The Best Stocks to Invest $1,000 in Right Now

Putting $1,000 toward a couple of stocks can be a great starting point to building a strong portfolio or expanding an existing one. The good part about a booming stock market is that the shares of many companies are performing well, but the bad news is that the market's strong performance can make it difficult to determine which companies will end up being great long-term investments.

I think two technology stocks that will be worth owning years from now are the semiconductor manufacturing company Taiwan Semiconductor (NYSE: TSM) and chip designer Broadcom (NASDAQ: AVGO). Here's why.

Image source: Taiwan Semiconductor.

1. Taiwan Semiconductor dominates AI processor manufacturing

There's a lot of talk about a potential artificial intelligence bubble right now, and some of it is warranted given some companies' lofty valuations and elusive earnings. But I also think it's wrong for investors to dismiss the concrete sales and earnings that some AI companies currently have. For example, Taiwan Semiconductor, also called TSMC, just reported revenue of $33.1 billion, up 30% from the year-ago quarter, and earnings of $2.92 per American depositary receipt (ADR), a 39% increase.

TSMC isn't just doing well in its recent quarter; the company also has a huge advantage over other semiconductor manufacturers because it makes an estimated 90% of the world's most advanced processors. Meanwhile, competitors, including Samsung and Intel, are trying to catch up to TSMC's massive lead but have yet to convince major customers to leave TSMC for their manufacturing.

Years of investing in advanced manufacturing processes are now paying off for TSMC as it uses this competitive advantage to benefit from a huge uptick in artificial intelligence spending. Data center spending could reach up to $4 trillion over the next five years, which should be a boon to TSMC's chip manufacturing business for years to come.

2. Broadcom is expanding its AI chip footprint

Broadcom may not be a household name for many investors, but it's been an important semiconductor designer for tech companies for many years, and it recently scored a significant partnership with OpenAI that elevated its opportunities.

The OpenAI and Broadcom collab consists of the two companies co-developing AI accelerators and Broadcom providing AI server racks and networking systems to OpenAI over the next four years. While the companies didn't disclose the financial details of the deal, The Wall Street Journal reports it could be worth billions of dollars for Broadcom.

Even before the partnership was announced, Broadcom had a strong position in the artificial intelligence space. The company's total sales rose 22% to $15.9 billion in Q3, and non-GAAP earnings per share rose 36% to $1.69. The company's management estimates that Broadcom's AI sales will reach $90 billion annually by 2027, which is more than 7 times its artificial intelligence revenue from last year.

Expect some volatility

I think investors should expect some volatility ahead for AI stocks as investors try to determine which companies have true advantages in this space. There are certainly some AI stocks that are overvalued right now, and some of them are riding high on speculation, rather than on strong sales and earnings.

Any temporary AI stock sell-off could lead to Broadcom's and TSMC's stock experiencing some turbulence in the short term. But over the long term, these two companies should be able to continue benefiting from their strong positions in the artificial intelligence market.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.