U.S. tech stocks are continuing their sell-off on Tuesday. As of this writing, America’s tech heavy NASDAQ-100 Index was down 1.8% for the day and falling. The sell-off had no particular trigger; however, the ongoing correction of which it was a part has been blamed on Donald Trump’s tariffs, as well as high valuations prior to the correction.
In this author’s view, U.S. tech stocks still have a ways to fall – especially generative artificial intelligence (AI) stocks. Most of these companies are not generating much incremental revenue from AI when compared to the money they’re spending on it. However, there are some AI stocks that are beginning to get interesting. In this article, I explore three AI stocks that I’d invest in in 2025, including two tech stocks and one car company that’s using AI to make its operations leaner.
TSMC
Taiwan Semiconductor Manufacturing (NYSE:TSM), also known as TSMC, is a Taiwanese semiconductor company. It makes the the world-class AI computer chips sold by NVIDIA, Apple, and others. Taiwan Semiconductor is easily one of the world’s most important companies. It supplies 90% of the world’s most advanced computer chips, making it a vital part of the world’s high-tech ecosystem.
Taiwan Semiconductor stock has taken a beating this year. Down 13% for the year, it has underperformed even the lagging U.S. tech stocks. However, as a result of the beating it has taken, TSM also has a cheaper valuation now than it had at the beginning of the year. At today’s price, TSMC trades at 25 times earnings. That’s not exactly a bargain basement valuation, but TSMC is cheaper than it was a few months ago, and its earnings will probably grow in the year ahead, increasing the “E” in the P/E ratio.
Alphabet Inc (NASDAQ:GOOG) is a U.S. based tech company. Better known as “Google,” it develops Google search, the Android smartphone operating system, Gmail and more. Alphabet stock has taken a real beating this year, being down 15.6% since January 1. Apart from Google being caught up in the sector-wide selling in U.S. tech, there aren’t any immediately obvious reasons for this to be happening. Google had strong earnings growth in its last quarter, and it trades for just 20 times earnings. There is reason to think that Google’s earnings this year won’t be as strong as they were last year, as the company is undertaking a massive AI capital expenditure program. But then again, it’s still pretty cheap even if you assume a 10% decline in earnings followed by a 2026 recovery.
Magna International
Magna International (TSX:MG) is a name you might be surprised to see on this list. A Canadian auto parts and contract car manufacturing company, it is hardly considered high-tech. However, MG is in fact a very effective user of AI —not in selling it to other users, but in using it to improve its own operations.
Magna International uses AI-equipped robots to automate key functions at its warehouses. Specifically, it uses them to facilitate building car parts. This use of AI leads to more efficient operations and, potentially, higher margins at Magna International.
