Two Stocks Poised for Long-Term Growth in AI
Assessing the future of a rapidly evolving field like artificial intelligence (AI) can be challenging. Nevertheless, two stocks stand out as potential long-term winners: Meta Platforms (NASDAQ: META) and Taiwan Semiconductor Manufacturing (NYSE: TSM). Though these companies operate in different sectors, each is well-positioned for future success.
Investment Focus for Meta Platforms
Meta Platforms, known previously as Facebook, primarily generates revenue through its social media platforms, with 98% of Q1 earnings coming from advertising. This heavy reliance on ads underscores Meta’s core business model.
The company has integrated AI tools into its advertising strategy, enhancing ad targeting and effectiveness. This improvement enables Meta to command higher prices for ads, as advertisers gain a better return on their investment.
Moreover, Meta is investing significantly in AI-driven hardware, including smart glasses. Although these technologies are still in development, successful adoption could open new revenue streams not factored into the current valuation, potentially leading to substantial stock price growth.
Investors can be confident that Meta will remain relevant over the next decade, particularly as it continues to enhance its AI capabilities. Patience will be key, as advertising revenue may fluctuate with economic cycles.
Taiwan Semiconductor’s Strategic Advantage
Taiwan Semiconductor Manufacturing Company (TSMC) remains the leading fabrication foundry, consistently innovating to produce advanced semiconductor chips. This focus on innovation secures its status within the chipmaking industry.
Many leading technologies, such as iPhones and Nvidia (NASDAQ: NVDA), rely on TSMC’s chips. Although specific products may come and go, the demand for semiconductors from TSMC is expected to persist.
An investment in TSMC effectively bets on the increasing need for both quantity and sophistication in semiconductor technologies, a trend that seems inevitable in today’s digital world.
Management projects a remarkable 45% compound annual growth rate (CAGR) in AI-related chip revenues over the next five years, reinforcing TSMC’s long-term relevance and appeal.
Current Valuation Insights
Both stocks appear attractive for long-term investment, but why consider buying now? While it may have been better to have purchased these stocks earlier, they still present solid entry points today.
META PE Ratio data by YCharts
Both stocks currently trade below their average price-to-earnings (P/E) ratios from earlier in 2024. While they may not be available at bargain prices, the valuations are reasonable, providing confidence for new investors.
Investment Considerations for Meta Platforms
Before investing in Meta Platforms, consider the following:
Although the Motley Fool Stock Advisor analyst team has identified ten other stocks they favor right now, this should not detract from Meta’s potential. Past recommendations, like Netflix and Nvidia, have shown significant return potential; for instance, an early investment of $1,000 in Netflix could have grown to $642,582.*
As a note, Stock Advisor has delivered an impressive average return of 975%, significantly outpacing the S&P 500’s 172% return.
*Stock Advisor returns as of May 12, 2025
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keithen Drury holds positions in Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool also holds positions in and recommends these companies. 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.
