Artificial intelligence (AI) is playing a disruptive role across several industries as the technology allows businesses, governments, and organizations to improve productivity and efficiency with its ability to automate repetitive tasks and take over certain functions.
The potential of AI helps explain why its increasing adoption is expected to give global gross domestic product (GDP) a big boost going forward, adding trillions of dollars to the world’s economy. Not surprisingly, a lot of money is being spent on AI-related hardware and software to help capture some of this economic potential. Market research firm IDC expects global spending on AI infrastructure to exceed $200 billion by 2028, which would be a nice increase over this year’s projected spending of $150 billion.
On the other hand, the research firm expects the AI software platforms market to clock an annual growth rate of almost 41% through 2028. That’s why now is a good time to take a closer look at the prospects of two companies that are taking advantage of these lucrative end markets and have the potential to deliver healthy long-term gains for their investors.
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1. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM -2.04%) offers a great way for investors to capitalize on the huge investments in AI infrastructure. Popularly known as TSMC, this Taiwan-based company is the largest semiconductor foundry in the world, fabricating semiconductors on a large scale for major chip designers such as Nvidia, Broadcom, AMD, Marvell Technology, and others.
These customers are seeing terrific growth in sales of their AI chips, and that’s having a positive impact on TSMC’s financial results. For instance, all the customers mentioned above saw remarkable growth in their AI chip revenue in their latest quarters. Nvidia reported 73% growth in data center revenue for the previous quarter, while Broadcom’s AI revenue jumped 46%. A similar story unfolded for Marvell Technology as well, driven by healthy demand for its custom AI processors.
Importantly, all these companies are leaders in their respective segments, and their outlook makes it clear that they will be able to sustain their healthy growth rates. Broadcom, for example, sees a serviceable addressable market worth a whopping $60 billion to $90 billion for its chips over the next three years, and that’s excluding the potential revenue it could pull in from the new customers that it is working with.
Meanwhile, the data center graphics card market is expected to clock a 30% annual growth rate over the next decade. This explains why TSMC is forecasting its AI accelerator revenue to double this year, followed by a compound annual growth rate (CAGR) in the mid-40% range over the next five years. The impressive growth in the AI chip market is the reason why TSMC’s revenue in the first four months of 2025 has increased by 43% from the same period last year.
That’s an improvement over the 30% revenue growth the company delivered in 2024 to $90 billion. The strong start to 2025 is the reason why TSMC’s growth is set to accelerate this year, followed by healthy, double-digit growth rates in the next couple of years as well.
Data by YCharts.
What’s worth noting is that TSMC’s 67% share of the global foundry market gives the company a solid competitive advantage and puts it in a nice position to make the most of the secular growth opportunity in AI chips. And finally, TSMC’s trailing earnings multiple of 24 means that investors are getting a great deal on this AI stock right now, and they should consider grabbing this opportunity with both hands before it flies higher following the 37% gains it has clocked in the past two months.
2. C3.ai
The adoption of AI software by businesses and governments is turning out to be a tailwind for C3.ai (AI -2.46%), a pure-play enterprise AI software provider that’s witnessing strong customer interest.
C3.ai has been in the news of late for winning contracts from the U.S. Air Force (USAF), which has been deploying its platform for predictive maintenance of aircraft, weapons systems, and ground assets. Specifically, the USAF has raised its contract ceiling for C3.ai’s generative AI software to $450 million from an initial $100 million. The good part is that the company has started executing contracts for the USAF under this program.
This, however, is one of the many contracts that C3.ai has been winning, apart from getting more business from existing customers. In the recently concluded fiscal year 2025, C3.ai closed 264 agreements with customers, an increase of 38%. This number included 174 initial production deployments, which refers to the pilot projects that the company is currently undertaking.
C3.ai CFO Hitesh Lath remarked on the company’s recent earnings conference call:
At the end of the quarter, we had cumulatively signed 346 initial production deployments, of which 263 are still active. This means they are either in their original 3- to 6-month term or extended for some duration, converted to an ongoing subscription contract or are currently being negotiated for conversion to ongoing subscription contracts.
So, there is a good chance that C3.ai’s growth rate could keep getting better following the 25% increase in its revenue last fiscal year, which was an improvement of nine percentage points over its fiscal 2024 top-line growth. Management has guided for a 20% increase in revenue for the current fiscal year to $465 million. However, C3.ai could exceed that mark if it can convert its ongoing pilot projects into long-term contracts.
After all, the company’s relationship with key federal agencies and big names such as ExxonMobil, U.S. Steel, Bristol Myers Squibb, and many others establishes it as a credible player in the AI software market, and that could help it attract more customers into its fold. This is probably why analysts expect C3.ai’s growth rate to pick up in the future and project that it will become profitable in the next couple of fiscal years.
Data by YCharts.
Just like TSMC, even C3.ai stock has clocked strong gains of 27% in the past couple of months. The company’s ability to outpace Wall Street’s estimates going forward thanks to the improving traction of its generative AI software solutions indicates that C3.ai could continue to head higher, which is why investors may want to consider buying it before it is too late.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Bristol Myers Squibb, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, C3.ai, and Marvell Technology. The Motley Fool has a disclosure policy.
