Investor optimism is returning, and the stock market is seeing the return of growth stocks. While the Toronto Stock Exchange enjoyed its fame with energy stocks, it is time to broaden your investment and go beyond Canada to the south of the border. Thankfully, the Tax-Free Savings Account (TFSA) allows you to invest in U.S. stocks without hampering your tax benefit. Now is a good time to take advantage of this benefit and tap the strength of the U.S. stock market, which is advanced technology.
The U.S. stocks to buy in your TFSA
One key reason the U.S. stock market is the world’s biggest is because of the tech-heavy NASDAQ. And in the NASDAQ, one hardware and one software stock are a treasure trove today, as they shape the future artificial intelligence (AI) infrastructure.
AMD
A hardware stock fuelling the data centre and telecom network of the future is Advanced Micro Devices (NASDAQ: AMD). This company designs high-performance computing chips for PCs, data centres, game consoles, and embedded devices. Last year, AMD acquired Xilinx and expanded its addressable market to include network connectivity and automotive chips. The stock halved in 2022, while the company’s revenue surged 44% thanks to the Xilinx acquisition.
AMD’s share price dipped, as global PC shipments fell 16.2% in 2022, because inflation and interest rate spikes reduced discretionary spending. Its revenue from client business that provides chips for PCs and laptops halved. The stock was also affected by crypto, and the tech bubble burst. However, the market failed to recognize the data centre opportunity. The increase in the data centre mix enhanced AMD’s operating margin to 27% from 25% in 2021.
The market has not yet priced in AMD’s data centre opportunity, as the stock trades at the 2020 pandemic level. The stock has the potential to surge double digits in the next five years, as it grows in the data centre, automotive, and network connectivity market.
Microsoft
Another tech stock that took a hit from the tech selloff and declining PC shipments is Microsoft (NASDAQ: MSFT). The stock fell 32% in 2022 and is still trading at a 25% discount from its 2021 high. Microsoft is a leader in the software space, with its Office 365 suite powering most PCs and laptops and its Azure cloud platform serving enterprises’ data centre computing needs. Microsoft’s second-quarter revenue surged 2%, as a 19% decline in Personal Computing was more than offset by 18% and 7% growth in cloud and business processes.
Microsoft’s chief executive officer Satya Nadella has been focusing on growing the cloud business for the last decade. Azure will see growth as 5G leads the way to artificial intelligence (AI) at the edge through autonomous cars and smart cities. The fifth-generation technology will connect everything to the cloud, and Azure is one of the leading players in AI cloud computing.
The latest buzz is its ChatGPT AI platform, which has attracted mainstream interest, taking AI assistants to the next level. The AI chat feature has also pulled traffic to its Bing search engine. Microsoft is continuously improving its platform. If successful, ChatGPT could redefine the experience of Azure cloud hosting products.
With tech, it is difficult to forecast growth possibilities. Now is a good time to buy Microsoft stock while it trades at the 2021 level. The proliferation of AI-enabled edge devices could open a new opportunity for Microsoft.
The hidden treasure of the two U.S. stocks
Tech stocks scale very fast in growth momentum. Future tech could be disruptive and can make or break market leaders. So far, AMD and Microsoft are leading in the AI game. Their growth could be a treasure, as the potential is difficult to quantify. Buy and hold these stocks in the TFSA and enjoy future growth.
But make sure to diversify your portfolio across growth and dividend stocks across different sectors.
