Artificial intelligence (AI) has become a game-changer in various industries, revolutionizing the way we create and accomplish tasks. With the launch of ChatGPT in November 2022, AI applications have soared, allowing people to generate essays, songs, lifelike images, and more in a matter of seconds. The rise of AI has not only saved time and money for individuals and companies but has also created a massive buying frenzy in AI stocks.
However, the popularity of AI has come at a cost, as many investors already own some AI stocks due to the significant opportunities in this sector. Tech giants like NVIDIA control a large portion of the AI chip market, making their stocks relatively expensive, with a price-to-earnings (P/E) ratio of 33. As a result, investors may be hesitant to bet on the future growth of these tech companies.
But fear not, as there are still some AI stocks that remain attractive even if their growth is not explosive. Two such stocks are Taiwan Semiconductor Manufacturing (NYSE:TSM) and OpenText (TSX:OTEX).
Taiwan Semiconductor Manufacturing (TSM) is a Taiwanese computer chip company and the contract manufacturer for NVIDIA, the dominant player in AI chips. While NVIDIA’s stock is already priced in, TSM trades at a more reasonable 21 times earnings, making it a cheaper alternative for investors looking to tap into the AI market indirectly. As TSM makes money from all the other tech companies, it provides a more affordable entry point into the AI sector.
OpenText (OTEX), a Canadian tech company, is another option for investors seeking exposure to AI. OTEX utilizes AI in various text-related software enterprises, including its Cybersecurity Aviator app, which employs AI to identify security threats for organizations. Additionally, OTEX is a Dividend Aristocrat and a value stock trading at a modest 10.76 times adjusted earnings. These factors make OTEX an appealing choice for investors who prefer stable dividends and a more reasonable price point.
While AI stocks in general may be getting expensive, opportunities still exist for investors willing to explore alternatives. TSM and OTEX offer cheaper entry points into the AI market, making them attractive investment options. It is important for investors to conduct thorough research and analysis, considering their risk tolerance and investment goals before making any investment decisions.
In the rapidly evolving world of AI, the potential for growth and innovation is immense. As new AI technologies continue to emerge and impact various sectors, it is crucial for investors to stay informed and identify investment opportunities that align with their investment strategies and objectives.
