Nvidia and Broadcom's computing units will power future AI models.
Taiwan Semiconductor Manufacturing makes the chips for many big tech companies.
Alphabet and Meta Platforms are slated to cash in on AI deployment over the next five years.
Although the stock market continues to hit new all-time highs, there are plenty of investment opportunities available. These picks cash in on the massive amount of money being spent on AI infrastructure, as well as other long-term AI opportunities.
The artificial intelligence investment trend is far from over, and I think these five can still crush the market moving forward.
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 »
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What good AI investment list is complete without the king of AI, Nvidia (NASDAQ: NVDA)? Nvidia has been the top AI investment pick since the arms race began in 2023 for good reason. Its graphics processing units (GPUs) have been the gold standard to build AI models on, and management sees massive growth in the future.
During its Q2 conference call, Nvidia revealed that it expects the AI hyperscalers to spend around $600 billion on data center capital expenditures this year. With Wall Street estimating Nvidia's revenue will be $206 billion for its fiscal year, it's safe to estimate that Nvidia gets about a third of that spending.
However, management also projects that global data center capital expenditures could reach $3 trillion to $4 trillion by 2030, indicating that Nvidia may reach $1 trillion in sales. If that's the case, Nvidia is a no-brainer buy right now.
Broadcom (NASDAQ: AVGO) is also vying for a piece of that pie. While GPUs are fantastic at performing all types of calculations, if a computing unit is only going to do one task during its serviceable life, then a GPU might be overkill. Instead, Broadcom is developing custom AI accelerator chips (which it calls XPUs) in tandem with the end user. This allows the customer and Broadcom to design the chip with the workload in mind, providing customers with more performance at a lower cost.
Momentum in this area is growing, as Nvidia's GPUs are incredibly expensive. While this isn't a sign that Nvidia's sales are going to tumble off a cliff, future AI spending may shift more toward purpose-built chips, which benefits Broadcom over the long run.
Neither Broadcom nor Nvidia can fabricate their own chips. Instead, they outsource that work to Taiwan Semiconductor Manufacturing (NYSE: TSM), the world's leading chip foundry. TSMC makes chips for nearly every big tech company around the world, and it has locked in that client base thanks to its top-notch execution and continuous innovation.
The company is slated to continue growing as long as we're using more technology and more advanced versions of it. This is a pretty safe bet, making Taiwan Semiconductor a safe and surefire investment too.
Switching more toward the application side, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has gone from a disappointment in the AI world to a leader in no time. Its generative AI model, Gemini, emerged as one of the best, despite being late to launch at the start of the AI arms race. Gemini has also been integrated into Alphabet's cash machine, the Google search engine, allowing this platform to modernize.
A huge concern with Alphabet was how its primary business would fare in the age of AI. With the seamless integration of AI search overviews, this will likely be enough AI horsepower to convince the masses to continue using Google. As a result, Alphabet's long-term future is secured, making it a strong investment now.
Meta Platforms (NASDAQ: META) has been a big spender in the AI arms race. It's developing AI capabilities for its social media platforms, like Instagram and Facebook, so its dominant ad business can continue growing. Meta is heavily investing in tools that create ads that perform better, along with technology that keeps users on the platform longer, allowing its ad revenue to rise.
Furthermore, Meta recently announced its AI glasses, which could open up a new revenue stream for the company. Even if these flop, Meta's advertising business is rapidly growing (it rose 22% last quarter), making it a solid investment pick right now.
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Keithen Drury has positions in Alphabet, Broadcom, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.