5 Must-Buy AI Giants for Double-Digit Returns in the Short Term

The post-election rally of Wall Street after Donald Trump became President for the second term, has evaporated. As the initial euphoria of market participants is over, investors are assessing the pros and cons of Trump’s economic policies, such as the imposition of tariffs, reduction of corporate taxes, deregulation of corporate America and their impact on inflation.The technology sector is also concerned about Trump’s tariffs on high-end chipsets, the future of the $52.5 billion Chips and Science Act and the imposition of antitrust regulations on big techs. Nevertheless, I believe that the AI frenzy will continue as this technology has become the need of the hour.At this stage, we recommend five generative artificial intelligence (AI) behemoths with a favorable Zacks Rank that have double-digit upside potential in the short term. These are Alphabet Inc. GOOGL, Meta Platforms Inc. META, Taiwan Semiconductor Manufacturing Co. Ltd. TSM, Adobe Inc. ADBE and Broadcom Inc. AVGO.AI Frenzy Remains IntactThe astonishing rally of U.S. stocks that started at the beginning of 2023 was predominantly driven by the technology sector. An unprecedented adoption of generative AI technology across the world was the prime factor. Bloomberg Intelligence estimates that generative AI spending will increase from $67 billion in 2023 to $1.3 trillion by 2032. UBS estimated that four U.S. technology giants that are member of the so-called “magnificent 7” will spend around $267 billion as capital expenditure on AI applications in 2025, a jump of 33.5% year over year. 5 AI Bigwigs to Buy With Double-Digit Short-Term AppreciationEach of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The chart below shows the price performance of our five picks in the past three months.Image Source: Zacks Investment ResearchAlphabet Inc.Zacks Rank #2 Alphabet is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI (Gen AI) solutions and core Google Cloud Platform products. GOOGL’s strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers. Alphabet’s expanding GenAI capabilities present a potential catalyst for future growth. GOOGL’s dominant position in the search engine market is a strong growth driver. Major search updates and the removal of bad ads to enhance search results continue to boost traffic on GOOGL’s search engine.GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software. Impressive Price Upside Potential for GOOGL StockThe average short-term price target of brokerage firms represents an increase of 17.6% from the last closing price of $175.58. The brokerage target price is currently in the range of $185-$240. This indicates a maximum upside of 36.7% and no downside.Meta Platforms Inc.Zacks Rank #2 Meta Platforms is set to receive initial shipments of NVIDIA Corp.’s (NVDA) new flagship AI chip later this year. NVIDIA’s next-generation AI chip, called Blackwell, is the upcoming driver. META is set to get B200 Blackwell chips.META’s AI-driven platform is enhancing ad delivery efficiency and increasing return on ad spend for advertisers. Solid performance in spaces like e-commerce, gaming, entertainment, and media is benefiting Meta Platforms. Management said that the company will invest $38-$40 billion as capital expenditure in AI initiatives in 2024. Moreover, capital spending is likely to reach more than $50 billion in 2025. On July 24, META unveiled its Llama 3 AI model. Using NVIDIA’s latest HDX H200 chip that supports Meta Platforms’ Llama 3 AI model, an investment of $1 by an API provider can generate $7 in revenues over the next four years. This mostly free Llama 3 model and its advanced version to be released next year aim to compete with incumbents like Open AI. Strong Price Upside Potential for META SharesThe average short-term price target of brokerage firms represents an increase of 12.2% from the last closing price of $577.16. The brokerage target price is currently in the range of $475-$811. This indicates a maximum upside of 40.5% and a maximum downside of 17.7%.Taiwan Semiconductor Manufacturing Co. Ltd.Zacks Rank #1 Taiwan Semiconductor is the largest manufacturer of AI-based chipsets for the world’s best AI chipset developers. It has a strong clientele. The company is the largest manufacturer of NVIDIA’s chipsets. NVIDIA is globally the largest developer of generative AI-based chips. TSM provides a range of wafer fabrication processes, including processes to manufacture complementary metal-oxide-semiconductor logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. The growing adoption of its multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum.TSM’s growing efforts to ramp up the production of 3nm and development of 2nm is a plus. Also, strength across its 7nm, 16nm and 28nm technologies are contributing well to its top-line growth. Excellent Price Upside Potential for TSM StockThe average short-term price target of brokerage firms represents an increase of 19.2% from the last closing price of $188.50. The brokerage target price is currently in the range of $200-$250. This indicates a maximum upside of 32.6% and no downside.Adobe Inc.Zacks Rank #2 Adobe has extensively implemented AI applications across its flagship products, such as Photoshop, Illustrator, Lightroom and Premiere. Earlier this year, ADBE introduced generative AI-driven Adobe Firefly. Moreover, Adobe Acrobat and Reader AI Assistant help users summarize documents and answer questions, saving time and helping users accomplish tasks faster.Using its new AI-driven cloud-based platform, ADBE is also diversifying into digital marketing services, offering data mining services, which help businesses measure page views, purchases and social media sites. Adobe Marketing Cloud enables marketers to deliver personalized web experiences across multiple devices, manage multichannel campaigns and optimize media monetization. ADBE has launched Adobe Express, an application for quick editing effects. Leveraging generative AI, this tool is useful for short-form video content like Instagram Reels. Adobe also launched an AI-based Express app for iOS and Android.Attractive Price Upside Potential for ADBE SharesThe average short-term price target of brokerage firms represents an increase of 14.4% from the last closing price of $529.87. The brokerage target price is currently in the range of $440-$703. This indicates a maximum upside of 32.7% and a maximum downside of 17%. Broadcom Inc.Broadcom is benefiting from strong demand for its networking products. In second-quarter 2024, it witnessed strong demand for custom AI accelerators, AI networking solutions, Ethernet switching, optical lasers, thin dies, PCI Express switches and Network Interface Cards from hyperscale customers. AVGO’s solutions are suitable for addressing the needs of an increasing AI workload and the growing need for fast networking in data centers. The acquisition of VMware has benefited the infrastructure software solutions of Broadcom. VMware’s expanding clientele, which includes the likes of Alphabet and Meta Platforms, is noteworthy. AVGO’s strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, has been a key catalyst. AI revenues are now expected to be $12 billion for fiscal 2024.Solid Price Upside Potential for AVGO StockThe average short-term price target of brokerage firms represents an increase of 12.5% from the last closing price of $170.38. The brokerage target price is currently in the range of $150-$240. This indicates a maximum upside of 40.9% and a maximum downside of 12%.Must-See: Solar Stocks Poised to SkyrocketThe solar industry stands to bounce back as tech companies and the economy transition away from fossil fuels to power the AI boom.Trillions of dollars will be invested in clean energy over the coming years – and analysts predict solar will account for 80% of the renewable energy expansion. This creates an outsized opportunity to profit in the near-term and for years to come. But you have to pick the right stocks to get into.Discover Zacks’ hottest solar stock recommendation FREE.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Adobe Inc. (ADBE): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. 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