Despite the recent market fluctuations, AI stocks have generally followed a strong upward trajectory since last year. However, even these high-flying stocks are not immune to periodic sell-offs. For long-term investors, market dips can present valuable opportunities to acquire high-quality stocks at discounted prices.
Here are three top-tier AI stocks to consider if the sell-off persists:
Palantir Technologies (NYSE: PLTR)
Palantir Technologies is making significant strides in integrating AI into various industries. The company specializes in developing custom software for data analysis and real-time output, with applications ranging from hospital operations to military missions. Palantir’s revenue growth has accelerated since the launch of its Artificial Intelligence Platform (AIP). In the second quarter, revenue from U.S. private sector clients grew by 55% year-over-year, and the number of U.S. customers increased by 83% from the previous year. Analysts project that Palantir will see an average earnings growth of 30% annually over the next three to five years. Despite its forward P/E ratio of 87 reflecting much of this growth, Palantir remains a strong candidate for investors, particularly if its stock experiences a dip due to market volatility.
Taiwan Semiconductor (NYSE: TSM)
As a leading chip fabricator, Taiwan Semiconductor is crucial to the AI industry due to its role in manufacturing advanced chips. It produces 61% of the world’s semiconductors, including those used in Apple’s iOS devices and Nvidia’s AI chips. The company’s revenue grew by nearly 33% year-over-year in the second quarter, driven by the AI boom. The global semiconductor market is expected to expand by 8.8% annually over the next decade, benefiting Taiwan Semiconductor significantly. Analysts forecast a 26% annual earnings growth over the next three to five years. While geopolitical tensions with China present a risk, Taiwan Semiconductor’s current forward P/E ratio of 26 may represent a bargain, making it an attractive option if the stock price falls further.
Arm Holdings (NASDAQ: ARM)
Arm Holdings designs CPU architectures used in a wide range of electronic devices, from mobile phones to cloud computing. The company holds an estimated 50% global market share and earns royalties on every chip produced based on its designs. With AI expected to drive substantial growth, Arm projects that 100 billion AI-equipped Arm chips will be shipped by the end of its fiscal year 2026. This would represent significant growth compared to its historical volume. Analysts predict that Arm’s earnings will increase by 25% annually over the next three to five years. However, with a forward P/E ratio of 80, Arm’s shares are currently priced at a premium. Despite this, it remains a noteworthy stock for long-term investors, especially if a market sell-off provides an opportunity to buy in at a lower price.
