No-Brainer AI Stocks for Long-Term Growth

Capitalizing on the AI Boom: A Look at Alphabet and TSMC

The investment landscape is undergoing a profound transformation driven by the meteoric rise of Artificial Intelligence (AI). With estimates suggesting AI will add over $15 trillion to the global economy, it's a space investors can't afford to ignore. One smart way to capitalize on this revolution is by investing in the tech companies powering AI, specifically those providing cloud computing services and AI chips.

Alphabet (Google): The Sleeping AI Giant Awakens

Cloud computing isn't just a buzzword; it's the backbone of many AI applications. As companies migrate to cloud platforms to harness the power of AI, Alphabet's (GOOG) (GOOGL) Google Cloud is soaking up this demand. The stock has surged to new highs, signaling investors are starting to recognize Google as a major player in the AI arms race. While Google Cloud still represents a smaller portion of Alphabet's overall business, it's the company's fastest-growing segment. In the second quarter, revenue was up 32% year-over-year. More importantly, this strong growth is translating to increasing profits, with Google Cloud's operating profit more than doubling year-over-year to $2.8 billion for the quarter.

Google Cloud's Immense Growth Potential

Google Cloud's growth is just getting started. In an increasingly competitive landscape where AI is accelerating the pace of innovation, companies must adopt AI or risk falling behind. With the majority of enterprise data still stored on on-premise servers, Google Cloud has significant room to grow in the years to come. Google Cloud is already a preferred platform for AI startups, but it's also winning deals with large enterprises. Google's competitive advantage is based on its proprietary AI models (Gemini) and computing systems powered by its custom-designed Tensor Processing Units (TPUs). These systems are optimized for AI inference, where computer models learn to make forecasts from new data without human input. The AI inference market is expected to be much larger than AI training, which has driven much of the growth in AI over the past few years.

Brand Power and Integration

Google already has one of the most valuable brands in the world, based on billions of people who use Search and other services every day. Its integration of AI into both its consumer and enterprise services should yield excellent returns for investors over the next 10 years.

Taiwan Semiconductor Manufacturing (TSMC): The Chipmaking Backbone

If Taiwan Semiconductor Manufacturing (TSMC) disappeared tomorrow, the global economy would likely collapse. It's the largest chip manufacturer by a wide margin. TSMC makes chips for several of the leading semiconductor companies, and these chips are used to power just about everything that makes the economy function: smartphones, cars, computers, data centers, and consumer electronics.

Dominance and Diversification

TSMC is in such a dominant position in the chip supply chain that it's kind of frightening. Geopolitical tensions between China and Taiwan pose a risk, but TSMC is also in the process of diversifying its manufacturing base across the world. It is building new facilities in the U.S., Europe, and elsewhere.

Expertise, Efficiency, and Innovation

TSMC is No. 1 in chip making because it has better expertise, a large manufacturing capacity, and superior chip-making equipment than competitors. The company has great relationships with customers that depend on TSMC to manufacture the most advanced chips for high-performance computing. Advanced chips, or those that are 7-nanometer and below, made up nearly three-quarters of its revenue in Q2. The company generated $45 billion in net income on $106 billion of revenue over the last year. That's a stellar profit margin of 43%. Management expects 2025 revenue to be up 30%, indicating surging demand for AI chips. They expect demand for AI chips to grow at over 40% annually through 2029. The stock is up 36% so far in 2025, and excluding a meltdown in the stock market, it should hit new highs in 2026 and for many more years. Demand for semiconductors is not slowing down, making Taiwan Semiconductor stock a no-brainer stock to buy and hold.