The Only 2 Artificial Intelligence (AI) Stocks You Need to Hold Through 2035

TSMC expects AI-accelerator revenue to grow at a mid-to-high-50% CAGR through 2029 and overall revenue at a 25% CAGR over the same period; the company is the No.1 foundry (~72% market share) and trades at ~26x forward earnings. Palantir ended 2025 with 954 customers (+34% YoY), 180 deals of $1M+ (vs 55 in Q4 2022), $11.2B in remaining deal value (3x since end-2022), and is outpacing a 29% CAGR AI software-platform market forecast to reach $237B by 2034.

Analysis

TSMC’s structural role in the AI supply chain creates a two-way lever: when AI demand accelerates, OEMs and hyperscalers front-load fabs and system designs, inflating TSMC’s near-term margin and capex visibility; when demand softens, the same front-loading produces sharp inventory-led revenue swings for foundry-exposed companies across 2–6 quarters. That cyclicity means owning foundry exposure without an explicit view on inventory dynamics or end-market absorption windows is a volatility trap — delta to realized earnings will be driven more by cadence and capacity allocation than by long-term TAM alone.

Palantir’s platform wins create durable data lock-in because operational AI agents embed into workflows, raising switching friction as customers automate decision loops. However, the larger risk is execution scaling: converting large contract backlog into high-margin, recurring cash requires repeatable deployment playbooks and an expansion of customer success capacity; failure here turns headline backlog into multi-year drag rather than immediate free cash flow.

Two macro/structural tail-risks loom: (1) geopolitics and export controls can re-route chip flows and reprice foundry capacity within a 3–18 month window, dramatically widening spreads between geopolitical “safe” supply and others; (2) commodification of inference via optimized software and general-purpose accelerators could flatten specialized accelerator pricing over a 3–5 year horizon, reducing the premium for advanced-node fabs. The consensus is overweight the benign path — underappreciating conversion friction for enterprise AI vendors and the timing risk embedded in fab capacity cycles.

Key Decisions for Investors

• Initiate a 12–24 month core long on TSM (size 1–3% NAV): buy equity or a LEAP call spread to cap premium. Rationale: secular capacity scarcity + pricing optionality into tight node transitions. Risk/reward: target 25–45% upside vs downside limited to exposure; hedge with a 30% notional put or reduce position if foundry utilization falls below 85% on next monthly run-rate.
• Pair trade — Long TSM / Short INTC (12 months, 1:1 dollar exposure): express structural foundry share shift and IDM execution risk at Intel. Rationale: asymmetric payoff if Intel’s node roadmap slips or market continues to favor external foundries. Risk/reward: potential 40%+ relative return if execution gap persists; stop-loss if Intel reports sustainable gross margin improvement and 2 consecutive quarters of fab utilization >80%.
• Convex growth play on PLTR (18–36 months): buy PLTR shares or 18–24 month LEAP calls and finance with shorter-dated call sales to reduce cost, OR buy stock with a protective 9–12 month put to cap downside. Rationale: high upside from enterprise embeddings but execution/monetization risk. Risk/reward: asymmetric upside (2–4x if deployment cadence accelerates) vs downside equal to protected loss/premium; trim on any sign of increased churn or lengthening deal-to-revenue conversion beyond 12 months.
• Event hedge — buy 3–9 month protection across the complex (buy a small basket of puts on TSM/PLTR equal to 0.5–1% NAV): protect against a geopolitics-driven convulsion or sudden AI hardware repricing. Rationale: export controls/geopolitical events can compress both names simultaneously. Risk/reward: small insurance cost to avoid large drawdowns (30%+); consider layering more protection if headlines intensify.