Key Points

• Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) and IBM have crushed the S&P 500's returns over the last one year, three years, and five years.

• And TSMC stock has absolutely pulverized the broader market over the 10-year period.

• Shares of TSMC and IBM are currently yielding 1.26% and 2.31%, respectively.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Artificial intelligence (AI) is the biggest secular growth trend today. The global AI market will soar from $189 billion in 2023 to $4.8 trillion by 2033 -- a 25-fold increase in a decade -- according to a recent projection by the United Nations Conference on Trade and Development.

As with technology stocks in general, the vast majority of stocks that could be considered AI stocks either do not pay dividends or pay very small ones.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

While they are relatively rare, there are some top-performing AI stocks that pay decent dividends and have a good dividend payment history. These include the world's largest semiconductor (or "chip") foundry Taiwan Semiconductor Manufacturing Corp., or TSMC (NYSE: TSM), and International Business Machines, or IBM (NYSE: IBM), one of the world's oldest large tech companies.

So, folks who like dividend-paying stocks and want to invest in AI -- forgive the cliché -- can have their cake and eat it too.

2 Top AI stocks that pay decent dividends

Company	Market Cap	Dividend Yield	Forward P/E Ratio	Wall Street's Projected Annualized EPS Growth Over Next 5 Years	5-Year Return
Taiwan Semiconductor Manufacturing	$963 billion	1.26%	24.2	22.7%	296%
IBM	$270 billion	2.31%	26.7	6.3%	223%
S&P 500	N/A	1.24%	N/A	N/A	112%

Data sources: Finviz.com and Yahoo! Finance. P/E = price to earnings. EPS = earnings per share. Data as of July 8, 2025.

TSMC: The world's largest chip foundry

Taiwan Semiconductor Manufacturing produces chips for companies that contract out all or some of the manufacturing of chips that they design. As the world's largest chip foundry, TSMC is the dominant company in the production of advanced AI chips, so it's been significantly benefiting from the growth of the AI market and should continue to benefit.

TSMC's customers includes most of the big names in chip companies -- such as Nvidia, Broadcom, and Arm Holdings. It also produces chips for big tech companies that have designed their own chips, including Apple, which is widely considered TSMC's largest customer, followed by Nvidia.

The company is off to a great start in 2025. In the first quarter, its revenue jumped 35% year over year to $25.5 billion, driven by continued strong AI-related demand. Better yet, its EPS surged 54% to $2.12. Its EPS growing faster than its revenue reflects its expanding profit margin.

On the Q1 earnings call, management reaffirmed its 2025 guidance that its revenue from AI accelerators will double year over year.

TSMC started paying cash dividends in 2004 and has never halted or reduced its dividend per share.

TSMC stock is trading at 24.2 times its forward projected EPS, which is reasonable for a stock of a company that Wall Street expects will grow EPS at an average annual rate of nearly 23% over the next five years.

IBM: Successfully transitioning to AI and other high-growth markets

IBM has been in a years-long transitioning mode, divesting of legacy businesses and investing in growth markets, notably cloud computing and AI. This transitioning resulted in its revenue declining, which in turn caused its profits and cash flows to also decrease. But Big Blue is back in growth mode.

In 2024, IBM's revenue increased 3% in constant currency to $62.8 billion, driven by a 9% rise in software revenue, offset by declines of 1% and 3% in its consulting and infrastructure segments, respectively. Adjusted earnings per share (EPS) from continuing operations was up 7% year over year. Free cash flow (FCF) rose 13% year over year to $12.7 billion.

IBM's generative AI book of business ended the year at $5 billion inception to date. (Generative AI enables users to quickly generate new content based on a variety of inputs. It's the type of AI that's largely powering the AI boom.)

The AI business is growing fast, increasing $2 billion from the third to the fourth quarter 2024. Moreover, it tacked on another $1 billion-plus in the first quarter of 2025 to bring its total to more than $6 billion. About one-fifth of this business comes from software and four-fifths from consulting, CEO Arvind Krishna said on the Q1 earnings call.

