Pinpointing strong bargains in the stock market is key to success, and the market is full of them right now. While some may be concerned about tariff effects in the short term, most of these stocks have incredibly bright long-term outlooks. By shifting your focus from the next few months to the next few years, you can ignore some of today’s events, and it will be obvious which stocks are great buys now.
Three companies that are down more than 30% from their all-time highs and look like excellent buys are Nvidia (NVDA 4.11%), Taiwan Semiconductor (TSM 0.57%), and ASML (ASML 0.38%). These three also represent a great picture of the AI chip value chain, and as long as AI continues to be an area where businesses invest, these three will succeed.
The AI chip value chain is a lucrative area to invest in
As a quick overview of the supply chain, Nvidia places Taiwan Semiconductor’s chips in its GPUs (graphics processing units), which have been the primary computing unit deployed by the AI hyperscalers. To make these chips, Taiwan Semiconductor needs specialized machines from ASML known as extreme ultra-violet (EUV) lithography machines. No company in the world has EUV technology besides ASML, so its engineering dominance has earned it a technological monopoly.
As the demand for Nvidia GPUs rises, so does the need for more Taiwan Semi chips. Increased chip demand requires more production capacity, which means more ASML EUV machines. Again, this requires AI demand to continue rising, which seems to be the way that it’s heading.
Nvidia CEO Jensen Huang stated at its 2025 GTC event that data center buildouts will increase from about $400 billion in 2024 to $1 trillion by 2028. Considering that Nvidia’s trailing 12-month total data center revenue was $115 billion, it gets nearly a third of all data center spending. That’s a huge chunk of the market, and if Nvidia can maintain that percentage, it will deliver monster growth over the next few years.
This also jives with what Taiwan Semiconductor’s CEO, C.C. Wei, has been saying. For 2025, they expect revenue from their AI-related chips to double. Additionally, over the next five years, they expect AI-related revenue to grow at a 45% compounded annual growth rate, which would be an incredible achievement.
While investors can speculate whether these projections are valid, the reality is that these two CEOs are better connected to the demand than almost anybody else. While they can still make mistakes, the odds of getting this information completely wrong are unlikely. As a result, investors need to take refuge in the fact that there is still a massive AI buildout going on, and this trend will be unlikely to be disrupted over the next five years unless a severe economic collapse occurs.
I don’t think that’s likely, which makes these three stocks intriguing considering their sale prices.
All three of these stocks are far cheaper than they’ve been priced in recent history
While these stocks used to be highly valued, they aren’t that way anymore following the sell-off.
TSM PE Ratio (Forward) data by YCharts
ASML is the most expensive stock on the list at 24.4 times forward earnings, but those projections don’t include ASML’s recently announced plan to repurchase up to 10% of its stock. This could be a huge boost for the stock, making it even cheaper than it currently appears.
Nvidia at 23 times forward earnings is a no-brainer, as the growth it’s expected to achieve over the next few years is quite impressive.
Lastly, Taiwan Semiconductor is a steal at these levels because the broader market (as measured by the S&P 500 (^GSPC 0.74%)) trades for 19.8 times forward earnings. TSMC is expecting market-beating growth over the next five years, so buying it at a discount to the market is a great investment opportunity.
These three may be hurting, but the long-term outlook is still clear. All three of these stocks look like excellent bargains, and investors should scoop them up while they’re still cheap.
Keithen Drury has positions in ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
