In my opinion, the two best artificial intelligence (AI) stocks to buy right now are

The artificial intelligence (AI) stock boom is showing some signs of cooling off, but that by no means means means the opportunity for AI stocks is over.

Large corporations and startups are still spending more to capitalize on what many tech executives and experts are calling the biggest technological revolution since the Internet, and OpenAI chief executive Sam Altman said the demand for generative AI is still growing rapidly, so new energy solutions are needed to support it.

As a result, artificial intelligence stocks still seem to have a lot of upside potential. If you want to capitalize on this opportunity, these two stocks look like good choices.

1.Taiwan Semi-Conductor Manufacture

At the moment, most AI winners seem to be people likeNvidia) Hardware stocks like these are seeing a surge in demand for their GPUs and other components that form the backbone of the AI infrastructure. WithIntel (math.) andAdvanced Micro Devices ) are launching their own competing AI GPUs, competition for GPUs and other hardware components such as servers is expected to intensify.

Taiwan Semiconductor Manufacturer firms(NYSE: TSM)It's a company that's benefiting from increased competition related to artificial intelligence. Even better, the company is unlikely to experience the kind of competitive incursion faced by the hardware stocks mentioned above.

TSMC (also known as TSMC) is the world's largest manufacturer of solid-state semiconductors, with a 55% market share in third-party chip manufacturing and a 90% market share in advanced chip manufacturing.AppleNvidia, AMD, andBroadcom Technology companies and chip designers, such as Intel, have turned to TSMC to manufacture their product designs, and it is TSMC that has made the fabless era of chip design possible. Even Intel, which has its own foundry business, is letting TSMC manufacture its new high 3rd generation AI chips, as Intel is no match for TSMC in the production of advanced chips. TSMC can now produce 3-nanometer chips and plans to launch 2-nanometer chips in 2025.

This market share and significant position in the chip supply chain gives TSMC tremendous market power. In its fourth-quarter results, the company reported an operating margin of 41.61 TP3T, showing that it converts a high percentage of its revenue into profit.

Thanks to the AI boom, TSMC's growth is accelerating. Its March revenue grew 34.3% year-over-year, and its Q1 revenue grew 16.5% year-over-year, its fastest quarterly growth since 2022 and evidence that its growth is accelerating. Moreover, TSMC trades at a reasonable valuation and the stock has more potential upside as its growth accelerates.

2. Arm Holdings

Arm Holdings (NASDAQ: ARM)It's another long-term winner in the artificial intelligence space and a stock that looks like it has a sustainable competitive advantage.

Arm is a chip design company, but it has a different business model than most of its competitors in the industry: instead of selling directly to end users, Arm licenses its designs and collects royalties on each sale of a product that uses its designs.

The company works closely with Nvidia and its partners who have invested heavily in the field of artificial intelligence, includingAlphabetThe company has just announced a new Axion artificial intelligence chip based on Arm that will be used in its cloud computing data centers.

Arm also has another advantage that coincides with the above point made by OpenAI's chief executive officer, Sam Altman. Running an AI application like ChatGPT consumes a lot of energy, and Arm's CPUs are known for being much more efficient than x86 chips from Intel and AMD. This is the main reason why around 99% of smartphones use Arm processors, and why it is becoming the AI hardware of choice. Arm's CPUs are used in Nvidia's Grace Hopper super chip, and Arm's architecture is included in Nvidia's Blackwell platform.

Arm's business model, in which licensing revenue precedes royalty revenue, also suggests that its revenue growth could accelerate in the coming quarters, as the company's stronger-than-expected licensing revenue growth in the most recent quarter provided impressive guidance for the fourth quarter.

As long as Arm maintains its CPU rate advantage, the company is likely to be a winner in the AI space.

Should you invest $1,000 in Semiconductor Manufacturing Corporation now?

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Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors, and Jeremy Bowman owns shares of Broadcom. The Motley Fool recommends Advanced Micro Devices, Alphabet, Apple, Nvidia, and Taiwan Semiconductor Manufacturing Company. The Motley Fool recommends Broadcom and Intel, and also recommends the following options: long Intel January 2025 $45 calls and short Intel May 2024 $47 calls. The Motley Fool has a disclosure policy.

The Two Artificial Intelligence (AI) Stocks I Want to Buy Right Now was originally published by The Motley Fool.