The company expects revenue growth to accelerate in 2025. For the year, it guided for annual revenue growth of at least 5% in constant currency and FCF of about $13.5 billion, or over 6% growth year over year.

IBM has a great dividend history. It's increased its quarterly cash dividend for 30 consecutive years.

IBM stock is trading at 26.7 times forward projected EPS. This might seem quite pricey for shares of a company that Wall Street expects will grow EPS at an average annual pace of 6.3% over the next five years. However, investors can expect to pay a premium for stocks of companies that have great track records of raising their dividends.

Moreover, the stock might turn out to be less pricey than it currently seems. IBM has solidly beat the analyst consensus estimate for earnings in the last four quarters, with two of the beats being quite large. Given how fast the company's AI business is growing, it could continue to solidly surpass earnings estimates.

Mark your calendars

TSMC is slated to release its Q2 2025 results before the market open on Thursday, July 17.

IBM is scheduled to release its Q2 results after the market close on Wednesday, July 23.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $980,723!*

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Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Apple, International Business Machines, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

There's no denying artificial intelligence (AI) technology has made enormous strides in just the past few years. But the businesses advancing it have still only scratched the surface of the underlying opportunity. Indeed, industry analytics outfit Precedence Research forecasts that the overall AI market will grow at an annualized pace of nearly 20% through 2034.

With that rapid-growth outlook as the backdrop, here are three of the best artificial intelligence stocks to buy right now, while they're all trading at a discount.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

1. Arm Holdings

When conversations turn to the tech companies with the biggest potential to profit from AI, Arm Holdings (NASDAQ: ARM) is one of the least frequently mentioned. Don't be fooled, though: It will play a critical role in artificial intelligence's future.

Arm is a semiconductor company -- sort of. It doesn't make chips. Rather, it designs chips and chip components, and then licenses those designs to more familiar chip companies that may use them unaltered, or modify them to suit their purposes. Those chipmakers themselves often punt their manufacturing duties to third-party foundries.

It's possible you're regularly using a smartphone, computer, or other piece of consumer technology with an Arm-based chip inside it without even realizing it, in fact. As of its most recently completed quarter, the company was generating on the order of $4 billion worth of high-margin revenue per year.

But what specifically makes Arm a great artificial intelligence stock pick (besides its 20% pullback from its February peak)?

When AI was in its infancy, the amount of electricity the hardware used wasn't much of a concern -- engineers were simply trying to figure out how to make the tech work. Now that the technology is proven and going mainstream, though, engineers are grappling with the fact that artificial intelligence platforms are very, very power hungry. According to a Goldman Sachs (NYSE: GS) study, by 2030, the ongoing growth of AI data centers will increase the amount of electrical power drawn by data centers globally by 165% compared to what it was in 2023.

It's not just data centers. The chips in AI-capable smartphones also consume an unusual amount of power, draining batteries' charges at an inconvenient rate.

Well, Arm's chip designs happen to be built from the ground up to be power-efficient. Amazon's Arm-based Graviton processor uses 60% less electricity than comparable chips; Google's Arm-based Axion chip also requires 60% less power than comparable processors.

The importance of this competitive edge isn't always prioritized in an environment where processing speed, capacity, and performance often take center stage. There's a reason, however, that Arm's revenue is expected to grow on the close order of 20% per year for the next three years despite the uncertain macroeconomic backdrop.

2. SoundHound AI

The world's earliest attempts at voice-based interfaces weren't particularly impressive. Although some of them are still around (like voice-commanded phone menus, for which the acceptable response options are fairly limited), many of the higher-level projects using this idea have since been abandoned.

Last year, for example, fast-food chain McDonald's discontinued its use of IBM's automated order-taking tech -- mostly because it never worked quite as well as hoped.

Just don't jump to sweeping conclusions about the idea based on that one decision, though. The underlying tech was actually McDonald's before it was sold to IBM back in 2021 as part of what was more of a cheap experiment than an investment in a whole new profit center that was outside of either company's wheelhouse. Something more purpose-built, atop a more advanced AI platform, could prove more successful.

Enter SoundHound AI (NASDAQ: SOUN).

