2 Top Artificial Intelligence Stocks to Buy in December
AInvestSaturday, Dec 7, 2024 5:43 am ET
5min read
NVDA --


Artificial intelligence (AI) continues to be a driving force in the stock market, with semiconductor companies and cloud computing firms being early beneficiaries. As software companies start to see growth opportunities, investors are looking for attractively valued stocks in the AI space. Let's explore two semiconductor stocks that should see AI help power their growth in December and beyond.

1. Nvidia

Nvidia (NASDAQ: NVDA) has become the dominant player in the GPU market, with an approximate 90% market share. The company's GPUs have become the backbone of the AI infrastructure buildout, thanks to its CUDA software platform, which allows the chips to be programmed for more efficient tasks. This has led to a wide moat for Nvidia, as more developers learn to program GPUs using CUDA, creating a virtuous cycle.

Nvidia's CEO has stated that the current demand for its chips is "insane," as the world's top tech companies race to become AI leaders. Despite its huge gains in the past few years, the stock trades at an attractive valuation. It has a forward price-to-earnings (P/E) ratio of about 33 based on 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of approximately 1. A PEG ratio under 1 is usually considered undervalued, but growth stocks will often command PEG ratios well above 1.

Nvidia's largest customers have expressed plans to continue ramping up AI infrastructure spending, taking advantage of what many view as a once-in-a-generation opportunity. The company's strong position in the AI market, combined with its attractive valuation, makes it an attractive option for investors looking to buy in December.



2. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC for short, has become the leading player in the contract semiconductor manufacturing space. The company is a close partner with Nvidia and the primary manufacturer of its GPUs. Apple, meanwhile, is its largest customer, regularly buying out all of the capacity of TSMC's advanced nodes when TSMC moves to newer advanced chip manufacturing technology.

TSMC has two big AI growth opportunities in front of it. The first is meeting the huge demand for AI chips coming from the AI infrastructure buildout. TSMC will continue to benefit from Nvidia's success, but it will also benefit from any companies looking to get in on this space as well. A number of companies have started to design custom AI chips through Broadcom and Marvell to meet specific needs, while Arm Holdings and Softbank have been rumored to be looking for manufacturing capacity to make their own AI chips.

The second opportunity is an increased demand coming from an end device hardware upgrade cycle. Newer smartphones and PCs are generally needed to run the latest AI offerings, so any increased demand for smartphones or computers would benefit the company. Apple is pushing its new AI features with Apple Intelligence, which is expected to boost iPhone 16 sales, while Microsoft has been advancing its AI Copilot, which could help with an enterprise PC upgrade cycle.

TSMC continues to invest in adding more capacity while also continuing to push technology innovation and shrinking node sizes. Smaller nodes allow for better chip performance and power consumption, while also increasing the number of chips that can fit on a wafer. TSMC has also displayed strong pricing power over the past few years, and it is set to raise prices once again in 2025.

Like Nvidia, TSMC trades at an attractive valuation, with a forward P/E under 23 based on analysts' 2025 estimates and a PEG of 1.2. Given the opportunity still in front of TSMC, it looks like a solid stock to buy in December ahead of what should be a strong 2025 for the company.



Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $376,143!*

Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,028!*

Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $494,999!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 2, 2024

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.



In conclusion, Nvidia and Taiwan Semiconductor Manufacturing are two top AI stocks to consider buying in December. Both companies have strong positions in the AI market, attractive valuations, and significant growth opportunities. As the AI market continues to grow, these companies are well-positioned to capitalize on the trend and provide strong returns for investors.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.