Key Points
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Nvidia’s GPUs have been the industry standard since the AI trend kicked off three years ago.
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Broadcom is making an alternative to Nvidia GPUs.
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Taiwan Semiconductor supplies the chips for both companies’ products.
- 10 stocks we like better than Nvidia ›
The artificial intelligence (AI) boom is far from over, and multiple companies have announced plans to increase their capital expenditures to build out more computing capacity. While some investors are growing concerned about these increased spending levels, the reality is that investors can pivot their strategy to invest in the companies that are benefiting from this buildout.
I’ve got three stocks that look like excellent buys right now, and each could see a strong finish to 2025 and have a fantastic 2026 as well.
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1. Nvidia
Nvidia (NASDAQ: NVDA) has been at the top of every AI investing list over the past three years for a good reason: It’s a primary beneficiary of the massive data center buildout trend. Its graphics processing units (GPUs) are used in nearly every data center around the world, giving it an important early move advantage.
Capturing the initial market was a big deal, as now clients have developed all of their workloads to run on Nvidia’s platforms, making switching incredibly difficult. This bodes well for Nvidia’s future, especially as capital expenditure plans ramp up.
Nvidia projects that global data center capital expenditure will rise to $3 trillion to $4 trillion by the end of 2030, which amounts to monumental growth for the company. If there’s truly that much growth left in the AI data center realm, Nvidia is a must-buy at these prices, as it will be a huge beneficiary of this massive AI spending spree.
2. Broadcom
Broadcom (NASDAQ: AVGO) is an emerging competitor to Nvidia. Instead of making broad-purpose computing units like the GPU, Broadcom is partnering with end users to develop custom accelerated computing units. These have multiple advantages over GPUs that have been used to build out the majority of the AI computing power over the past three years.
The first is cost. If you look at Nvidia’s margin profile, it’s clear that it’s making a ton of money from all of the GPUs it sells. Broadcom is partnering with end users to drive the price down, making them more attractive options than GPUs.
The second is performance. Broadcom tailors the architecture of the chip to conform to the computing workloads its clients will run, which optimizes performance. All of this comes at the cost of flexibility, as these units cannot perform the wide variety of workloads that a GPU can. Still, this is an excellent trade-off for many of the AI hyperscalers, and it will continue to grow Broadcom’s business.
While Broadom won’t replace Nvidia’s GPUs, they are a worthy competitor, and it’s a company to watch over the next few years.
3. Taiwan Semiconductor
Nvidia and Broadcom are known as fabless chip companies because they design the chips and then outsource the work to other companies that actually build the product. Taiwan Semiconductor (NYSE: TSM) is one of those companies, and it’s known to be the world’s leading chip foundry. Taiwan Semiconductor has risen to this leadership role through continuous innovation and improvement of existing technologies.
One recent innovation is its new 2nm (nanometer) chip node, which is far more energy efficient than previous generations. Compared to the 3nm chip node, it consumes 25% to 30% less power when configured to run at the same speed.
With energy consumption becoming a bottleneck for AI aspirations, this innovation will be received with open arms and will cause its clients to place this new technology in their devices at a premium price point. This will help boost TSMC’s revenue, making it a great stock to buy and hold over the next few years.
An investment in Taiwan Semiconductor is a bet that we’re going to use more advanced chips in greater quantities, which seems like a smart place to bet in today’s AI-fueled age.
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Keithen Drury has positions in Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.