3 Must-Buy AI Stocks Under $200 for Long-Term Growth

Generative AI spending is expected to increase 20 times over the next decade, creating significant opportunities. Companies with strong products and competitive advantages are poised to be long-term winners. Below are three stocks that offer great potential and can be purchased with just $200.

1. Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC is the world’s leading chip manufacturer, capturing most orders for high-end chip designs due to its advanced technology. Its major clients include Nvidia and Apple. The company recently reported strong second-quarter earnings and better-than-expected guidance for Q3. CFO Wendell Huang attributed this to "strong smartphone and AI-related demand for our leading-edge process technologies."

Investing in TSMC is a secular way to capitalize on the growing demand for AI chips. Although Nvidia currently dominates the GPU market, other companies are developing designs to compete. TSMC's advanced technology ensures it will continue to receive business from these companies.

Geopolitical risks add some uncertainty, but TSMC’s current stock price looks attractive. Shares trade at a forward price-to-earnings (P/E) ratio of 27.2. With AI driving demand, TSMC could increase prices, expand margins, and boost earnings, justifying its current valuation and associated risks.

2. Snowflake

Snowflake plays a crucial role in AI development by providing cloud infrastructure that helps enterprises manage their data across multiple public cloud services. Its platform, Cortex AI, allows businesses to apply large language models to their data, creating unique generative AI applications.

Despite a slowdown in revenue growth, Snowflake's long-term prospects remain strong. The company reported a 34% revenue increase in Q1, with management expecting better full-year revenue than initially forecast. The stock has been punished by investors, but its current price looks appealing, trading at an enterprise value-to-sales ratio of less than 14.

Snowflake’s high gross margin and operating leverage should result in significant earnings growth over time, making it a solid investment for the future.

3. UiPath

UiPath is the leader in robotic process automation (RPA) software, which automates repetitive tasks to improve worker efficiency. The company is integrating AI capabilities into its tools to enhance automation.

UiPath faced a massive sell-off after disappointing first-quarter results and management’s reduced outlook for full-year recurring revenue. Despite this, the long-term outlook remains positive. Its dollar-based net retention rate is over 100%, indicating strong customer retention and an effective land-and-expand strategy.

The global RPA market is expected to grow significantly, providing more opportunities for UiPath. Shares now trade at an enterprise value-to-sales ratio of less than 4. With potential for double-digit revenue growth and operating leverage, UiPath is a promising investment at its current price.

This analysis is provided by Motley Fool; please consult your financial advisor before making any investment decisions.