Artificial intelligence has driven many stock prices up, but these three still hold great value.
The past two years have been dominated by artificial intelligence (AI) stocks. The influx of spending on AI infrastructure and development, combined with investor excitement about its potential to transform multiple industries, has pushed some companies’ stock prices into astronomical territory. It can be difficult to find blue-chip companies whose stocks are trading at fair prices below $200.
But there may still be a lot of growth left when it comes to investing in AI. According to Bain analysts, the market for AI hardware and software is expected to grow 40% to 55% annually through 2027.
Many stocks already have these high expectations built into their prices, but all three of these software and hardware makers offer opportunities to buy their companies at great prices. And the best part is that each stock trades for around $200, making it accessible to just about anyone looking to get started with AI stocks.
Image source: Getty Images.
1. Alphabet
alphabet (GOOG -1.55%) (Google -1.45%) The company behind Google. While many expected competitors’ AI advances to eat into Google’s business, Alphabet’s management has successfully incorporated AI into its core products.
The biggest change in search over the past year has been the introduction of new AI. If you’ve typed a question into a Google search box over the past few months, you’ve probably seen an AI-generated answer and a link to its source.
Management says this new feature is increasing engagement and satisfaction among users as Google answers more questions. Meanwhile, advances in AI over the past 18 months have enabled us to reduce the cost of using generative AI to answer these queries by 90%, allowing us to deploy this capability globally.
The company also uses AI capabilities to offer new ways to search the web. One of our products, Circle to Search, allows users to start a search by circling a word or image on a web page while browsing on an Android smartphone. Google Lens makes searching the web as easy as taking a photo. Both have increased valuable search types such as product discovery and shopping.
Meanwhile, Google Cloud, Alphabet’s cloud computing arm, saw a significant increase in revenue as developers leveraged its compute for generative AI applications. Not only has its revenue increased over the past two years, but it also now generates significant operating profits for Alphabet. Google Cloud had operating income of $1.9 billion last quarter, up from a loss of $270 million a year earlier and a loss of $700 million in the third quarter of 2022.
Alphabet continues to innovate in the AI space. The company released the latest version of its large-scale language model (Gemini 2.0) in December, as well as an AI agent built on the model that helps navigate browsers and debug computer code. Alphabet’s scale and distribution capabilities favor the development and proliferation of AI-driven software.
With the stock trading at $194 as of this writing, this stock looks like great value. Even though analysts expect profits to grow by double digits over the next few years, it’s only 22 times the 2025 profit forecast. This is a bargain compared to other AI stocks.
2. Qualcomm
Qualcomm (QCOM -0.81%) is best known for its wireless patents covering 3G, 4G, and 5G connectivity. All smartphone manufacturers pay Qualcomm a license fee to use their patents. This extremely high-margin revenue has helped fuel Qualcomm’s chip-making innovations, and that’s not likely to change anytime soon.
Qualcomm makes chipsets for smartphones, from simple baseband chips that can connect smartphones to wireless networks, to all-in-one Snapdragon products that incorporate an application processor and a baseband or modem set. Most high-end Android smartphones are equipped with Snapdragon chips.
So far, Qualcomm’s chips haven’t had much to do with AI. But that’s starting to change. In 2024, Qualcomm introduced the Snapdragon processor series designed for Windows PCs to perform on-device AI inference. Keeping AI processes on-device ensures user data privacy and allows users to take advantage of AI capabilities without an internet connection.
Although the spread of so-called “AI PCs” equipped with Qualcomm chips has been slow, it is likely that more customers will demand on-device AI in their smartphones in the future. That requires a high-end processor like Qualcomm’s Snapdragon. As a result, Qualcomm could gain even more share of the smartphone market in the coming years.
Meanwhile, Qualcomm is also experiencing rapid growth in the automotive chip field. Qualcomm could become a valuable supplier to automakers in the coming years as in-vehicle computers become increasingly complex and dependent on fast, on-device AI processing. At an investor day in November, management announced a $45 billion design win for its automotive pipeline. For reference, the division generated $2.9 billion in revenue during fiscal year 2024.
Qualcomm’s stock price is less than $160, making it the perfect vehicle to own the future of on-device AI across smartphones and PCs, not to mention its huge potential in the automotive space. Analysts expect earnings growth to be about 10% in each of the next two years, but the stock trades at just 14 times forward earnings estimates. Qualcomm’s potential to expand its market share across multiple devices makes it an attractive stock at this price.
3. Taiwan Semiconductor Manufacturing
Taiwan semiconductor manufacturing company (TSM -0.70%)Also known as TSMC, it is the world’s largest chip manufacturer. The company contracts with some of the biggest chip designers, including Nvidia, Apple, and Broadcom, to manufacture the most advanced AI chips on the market. This is a dominant force, accounting for more than 60% of all spending on semiconductor foundries.
TSMC boasts such a high market share due to its advanced technological capabilities. In September, Nvidia CEO Jensen Huang praised TSMC as the best in the industry “by an incredible margin.” Thanks to its huge market share, TSMC should be able to maintain its technological advantage. This allows them to invest far more money into developing next-generation technology than their competitors, creating a virtuous cycle.
As demand for AI chips soars, TSMC is a clear winner. Sales rose 39% in the third quarter, and profits rose 54% as demand expanded margins. Demand was primarily driven by AI-related chips, but strong orders for smartphones also helped change the game. Revenue grew 31% in the fourth quarter, with strong margins.
Investors should expect margins to shrink as TSMC rolls out next-generation processes in the second half of 2025. Still, margins should widen over time as the company ramps up production, especially if demand for AI chips remains strong. The growing need for high-end processing power across devices should allow TSMC to capture an even larger share of semiconductor production in the coming years, despite its already dominant position. Therefore, revenue should grow faster than the industry as a whole.
At its current price of about $200, the stock trades at about 23 times expected earnings. That said, high profit margins and rising sales have pushed analysts’ consensus forecast for earnings growth to 27% in 2025. TSMC may not be able to maintain its growth rate, but it won’t see its growth rate slow down any time soon, as it remains an important piece of the puzzle in the continued advancement of artificial intelligence. It’s easy to pay $200 for TSMC with such huge growth potential.
