 94% to $35.1 billion in Q3 (ending October 27) and non-GAAP earnings per share climbing 119% to $0.81.

Looking ahead, CEO Jensen Huang forecasts that companies upgrading their AI infrastructure may spend up to $2 trillion within five years. While Nvidia won’t capture all that spending, it is well-positioned for ongoing growth in the AI sector.

It’s important to note that Nvidia shares come with a high price tag, holding a forward price-to-earnings (P/E) ratio of 32.6, exceeding the S&P 500’s approximate 24 forward P/E ratio.

2. AppLovin Taps Into a Booming Ad Market

AppLovin, an adtech platform leveraging AI, enables businesses to display ads on connected TVs and mobile applications. The company’s stock has experienced extraordinary growth, rising 715% over the last year.

In Q3 (ending September 3), AppLovin reported a 39% increase in sales to $1.2 billion, and its diluted earnings per share soared 317% to $1.25. The advertising sector has reached a $1 trillion market in 2024, a year ahead of expectations, and AppLovin stands to gain significantly.

Anticipated global ad sales growth of 7.7% next year further positions the company as a leader, especially since 81% of digital advertising is projected to come from programmatic ad platforms like AppLovin by 2028.

Despite recent stock price increases, AppLovin has a forward P/E ratio of 47.6, indicating a premium valuation. However, it remains a strong contender for tech investors focused on the ad market.

3. Taiwan Semiconductor Leads in Chip Manufacturing

Taiwan Semiconductor Manufacturing Company (TSMC) is a critical player in creating artificial intelligence chips, commanding an estimated 90% of the market for the most advanced processors.

As AI spending is projected to soar to $1 trillion in the coming years, TSMC has already seen its sales increase by 39% to $23.5 billion in Q3 (ending September 30), with earnings rising 54% to $1.94 per American depositary receipt (ADR). The company’s expertise in producing cutting-edge 3-nanometer chips, with plans for 2-nanometer chips in 2025, makes it a go-to for tech firms.

Compared to its peers, TSMC stock is relatively affordable with a forward P/E ratio of 22.9, lower than that of the S&P 500 and a significant step down from Nvidia’s and AppLovin’s valuations.

While these tech stocks may not guarantee higher returns than specific cryptocurrencies, each has a foothold in the thriving AI market, positioning them for growth over the coming years.

Seize This Opportunity For Growth

Have you ever felt left out of the biggest investment successes? Now is your chance.

Our team of expert analysts occasionally identifies “double down” stocks—companies they believe are on the verge of significant growth. Here’s a look at past successes:

• Nvidia: If you had invested $1,000 when we recommended it in 2009, you would have $355,269!
• Apple: A $1,000 investment when we doubled down in 2008 would be worth $48,404!
• Netflix: A $1,000 investment from our 2004 recommendation would have grown to $489,434!

We’re currently issuing “Double Down” alerts for three promising companies. Don’t miss out on your chance to invest again.

Discover 3 “Double Down” stocks »

*Stock Advisor returns as of December 23, 2024

Chris Neiger holds no shares in any of the stocks mentioned. The Motley Fool recommends and holds positions in AppLovin, Goldman Sachs Group, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

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