The last month of 2024 has arrived, and 2025 is right around the corner. However, there are far too many good deals in the market to sit December out and wait for 2025.
Three stocks that I've got my eye on to buy more of in December are ASML (NASDAQ: ASML), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Meta Platforms (NASDAQ: META). All three of these companies are set to be long-term beneficiaries of the artificial intelligence (AI) arms race and make for great investments right now.
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Each company has a lot going for it
All three of these companies can be seen as AI investments. ASML and Taiwan Semiconductor are both plays on the chip industry that supports AI, while Meta Platforms is an investment in the development of generative AI models and the application of that technology.
ASML makes lithography machines that are sold to big chip foundries like Taiwan Semiconductor. These machines lay the microscopic electrical traces on chips that are spaced as little as 3 nanometers apart. ASML has a technological monopoly in this space, as it's the only company in the world that makes the machines it does.
It is also unlikely to be disrupted as it would take years of development and billions of investment dollars to create a competitor. This positions ASML well for the long term since its machines will continue to be purchased as the number of chips we use grows and the technology progresses.
Taiwan Semiconductor uses ASML's machines to fabricate chips for its huge client list. Customers like Nvidia and Apple don't have chip manufacturing capabilities. Instead, they farm that work out to a foundry like Taiwan Semiconductor, which takes a design and produces it for its clients.
Although Taiwan Semiconductor can produce the most powerful chips available (3nm chips), it's working on 2nm chips as well. This continual improvement march nearly guarantees Taiwan Semiconductor's steady income growth, as the chip price rises with each new generation of technology.
Lastly is Meta Platforms, also known by its previous name, Facebook. While the majority of Meta's revenue is generated from ads on its social media platforms, it's also heavily invested in the generative AI game. Its model, Llama, is one of the leading open-source generative AI models, making it a top option for developers looking to know what is happening with their data, unlike some of the other well-known options.
Additionally, it helps Meta "fine tune" the model without needing to spend heavily on resources. If Meta wins the generative AI race and Llama becomes one of the industry standards, it can benefit Meta as it will now have access to the most well-trained AI model, improving experiences on its platform.
While all three companies have solid stories to invest in, they also look like great bargains.
All three stocks are not overpriced
ASML recently became a bargain after its stock plummeted following Q3 earnings. That report contained a reduction in revenue guidance for 2025, mainly centered on falling China revenue. This is happening due to export bans on China for some of its most advanced machines and an economic downturn in China itself. After the fall, ASML now trades for 33 times forward earnings, about the same price it traded for last year.
With investors able to turn back the clock to get ASML's stock for cheaper, I think they should take every opportunity, as this giant won't stay beaten down forever.
Taiwan Semiconductor's stock price has consistently risen throughout 2024 as investors are starting to realize how smart of an investment it is. As a result, it's no longer "cheap," but I'd say it's fairly valued.
According to Wall Street analysts, Taiwan Semiconductor's revenue is projected to grow by about 25% next year, and earnings per share (EPS) to rise by about 26%. That makes the current price tag a fair price for the stock, making it a good buy in December.
Meta is the cheapest of the three, trading for 25.4 times forward earnings. As the S&P 500 trades for 23.5 times forward earnings, it's not that much more expensive than a broad market index. Considering that Meta's latest quarter saw revenue rise 19% and EPS increase 38% year over year, I'd say the stock has a fairly cheap price tag, making it a great stock to buy in December.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in ASML, Meta Platforms, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Apple, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
