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2023 has come and gone, leaving the stock market's tech sector buzzing with the promise of artificial intelligence (AI) technology. Some stocks have skyrocketed in response to the AI-based sea change, but a few were left behind -- and not always for good reason.

Three of The Motley Fool's top tech experts got together to share their most affordable AI plays in this market. Read on for the straight dope on their clear-eyed picks: Taiwan Semiconductor Manufacturing (TSM -1.25%), Amazon (AMZN -0.45%), and Applied Materials (AMAT 0.39%). All three are trading significantly below their all-time highs of 2021, and they are hungry for a comeback in 2024 and beyond.

Anders Bylund (Taiwan Semiconductor): Semiconductor-making giant Taiwan Semiconductor Manufacturing (often called TSMC) has been through a lot in the last couple of years, and most of the changes have been helpful.

Granted, the sailing wasn't all smooth. Intel's unexpected entrance on the third-party manufacturing stage added new headwinds to TSMC's business. Ongoing political tensions between China and America don't help either, though the company is working around the problem by positioning new facilities far away from the Chinese sphere of influence, such as Arizona.

But I'm still talking about a dominant player in an important industry, with tremendous growth prospects as the world economy wriggles out of the inflation-tinted straitjacket it donned in 2021. Taiwan Semiconductor's stock trades at merely 15 times forward earnings and 8.4 times sales. Share prices stand approximately 20% below their all-time highs, recorded in February of 2021 and again in January 2022.

I've been a fan of Taiwan Semi and its stock for decades. The company never ceases to surprise me with its iron-fisted grip on the chip-making market and terrific financial results. The stock has gained roughly 1,000% since I first looked into it in 2006, quadrupling the returns of the S&P 500 market index over that span -- and after all that, TSMC's stock still looks affordable and poised for further growth right now.

The chip industry should experience a glut of orders as companies of every stripe search for a foothold in the explosive AI industry, keeping TSMC's production lines more than busy for years to come. So I highly recommend grabbing a few TSMC shares before the stock price takes off again.

Nicholas Rossolillo (Amazon): Many investors found solace after the bear market with a "flight to safety" to the so-called "Magnificent Seven" stocks: Big tech platforms that kept growing and outperformed the market overall in 2023.

However, not all the Mag7 have been all that magnificent in recent years. Take Amazon, for example, which remains nearly 20% down from the all-time highs last set in late 2021.

I believe 2024 could be the year Amazon finally achieves those peaks again. The e-commerce and cloud computing leader is in the midst of a multiyear process of right-sizing its operations to boost profitability. In e-commerce, it's been filling its distribution centers with robotics for years. And in a further push to monetize its marketplace, Amazon has been rolling out advertising features for third-party merchants. Amazon already optimizes ads using AI, and late in 2023, it introduced AI-generated images for its marketers to use for promoting products.

And on the cloud computing side (where Amazon Web Services is still the cloud market leader), Amazon has reported that its customer spending seems to be solidifying after a year of trying to cut costs and conserve cash. And though it was late to the generative AI party, Amazon Web Services has been installing Nvidia GPUs into its data centers as well to keep pace with the times.

Indeed, even outside research indicates that the cloud market is poised for a monster year in 2024. Tech researcher Gartner thinks global cloud spending will rise 20% this year to around $680 billion. That could be a portent of good things to come for Amazon stock.

Amazon currently trades for about 28 times Wall Street analysts' expectations for 2024 free cash flow -- which implies this profit metric could skyrocket about 50% this year as Amazon's optimization work starts to pay off. I remain a buyer of Amazon stock at these levels.

Billy Duberstein (Applied Materials): Applied Materials is only about 10% below its late 2021 highs, but look for this all-star semiconductor leader to break that resistance level and eventually move higher.

Applied's business has a terrific combination of growth, profitability, and shareholder returns that should allow it to compound earnings well into the future. And compound earnings is the recipe for eventual new highs in the stock market.

Applied's great financial characteristics come from it being the most diversified semiconductor equipment company in the world, with leadership in several key technologies spanning leading-edge chips, lagging-edge specialty chips, and memory.

That diversification was on full display over the past year, when Applied's leading-edge and memory equipment sales went into a downturn. However, sales of lagging-edge specialty equipment usually used for producing auto and industrial chips remained strong. So while front-end wafer fab equipment is projected to decline about 15% in 2023 according to industry group SEMI, Applied actually managed to grow its semiconductor equipment sales 4.8% in its last fiscal year.

While impressive, some investors believe the previously strong industrial and auto sectors are now going into their downturn, so Applied's stock has plateaued a bit in recent months. But Applied's leading-edge tools, especially for AI chips and high-bandwidth memory, should get a boost in the near future.

In a recent analyst note last week, analysts at Keybanc Capital markets boosted their outlook for several AI-related stocks based on current channel checks. While Applied wasn't one of the stocks upgraded, its leading-edge tools do help produce the chips from each of the three stocks highlighted. So leading-edge tool growth should offset any weakness in the specialty sector. That's especially true as IDC projects the overall semiconductor market to bounce back with 20% growth in 2024.

Moreover, Applied isn't resting on its laurels. It's a forward-thinking company perpetually looking for new growth avenues and the next major technology breakthrough. For instance, the company is currently looking to apply its atomic-level manufacturing talents to augmented reality. This past week, Applied and Alphabet (GOOG -0.10%) (GOOGL -0.20%) announced a collaboration for multiple generations of Google's new lightweight augmented reality glasses platform. And last year, Applied announced it would be investing $4 billion in its groundbreaking EPIC R&D center. The EPIC center will be a nexus of collaboration between university researchers, Applied, and the company's chipmaking customers to speed up the pace of innovation.

Applied's profitability allows it to invest in new ventures like these, somewhat future-proofing its business, all while returning capital to shareholders via buybacks and a rising dividend. It shouldn't stay below its all-time high much longer.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Amazon, Intel, and Nvidia. Billy Duberstein has positions in Alphabet, Amazon, Applied Materials, and Taiwan Semiconductor Manufacturing. His clients may own shares of the companies mentioned. Nicholas Rossolillo has positions in Alphabet, Amazon, Applied Materials, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Applied Materials, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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