As its name suggests, SoundHound makes AI-powered voice communications work as was only dreamed of just a few years ago. It has been developing its current propriety AI platform (called Houndify) since 2015, marking the point where mere speech-recognition technology became speech-to-meaning technology, and even speech-to-understanding technology. There's arguably no other player nearly as far along as SoundHound is within the voice-driven sliver of the AI market.

As evidence of this argument, several automakers are also developing their in-car assistance tech around Houndify, while credit card company Mastercard features SoundHound's tech within the automated voice-ordering solution it now offers quick-service restaurants like the aforementioned McDonald's.

It's still not quite in its prime, and many consumers remain a bit hesitant to use automated voice-based interactions for many different aspects of their daily lives. They'll likely come around, though. Market research outfit Market.us believes the worldwide voice-based AI agent market alone will expand at an average annualized pace of nearly 35% through 2034. SoundHound AI is positioned to capture much of this growth.

In fact, it already is. Its first-quarter revenue improved an incredible 151% year over year, accelerating from the 85% growth it reported for the entirety of 2024.

3. BigBear.ai

Finally, add BigBear.ai (NYSE: BBAI) to your list of no-brainer artificial intelligence stocks to buy right now.

To date, most of the market's focus in the AI-powered decision-making software space has been on Palantir Technologies.

And understandably so. Not only did the Centers for Disease Control tap Palantir for help in getting a handle on the COVID-19 pandemic, but several arms of the Department of Defense also rely on its next-generation services to solve next-generation problems. These are high-profile deals. Never even mind the fact that Palantir is the biggest name in the artificial intelligence platform business.

Investment opportunities are relative, though; small companies with lots of growth potential are still capable of producing big gains for investors. There will just be fewer shareholders experiencing them.

BigBear is one such company.

At first glance, it may appear to be a near carbon copy of Palantir. Look deeper, though. BigBear.ai is different by virtue of being largely focused on businesses rather than government institutions. Manufacturing facilities, industrial warehouses, healthcare providers, and biopharma companies are its current core target markets -- although it can and does serve some public sector clients.

Although the private sector tends to make major capital investments at a slower, more methodical pace (since their stakeholders typically require careful care of resources), it's a much bigger opportunity than the government market. That's because AI can ultimately help organizations save money, make money, or both. And of course, both are priorities within the business world.

According to a forecast by Precedence Research, the decision-making piece of the artificial intelligence industry will grow at an average annual pace of 16% per year through 2034.

That doesn't mean this AI stock will always be easy to own in the near or distant future. Not only is BigBear.ai not profitable, its fairly small size means it doesn't enjoy the benefits of scale. It also has relatively few analysts following it and directing investors' attention toward it.

If you can stomach the level of risk and volatility involved, though, this last point might help inspire you to buy: Analysts' current consensus price target of $6.63 for BigBear.ai is nearly twice the stock's present price. That's not a bad tailwind to have while starting a new investment.

Should you invest $1,000 in Arm Holdings right now?

Before you buy stock in Arm Holdings, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arm Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

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. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, International Business Machines, Mastercard, and Palantir Technologies. The Motley Fool has a disclosure policy.

Microsoft is releasing a pair of new Surface devices today, both models that undercut last year's Surface Laptop and Surface Pro on price but also take a pretty big step down in specs. One of the devices is a new 12-inch Surface Pro tablet, which we've covered in more detail here. The other is a new 13-inch Surface Laptop, whose specs and price straddle the narrow gap between the current seventh-generation Surface Laptop and the original price of the aging Surface Laptop Go 3.

The new Surface Laptop starts at $899, and preorders open today. It will be available on May 20.

The new laptop shares many specs in common with last year’s entry-level seventh-generation Surface Laptop, including an Arm-based Qualcomm Snapdragon X Plus processor, 16GB of RAM, and support for Windows 11’s expanded Copilot+ capabilities. It’s also smaller and lighter than the 13.8-inch Surface Laptop. But the CPU has eight cores instead of 10 or 12, the screen is smaller and lower resolution, and you’re more limited in your upgrade options; we’ve outlined the key differences in the table below.

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