NVIDIA (NASDAQ: NVDA) is one of the most talked about artificial intelligence (AI) stocks in recent memory. Rising 1,124% in just a few short years and eclipsing Apple as the world’s biggest company by market cap, it has done big things.
With all that being said, it’s beginning to look like NVIDIA’s winning ways are coming to end — or at least slowing down. Last week, the company put out an earnings release that easily beat expectations yet was followed by NVDA shares tanking in the markets. Additionally, the company’s billionaire backers, including its own chief executive officer (CEO), have been selling at a furious pace.
Today, NVIDIA trades at 60 times earnings and 30 times sales. Stocks this pricey don’t usually stay that way for long. Fortunately, there are other ways to get AI exposure in your portfolio. In this article, I will explore three stocks that I like more than NVDA at today’s prices.
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Taiwan Semiconductor
Taiwan Semiconductor Manufacturing (NYSE: TSM) is a Taiwanese computer chip company that is best known as NVIDIA’s contract manufacturer. All this explosive revenue growth that you see NVIDIA doing results in sales for TSM as well as NVIDIA. This fact shows up in TSMC’s financials. For example, over the last 12 months, the company’s revenue, earnings, and free cash flow have grown at the following rates:
- Revenue: 22.65%
- Earnings: 15.85%
- Free cash flow: 20.6%
No, these are not even close to NVIDIA’s blistering fast growth rates in the TTM period. However, TSMC’s business is much more diversified than NVIDIA’s. It does business with on-device AI companies like Apple, traditional tech companies, car companies, and so much more. So, if there is a downturn in NVIDIA’s data centre business, TSMC can still thrive. That, combined with its much lower multiples, makes TSMC a better buy than NVIDIA today, in this author’s opinion.
Constellation Software
Constellation Software (TSX: CSU) is a Canadian software company best known for its excellent long-term compounding track record. It invests in relatively small companies at the early stages of their development, with the aim of eventually integrating them with its existing operations. In this respect, it operates somewhat like a venture capital firm, only one that holds long-term instead of seeking “exits.”
Constellation Software’s AI exposure is not quite as strong as that with NVIDIA or TSMC, but it’s definitely there. For example, the company’s marketing consulting software has generative AI features that allow customers to create and deploy content swiftly. With its innumerable subsidiaries, Constellation has more AI under the hood than just that — it just happens to be one good example.
Brookfield
Brookfield Corp (TSX: BN) is a Canadian financial services company that you might be surprised to see on this list. Best known for its investments in infrastructure, renewables and real estate, it’s not something that looks very AI-related.
But looks can be deceiving. Brookfield actually does have considerable investments in AI, mainly through its partially owned subsidiary, Brookfield Infrastructure Partners. Brookfield Infrastructure Partners invests in AI data centres, which are of vital importance in actually serving AI to end users. These investments make Brookfield a real player in generative AI, even if it isn’t writing the code or designing the chips itself.
