AI Spending Could Soar to $4 Trillion: 2 No-Brainer Stocks to Buy Now (Hint: Neither Is Nvidia)

Key Points

• One of these companies recently reported a more than 600% increase in quarterly revenue.

• The other is positioned to benefit from demand for any chip -- not just Nvidia chips.

• 10 stocks we like better than Nebius Group ›

Jensen Huang, the chief executive officer of Nvidia, recently made a prediction. He said that he expects artificial intelligence (AI) infrastructure spending to soar to as much as $4 trillion by the end of the decade. As leader of the world's No. 1 chip designer and someone who maintains close communication with customers, Huang has a clear idea of what's to come in this high-growth market. So, when he speaks, investors sit up and take notice.

Trends we've seen in recent times support Huang's prediction. Companies from Meta Platforms to Alphabet have increased capital spending plans to boost this AI buildout. And chip designers as well as cloud service providers have reported increasing demand and revenue quarter after quarter.

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Though prices of these stocks have climbed, the good news is that it's not too late to add to your positions in certain players or open a new position. This infrastructure buildout suggests the momentum will keep going. Now, let's check out two no-brainer stocks to buy right now, and I may surprise you when I say I won't be talking about Nvidia. Though Nvidia is a clear AI star, the following two companies may be among the biggest winners as the general need for AI capacity soars.

1. Nebius Group

Nebius Group (NASDAQ: NBIS) offers the capacity customers so desperately need, and it's resulted in explosive revenue growth in recent times. In the latest quarter, revenue surged 625% year over year to about $105 million, and the company's AI cloud business even reached positive adjusted EBITDA ahead of its expectations.

Customers come to Nebius for access to high-powered graphics processing units (GPUs), or the AI chips necessary for key AI tasks like the training of models or inferencing -- the "thinking" process that helps the model solve complex problems.

Image source: Getty Images.

So, customers don't have to buy their own GPUs, and instead can rent this compute from the cloud services provider. This can save them both time and money. Meanwhile, customers also can opt for Nebius' managed services -- for example, MLflow for the handling of the machine-learning lifecycle. All of this makes Nebius a company that could see tremendous demand as this AI infrastructure spending phase advances.

To ensure its ability to serve demand, Nebius is ramping up and aims to add 1 gigawatt of power by the end of next year. (That's the equivalent of 100 million LED bulbs.)

The stock has soared more than 300% this year but still could have room to run as this phase of the AI boom unfolds.

2. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Company (NYSE: TSM) may benefit even more than chip giant Nvidia from the infrastructure buildout. That's because this player manufactures Nvidia's chips as well as the chips of other market giants, such as Advanced Micro Devices and Broadcom.

This means that as demand for all of those products grows, TSMC, as the world's biggest foundry, could see revenue explode higher. Since it doesn't depend on the fortunes of just one chip designer, this stock makes a great bet for investors concerned about which player will dominate in the coming years. As long as demand for AI chips continues, and there's reason to be optimistic about that, TSMC's future is bright.

TSMC also has made wise moves in recent times that should support its work in the U.S. market -- the biggest AI market globally -- and may shield it and its customers from the impact of import tariffs. The company has made enormous investments in U.S. manufacturing, and earlier this year said it would expand its investment to $165 billion to fund three new fabrication facilities, a research and development site, and two advanced packaging factories.

This chip giant in the recent quarter reported a 38% increase in revenue and said current trends suggest sustained strength in AI demand moving forward. Considering all of this, TSMC, trading at 29 times forward earnings estimates, is very reasonably priced and looks like a no-brainer buy as AI infrastructure spending heats up.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Nebius Group. The Motley Fool has a disclosure policy.