Nasdaq Correction: 3 AI Stocks That Could Propel Your Wealth

Many investors are feeling anxious as the Nasdaq index has entered correction territory, defined as a drop of at least 10% from its all-time high. Yet, it's important to remember that market corrections are common, typically occurring about once each year. Such fluctuations are part of the investment journey, and patience is key, even when portfolios reflect declines.

The recent downturn has undone growth accumulated since September of last year, essentially resetting the market's progress to that time. Nevertheless, there remain exceptional investment opportunities available that could potentially expedite your path to financial success.

So, why focus on these three stocks? They are deeply entrenched in a monumental technological transformation: artificial intelligence (AI).

Outperformance: A Game-Changer for Returns

The three AI stocks worth considering are Nvidia (NVDA), Taiwan Semiconductor Manufacturing Company (TSM), and Alphabet (GOOG). While these companies are sizeable, the probability of becoming a millionaire from a modest investment in any of them might be limited. However, their potential to deliver returns that surpass the market averages makes them excellent candidates for accelerating your journey to wealth.

If you were to invest $500 each month into an S&P 500 fund, which has historically yielded about 10% annually, your investment would total about $1 million in roughly 29 years. If, however, you could enhance your returns to 13% annually, you could reach millionaire status about five years sooner.

This emphasizes the importance of identifying companies likely to outperform the market, thereby significantly speeding up your quest for financial success.

Huge Growth Potential from AI

Nvidia produces graphic processing units (GPUs) that are essential for training AI models and executing tasks once those models are live. Currently, Nvidia holds a dominant market position, and its remarkable growth trajectory is projected to continue. Analysts expect Nvidia's revenue to increase by 56% in the fiscal year ending January 2026 due to ongoing investments by major clients in AI.

Similarly, Taiwan Semiconductor Manufacturing Company, or TSMC, is a key player in the AI wave as it manufactures many chips that drive AI technology. Nvidia is one of TSMC's largest clients, but the company also serves various competitors in the AI space. TSMC's management anticipates tremendous growth over the next five years, projecting AI-related revenue to increase at a compound annual growth rate of 45%, with overall revenue climbing by nearly 20%. With a unique positioning in the chip sector, TSMC is well-equipped to gauge future demand, and when it forecasts chip demand to double in the coming years, it’s certainly worth investors’ attention.

While Alphabet primarily derives its income from advertising, through platforms like its search engine and YouTube, it is also a significant contender in the AI sector. Alphabet is incorporating AI into its advertising tools and is enhancing search results with AI capabilities. The most substantial growth from AI is coming from its cloud computing segment, Google Cloud. AI is a boon to cloud services since many companies lack the resources for large-scale computing infrastructure upfront.

As a result, many companies opt to rent the computational power they need via cloud providers like Google Cloud, which has led to tremendous growth in that sector. In the fourth quarter, Google Cloud revenue soared by 30%, establishing it as one of Alphabet's quickest-growing divisions. This balance allows Alphabet to benefit from both the growth potential of AI and cloud computing while enjoying the stability of its dominant advertising business.

After this recent market dip, all three companies are relatively inexpensive based on historical metrics.

While the Nasdaq has returned to levels seen in September, these stocks are trading at lower valuations than before. Both Alphabet and TSMC are currently priced at under 19 times their expected future earnings, substantially cheaper than the valuations of the Nasdaq and S&P 500. Nvidia’s valuation is only slightly higher than those two indexes, but this premium is justified given its rapid growth.

In conclusion, these three stocks represent excellent buying opportunities right now, and their reduced valuation increases the likelihood of outperforming the market over the long term.

Nasdaq, Investment, AI