Three Straightforward Artificial Intelligence (AI) Shares to Purchase for 2025 with a $200 Investment Currently

Three Straightforward Artificial Intelligence (AI) Shares to Purchase for 2025 with a $200 Investment Currently

Over the past couple of years, artificial intelligence (AI) stocks have ruled the roost. The significant investment in AI infrastructure and development, coupled with investor excitement over its potential impact on various industries, has propelled numerous companies' stocks into stratospheric heights. Finding a decent company with a reasonably priced share below $200 can be challenging.

However, there might still be substantial growth potential for AI investing. Analysts at Bain predict a robust 40% to 55% annual growth rate for the AI hardware and software market until 2027.

Despite inflated expectations baked into numerous stocks' prices, these three software and hardware firms offer an opportunity to buy shares at reasonable rates. The best part is that all three stocks are priced around $200, making them affordable for AI stock enthusiasts.

1. Google's Parent Company

Known as Alphabet (GOOG -1.55%) (GOOGL -1.45%), this company is behind Google. In spite of expectations that competitors would undermine Google's AI domain, Alphabet's management effectively integrated AI into its core offerings.

One notable change in Google's search engine over the past year is the integration of AI. You've likely encountered AI-generated answers linked to their sources when searching Google with a question in the last few months.

Management claims that this new feature is enhancing user engagement and satisfaction, as Google is now able to answer an increasing number of users' questions. Furthermore, its AI developments over the past 18 months have enabled it to reduce the cost of utilizing generative AI to answer queries by 90%, enabling a global rollout.

Alphabet utilizes its AI capabilities to innovate user search experiences. For instance, the product "Circle to Search" enables users to circle words or images on a webpage while browsing on their Android smartphone, initiating a search. Google Lens simplifies web search by allowing users to simply snap a picture. Both enhance valuable search types like product discovery and shopping.

Meanwhile, Google Cloud, Alphabet's cloud computing division, has seen substantial revenue growth as developers leverage its compute for generative AI applications. Not only has revenue grown by a substantial margin over the past two years but also consistently produces meaningful operating profits for Alphabet. Google Cloud generated $1.9 billion in operating income during the last quarter, an increase from $270 million a year ago and a shift from a loss of $700 million in the third quarter of 2022.

Alphabet continues to innovate in AI. It introduced the latest version of its large language model (Gemini 2.0) in December, and AI agents built on the model to help with browser navigation and debugging computer code. Alphabet's scale and distribution capabilities provide it with an advantage in popularizing its AI-driven software.

With shares trading at $194 at the time of writing, the stock appears to be undervalued. Despite analysts' predictions of double-digit earnings growth for several years, it trades for only 22 times 2025 earnings expectations. This is a bargain compared to other AI stocks.

2. Qualcomm

Most people associate Qualcomm (QCOM -0.81%) with its wireless patents, covering 3G, 4G, and 5G connectivity. Every smartphone manufacturer pays a license fee to Qualcomm to use its patents, which has contributed significantly to Qualcomm's innovations in chipmaking and is unlikely to change in the near future.

Qualcomm manufactures chips for smartphones, from basic baseband chips allowing phones to connect to wireless networks to the all-in-one Snapdragon line, which combines an application processor with a baseband or modem set. The Snapdragon chip can be found in most high-end Android smartphones.

Thus far, Qualcomm's chips haven't been heavily involved in AI. However, that's starting to change. Qualcomm introduced a line of Snapdragon processors tailored for Windows PCs aimed at running on-device AI inferences in 2024. By keeping AI processes on-device, user data remains private and allows users to access AI capabilities without an internet connection.

While the adoption of so-called "AI PCs" powered by Qualcomm's chips has been slow, future smartphone users may demand on-device AI. This requires more advanced processors like Qualcomm's Snapdragon. As a result, Qualcomm might capture a larger market share in smartphones over the coming years.

Furthermore, Qualcomm has a promising automotive chip segment. As automotive computers become increasingly complex and rely on fast AI processing, Qualcomm could emerge as a valuable supplier for automakers over the next few years. At its investor day in November, management reported $45 billion in design wins in its automotive pipeline. For reference, the segment generated $2.9 billion in revenue during fiscal 2024.

Qualcomm's share price of less than $160 makes it an excellent investment opportunity to capitalize on the future of on-device AI across smartphones and PCs, and the immense potential in automotive. Analysts forecast earnings growth of around 10% for the following two years, while shares trade for only 14 times forward earnings estimates. Qualcomm's potential to expand its market share across multiple devices makes it an attractive stock at this price.

3. Taiwan Semiconductor Manufacturing

This Chinese company, Taiwan Semiconductor Manufacturing, is a leading semiconductor manufacturer, playing a crucial role in the global electronics industry. By producing cutting-edge chips, it has helped propel the progress of technology and driven innovation in various sectors.

Taiwan Semiconductor Manufacturing Company (TSMC), often referred to as simply TSMC, is the undisputed leader in the global chip manufacturing sector. It partners with major chip designers such as Nvidia, Apple, and Broadcom to create the cutting-edge AI chips that dominate the market. With a remarkable market share of over 60%, TSMC is the undisputed ruler of semiconductor foundries.

TSMC's dominance is largely due to its technological superiority. In September, Nvidia CEO Jensen Huang extolled TSMC's abilities, labeling it as the best in the business by a significant margin. The company's vast market share enables it to maintain this technological edge, as it has more funds to allocate towards the development of future technology, creating a self-sustaining cycle.

TSMC has thrived as demand for AI chips has skyrocketed. Revenue surged by 39% in the third quarter, and earnings rocketed by 54% as margins expanded due to heightened demand. The boost in demand was primarily driven by AI-focused chips, but robust smartphone orders also played a key role. The company is projecting a 31% revenue increase and strong margins for the fourth quarter.

Investors should prepare for margin contraction as TSMC unveils its newest technologies in late 2025. However, margins should expand in the long term as production scales up, especially if AI chip demand remains high. The growing demand for robust processing capabilities across various devices means TSMC should continue to control an even larger share of the semiconductor market in the coming years, despite its current dominant position. Consequently, revenue growth should outpace the overall industry's expansion.

At its current valuation of around $200, TSMC shares are trading at approximately 23 times forward earnings. However, strong margins and consistent revenue growth have analysts forecasting a 27% earnings increase in 2025. Although TSMC might not sustain that growth rate, the downward trend should be gradual as it remains a crucial component in the expansion of artificial intelligence. With such promising growth prospects, TSMC is an undeniable choice at $200.

1. In the realm of finance, Alphabet's diversified investments in AI include not only its search engine but also its cloud computing division, Google Cloud. This segment has seen substantial revenue growth due to the increased demand for AI-driven services, contributing significantly to Alphabet's annual revenue and profits.
2. As for Qualcomm, while it has traditionally been associated with wireless patents, its future growth prospects lie in AI inferences and on-device AI capabilities. The company's introduction of Snapdragon processors for Windows PCs, aimed at running AI processes on-device, could open up new markets and increase its revenue and market share in the coming years.

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