3 Cheap AI Stocks

The rapid expansion of the AI sector led to soaring tech stock prices, but some AI companies still offer appealing valuations. Although factors like macroeconomic conditions have lowered share prices, these three AI stocks are set for long-term growth.

AI Stock Bargains

Investors seeking AI bargains can consider Taiwan Semiconductor Manufacturing (TSMC), Super Micro Computer (Supermicro), and Google parent Alphabet. Compared to Nvidia, these three AI stocks have lower price-to-earnings ratios. These companies experienced share price declines due to various headwinds, including global economic uncertainty caused by tariff policies. However, the AI trend is expected to boost their businesses over the long run.

Taiwan Semiconductor Manufacturing (TSMC)

TSMC is a strong investment because of its leadership in manufacturing AI chips. Its ability to efficiently produce 3-nanometer (nm) chips in large volumes is driving rapid sales growth. This technology accounted for 22% of the company's $25.5 billion in first-quarter revenue, up from 9% the previous year. TSMC is also developing its next-generation 2nm technology, expected to enter production later this year. TSMC's Q1 sales grew 35% year over year to $25.5 billion, and its Q1 gross margin rose to 58.8%, up from 53.1% the previous year. The company anticipates Q2 revenue between $28.4 billion and $29.2 billion, a 37% increase from the prior year's $20.8 billion. TSMC also received $6.6 billion in federal funding under the CHIPS Act to build semiconductor fabrication facilities in the U.S., positioning it for long-term growth.

Super Micro Computer (Supermicro)

Supermicro provides servers and data storage solutions for businesses creating AI systems. In its fiscal 2025 Q3 (ended March 31), Supermicro's revenue reached $4.6 billion, a 19% year-over-year increase. While this growth was strong, it did not meet the company's forecast of at least $5 billion in sales, as customer purchasing delays shifted some sales into Q4 and later, according to CFO David Weigand. The macroeconomic climate and tariffs affect Supermicro in the short term, but AI's growth is expected to support the company over time. The AI market is projected to grow from $184 billion in 2024 to $826 billion by 2030. Supermicro anticipates closing out fiscal 2025 with sales between $21.8 billion and $22.6 billion, a substantial increase from the prior year's $14.9 billion. Through the first three quarters of fiscal 2025, the company's sales of $16.2 billion already exceeded the previous year's total revenue, putting its revenue goal within reach.

Alphabet (Google)

Google parent Alphabet is making significant investments in AI, spending $52.5 billion in capital expenditures last year to develop advanced AI systems. AI is integrated into every Alphabet product with at least half a billion users. The inclusion of AI in products like Google's search engine and Google Cloud contributed to double-digit year-over-year sales growth in Q1. Google's revenue reached $50.7 billion, and Google Cloud earned $12.3 billion. This performance helped Alphabet achieve $90.2 billion in total Q1 revenue, up from $80.5 billion in 2024. Waymo, Alphabet's self-driving car business, uses AI to make autonomous driving decisions and provides over 250,000 passenger rides per week, a fivefold increase from the previous year. Alphabet's stock has declined due to macroeconomic conditions and antitrust cases. The company can appeal these decisions, so these challenges may not impact its business. TSMC, Supermicro, and Alphabet have faced headwinds that have lowered their share prices, creating a buying opportunity for investors with a long-term view. The AI market's continued growth and these companies' AI success position them for growth in the coming years, making their current stock valuations attractive.