Nvidia (NASDAQ:NVDA) shares took many investors by surprise in 2023. Shares have more than tripled year to date and currently carry a 232 P/E ratio. The forward P/E ratio of 59 makes shares look more palatable, but most of the upside potential came and went for investors.
Shares may continue to go higher and reward long-term investors, but the stock’s nearly parabolic growth rate since October 2022 makes it prime for a correction. Even if that correction doesn’t come anytime soon, other AI stocks have more reasonable valuations and can have more gains ahead.
Artificial intelligence is changing the way companies operate and serve customers. This technology will create many winners in the stock market that can reward long-term investors. Add these three AI stocks to your watchlist in the search for the next Nvidia.
Super Micro Computer (SMCI)
Although Nvidia’s year-to-date gains have been impressive, Super Micro Computer (NASDAQ:SMCI) shares have done better. SMCI stock more than quadrupled year to date, and the company’s preliminary earnings gave investors additional reasons to hold onto the stock.
The company’s guidance numbers comfortably exceeded prior guidance by wide margins. Fiscal Q4 guidance went from $1.7B-$1.9B to $2.15B-$2.18B. SMCI has experienced record orders with a rapidly growing backlog.
Although the company reported solid preliminary earnings, investors must look at a company’s valuation before buying shares. High growth makes a stock attractive, but it wouldn’t make much sense to buy a stock with a 1,000 P/E ratio.
Luckily, Super Micro Computer has a reasonable valuation, especially for a company with its growth potential. Shares currently trade at a 32 P/E ratio. Super Micro Computer’s AI infrastructure solutions help its clients develop and execute advanced AI and HPC applications. Its servers are critical for artificial intelligence and the metaverse.
Shares trade at a reasonable level, and the company’s growth is accelerating. The stock looks like one of the top picks in AI.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) is one of the top semiconductor companies. The firm has many clients, including Nvidia and Apple (NASDAQ:AAPL). Taiwan Semiconductor Manufacturing has enabled roughly 85% of the worldwide semiconductor startup product prototypes.
Recent quarters of declining revenue and earnings have made the stock more affordable, heading into the AI boom. TSM shares currently trade at a 16 P/E ratio with a dividend yield approaching 2%.
Once revenue and earnings get back on track, shares can soar. The stock is down by more than 30% from its all-time high and faces headwinds. TSM has delivered an 18.6% earnings compounded annual growth rate since 1994. The company has faced more challenging headwinds in the past and has been very rewarding for long-term investors. The rising demand for AI combined with a low valuation makes TSM a worthy AI stock to watch.
Symbotic (NASDAQ:SYM) shares have gained more value than Super Micro Computer shares on a year-to-date basis. The 345% year-to-date gain is a sight to behold. Let’s look at the force driving the momentum.
Symbotic’s AI products and software help clients reimagine the supply chain and oversee the flow of inventory. Walmart is one of many clients that have added Symbotic robots to its warehouses. This allows companies to deliver more goods at a quicker rate while reducing costs. Symbotic’s resources also take up less space in warehouses which provides more room for inventory.
Symbotic reported 77.6% year-over-year revenue growth in Fiscal Q3 as the figure jumped from $176 million to $312 million. The company’s adjusted EBITDA loss shrank from $22 million to only $3 million. Symbotic’s systems sales contract with GreenBox increased the company’s contracted backlog to approximately $23 billion. The company expects to generate $290 million to $310 million in revenue in Fiscal Q4.
High revenue growth and narrowing losses can turn this company into a long-term winner. It can be a good AI stock to keep your eye on.