The Best Stocks to Invest $50,000 in Right Now

While $50,000 may seem like a huge chunk of money to invest in the stock market, fractional shares have made any amount enough to get started. So, whether you have $50 or $50,000, you can get started investing.

Furthermore, fractional shares make it easier not to worry about how expensive a stock may look based on a dollar figure. What matters is how much of the company you get to own based on the price you pay. Understanding a stock’s valuation is a crucial part of being an investor, and if you can grasp it, you’ll have a significant advantage over many other market participants.

Regardless of how much money you have, I think these three stocks look like excellent bargains right now and make for great picks regardless of your investing experience.

All three stocks are affected by the AI race

Three of my best stocks to buy now are Nvidia (NVDA -0.07%), Alphabet (GOOG -0.01%) (GOOGL -0.11%), and Taiwan Semiconductor Manufacturing (TSM -0.95%). They are all major participants in the AI race and are benefiting in multiple ways.

Nvidia’s graphics processing units (GPUs) power many of the AI models used today, and the company has continuously launched new products to ensure it stays at the top. Although AI has become more prevalent, the industry is still a long way from achieving the computing capacity needed to run an AI-first business world, and its GPUs will be a crucial part of realizing that reality.

Taiwan Semiconductor (also known as TSMC) is the world’s leading semiconductor foundry, producing chips for companies like Nvidia that lack the capabilities to manufacture their own chips. It has established its market leadership through excellent yields and continual innovation. And it has invested $165 billion into the U.S. to expand its production footprint away from Taiwan, which helps reduce fears of a single point of failure.

Alphabet is better known for some of the companies under its umbrella, such as Google, YouTube, Waymo, and the Android operating system. Despite its wide product lineup, the company’s finances are heavily tied to advertising, specifically from the Google search engine.

Many investors are concerned that generative AI could displace Google Search, and the stock is undervalued as a result. While some defectors are to be expected, Google has integrated AI search overviews, which helps bridge the gap between generative AI and a traditional search experience. This will likely be all that’s needed to maintain the vast majority of its user base, indicating that the market’s concerns are overblown.

All three of these companies have fairly straightforward investment theses, but why are they the best buys now?

The valuations of these three vary widely

As mentioned above, knowing that Nvidia trades for around $160, TSMC for $230, and Alphabet for $180 is one thing, but understanding their valuation is a much more important part of investing. Valuation focuses on how much of a company’s earnings (or other financial metric) the stock price represents.

If you just looked at the dollar figures, you would assume that Nvidia is the “cheapest” stock. But when you assess its forward price-to-earnings ratio (P/E), it’s the most expensive.

NVDA PE Ratio (Forward) data by YCharts.

Nvidia’s stock is quite expensive at 37 times forward earnings, but it’s expected to undergo huge growth over the next few years as the AI race goes on. This will make today’s stock price look less expensive, so I’m not concerned about it appearing significantly more expensive than the other two.

TSMC’s stock is nearly in line with the market average. The S&P 500 is a suitable comparison since it provides investors with the valuation of the total stock market.

The S&P 500 trades for 23.2 times forward earnings, which is slightly cheaper than TSMC. If the company can grow its earnings at a quicker pace than the market average (around 10% annually), then the stock could actually be considered cheap because it’s slated to deliver greater growth.

Management expects revenue to have a compound annual growth rate of nearly 20% over the next five years, which far exceeds the broader market’s long-term rate. As a result, I believe TSMC is an excellent stock to consider here.

Lastly, there is Alphabet, which is drastically undervalued compared to the market. Apprehension about its future is largely driving this because its most recent results were impressive, with revenue rising 12% and diluted earnings per share increasing 49% year over year.

I think the fears surrounding Alphabet’s stock are overblown, and I wouldn’t be surprised if it rises back to at least a market-average multiple. Because of that, it’s an excellent buy today.