Tesla(NASDAQ:TSLA) is evolving beyond electric vehicles (EVs) into a bona fide artificial intelligence (AI) company. Its plans for an autonomous Robotaxi fleet and its work in humanoid robotics could make it the world’s most valuable company, according to CEO Elon Musk.
The problem is at that time it hasn’t arrived yet. Tesla’s stock is up nearly 70% this year.However, its autonomous driving technology is only rated at the second level by the Society of Automotive Engineers (SAE), which requires driver intervention.Tesla plans to start selling its humanoid robot in 2026 year, but the company is notorious for missing promise dates.
Shares are traded 169 times forward earnings estimatesAnalysts estimate that the company’s no-nonsense valuation will grow revenue by an average of 8% per year over the long term.In other words, analysts want to see actual success from Tesla’s ambitious projects before putting them into expectations.
Maybe investors should do the same. At least Tesla’s current valuation reflects future growth. it dampens the stock’s upside for those buying at these prices. It might be wise to temporarily put Tesla stock down and instead focus on the AI ​​fantasy companies that are already coming to fruition and trading at attractive prices.
Here are two vivid examples.
A technological giant The alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) Best known for its Google brand, which includes its search engine and Workspace, a collection of cloud-based productivity tools, Alphabet is expanding beyond that, including YouTube and businesses in cloud computing, smartphone software, autonomous driving and quantum computing. In computing, Google’s Waymo has already started selling cars that operate at SAE level four, a higher level of autonomy than Tesla.Also, Alphabet is an early power player artificial intelligencedeveloping an artificial intelligence model (Gemini) and accumulating computing resources to train and run it, and it has a lot of first-party data from its Google products.
If anything, Alphabet is such a powerful company that regulators have begun attacking it. The US government successfully sued Alphabet earlier this year for anti-competitive tactics on its search engines and is now pushing back against Google. for its digital advertising practices. The lawsuit brings some uncertainty to the investment picture. Still, Alphabet remains a powerful tech force, even if it has to dismantle parts of its empire. Any spin-off could unlock value for investors, and Alphabet’s product could still dominate.
Also, Alphabet’s stock is worth using for such an attractive valuation. The stock is trading at 24 times earnings estimates for 2024. Meanwhile, Alphabet’s earnings will grow by an average of 16.5% per year. the earnings-to-growth (PEG) ratio is below 1.5, making it an easy buy at these prices and an AI fund like Alphabet with a PEG ratio of 2.0 to 2.5, so it’s now more than pricing in regulatory risk.
Working behind the scenes Taiwan Semiconductor Manufacturing(NYSE: TSM) may be the most dominant stock in AI, and most people don’t recognize the company’s name.The company, more commonly called TSMC, is the world’s leading semiconductor foundry Nvidia:design semiconductors but not manufacture them. TSMC is the biggest and best foundry on the planet. It’s probably the backbone of the tech world. in:
TSMC’s stock shares some similarities with Alphabet. It’s also trading near its all-time high. However, the stock’s valuation is cheaper than it probably should be due to some external risks the company faces from China , which has long claimed Taiwan as part of its territory, fears that China could eventually act on invasion threats, potentially disrupting business. Taiwan has a strong economy (21st in the world) and is a critical piece of the world’s political puzzle, thanks in part to TSMC.
The company has invested in manufacturing facilities in the US (and in Japan) to help mitigate these risks. But the stock is becoming such a good value at some point that TSMC is trading at 28 times earnings estimates for 2024. Thanks to AI-based semiconductors growth, TSMC’s long-term avg. 31% earnings growth. That PEG ratio (to 1.0) on what could be the AI ​​supply chain the most powerful company, making it a buy even with geopolitical risks.
Before buying shares in Alphabet, consider the following:
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Susan Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the listed stocks.The Motley Fool has positions in Alphabet, Nvidia, Taiwan Semiconductor Manufacturing and Tesla disclosure policy.
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