3 Best AI Stocks to Buy on Dip

Published Date : 07/06/2025 

Explore why Amazon, Taiwan Semiconductor Manufacturing, and Alphabet are excellent AI stocks to buy while they are still down from their all-time highs. 

Although the market has recovered from its April lows over the past few months, a handful of dominant artificial intelligence (AI) stocks are still well off their all-time highs. The future is still bright for many of these companies, and I think now is an excellent time to scoop up some of these stocks while they're still down.

Three stocks that are still down at least 10% from their all-time highs that look like strong picks right now are Amazon (NASDAQ: AMZN), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). I think buying shares of this trio could be a winning move for investors, and now is an excellent time to initiate a position.

When investors hear Amazon, they don't automatically think about AI, but they should. Amazon has deployed AI throughout its business, but that's not the reason I consider Amazon an AI stock. Amazon gets a large chunk of its profits (63% in the first quarter) from Amazon Web Services (AWS), its cloud computing business.

AWS is a massive beneficiary of the AI movement, as its servers are excellent places to run AI workloads on, especially when the client lacks the resources or workloads to justify buying their own supercomputer. That encompasses nearly all companies, except for the AI hyperscalers, and there are still a lot of AI applications to be deployed at an average business. This bodes well for Amazon, as AWS is the most critical part of its company, given how much it contributes to its profitability.

Amazon saw net sales in its AWS segment in the first quarter grow 17% from a year ago, with operating income increasing even faster at a 23% pace. It's critical for Amazon to accelerate this business unit. If it can achieve that, it will have an outsized effect on Amazon's overall profit picture. The current environment is favorable for AWS, so investors shouldn't be surprised if Amazon's stock continues to rebound as long as AWS posts solid results. With Amazon stock down around 14% from its all-time high, it still looks like a great value.

Few companies are as critical to modern technology as Taiwan Semiconductor Manufacturing (TSMC). Taiwan Semi is a chip foundry and fabrication facility for a wide client base. If you have a high-technology device (like a laptop or cellphone), chances are it has a chip from Taiwan Semiconductor. As a supplier to nearly everyone in the chip industry, TSMC has valuable insights into where the industry is headed.

Taiwan Semiconductor forecasts phenomenal growth over the next five years, driven by the increasing demand for advanced semiconductors, particularly in AI and other cutting-edge technologies. This growth is supported by TSMC's leading-edge manufacturing capabilities and its ability to produce the most advanced chips in the world. TSMC's stock is down about 15% from its all-time high, making it an attractive buy for investors looking to capitalize on the AI revolution.

Alphabet, the parent company of Google, has been beaten down despite solid results. Google's AI capabilities are well-known and are integrated into various products and services, from search algorithms to Google Assistant. The company continues to invest heavily in AI research and development, positioning it as a leader in the field.

Alphabet's stock is down around 10% from its all-time high, which is a great opportunity for investors to buy in at a discount. The company's strong financials and dominant market position in search and advertising make it a safe bet for long-term growth. With the increasing importance of AI in various industries, Alphabet's AI expertise is a significant asset.

In conclusion, Amazon, Taiwan Semiconductor Manufacturing, and Alphabet are all strong AI stocks that are currently undervalued. Investing in these companies now could yield significant returns as the AI market continues to grow and mature. 

Frequently Asked Questions (FAQS): 

Q: Why is Amazon considered an AI stock?

A: Amazon is considered an AI stock primarily due to its Amazon Web Services (AWS) segment, which is a major beneficiary of the AI movement. AWS provides cloud computing services that are ideal for running AI workloads, especially for companies that lack the resources to build their own supercomputers.

Q: What is Taiwan Semiconductor Manufacturing's role in the AI industry?

A: Taiwan Semiconductor Manufacturing (TSMC) is a leading chip foundry that supplies advanced semiconductors to a wide range of clients. Its cutting-edge manufacturing capabilities and production of the most advanced chips make it a critical player in the AI industry, particularly as the demand for AI-powered devices grows.

Q: How is Alphabet leveraging AI?

A: Alphabet, the parent company of Google, leverages AI across various products and services, including search algorithms, Google Assistant, and other applications. The company invests heavily in AI research and development, positioning it as a leader in the field and enhancing its competitive advantage.

Q: Why are these stocks currently undervalued?

A: These stocks are currently undervalued due to market fluctuations and overall economic conditions. Despite their strong fundamentals and growth potential, they have not yet reached their all-time highs, making them attractive buys for investors looking to capitalize on the AI market's growth.

Q: What is the long-term outlook for these AI stocks?

A: The long-term outlook for these AI stocks is positive. The increasing importance of AI in various industries, coupled with the companies' strong financials and market positions, suggests that they are well-positioned for significant growth and profitability in the coming years. 

More Related Topics :