2 Stocks That Are Better Buys Than the "Magnificent Seven"

The "Magnificent Seven" cohort has been a popular investing grouping over the past few years. This group has resulted in some impressive stock gains over the past decade, and many stocks in this grouping are still quite solid investments. It's made up of:

1. Nvidia
2. Apple
3. Alphabet
4. Microsoft
5. Amazon
6. Meta Platforms
7. Tesla

However, I think investors can do better. Two stocks that aren't wildly different than the Magnificent Seven, yet have far more upside than the average member, are Taiwan Semiconductor Manufacturing (NYSE: TSM) and Broadcom (NASDAQ: AVGO). Both of these two stocks are massive beneficiaries of increased AI spending, and I think they will outperform many members of the Magnificent Seven.

If you don't own shares of these two, now is the perfect time, as each stock is well off its all-time high and looks like an incredible bargain.

Image source: Getty Images.

Taiwan Semiconductor

Taiwan Semiconductor is one of the most important companies in AI, even if it's not talked about as much as Nvidia or one of the AI hyperscalers. It's the world's largest chip foundry, and often has the best technology available. This makes it a key company to have a partnership with, as it's the go-to company when you want the best chip technology.

TSMC, as it's also known, is a chip foundry, which means it isn't designing any products; it's just manufacturing designs from other companies. Businesses like Apple and Nvidia send it their chip designs, and it manufactures them on their behalf. This also allows it to make money from competitors, as it makes chips for both Nvidia and Broadcom.

Over the next few years, Taiwan Semiconductor's management team expects strong AI growth. From the period starting in 2024 and ending in 2029, it expects AI chip revenue to increase at a mid- to high-50% compound annual growth rate (CAGR). That's huge growth, but Taiwan Semiconductor isn't only making AI chips. It expects an overall revenue growth rate of about 25% during that same time frame.

Outside of Nvidia, no other stock in the Magnificent Seven is expected to deliver that level of growth, easily making TSMC a better investment pick than most of the stocks in that group.

Broadcom

Broadcom is the new kid on the block in the AI computing unit battles, and it's already seeing monster success. Instead of offering a broad purpose GPU like Nvidia is doing, Broadcom is targeting a different segment of the market. It is partnering with AI hyperscalers to design custom AI chips that are tailored to their workload. While these aren't as flexible as GPUs from Nvidia, they can provide superior cost effectiveness compared to GPUs in some situations.

The best example of a Broadcom-designed custom AI chip is the Tensor Processing Unit from Google. These two have collaborated for years on this product, and it's one of the reasons why Google's AI models are among the best at the cheapest price tag. Over the next few years, many other generative AI firms should see their custom AI chips arrive from Broadcom. This will turn into massive sales growth that management has already informed investors about.

During its fiscal 2026's first quarter (ended Feb. 1), Broadcom's custom AI chip division generated $8.4 billion. That works out to an annual run rate of nearly $34 billion. However, by the end of 2027, Broadcom expects custom AI chips alone to be generating more than $100 billion in annual sales. That's more than a triple from today's levels, as there are several other products that are included in Broadcom's $8.4 billion Q1 total.

I think there's huge growth in store for Broadcom over the next few years, and that will make the stock perform better than every Magnificent Seven member, including Nvidia.

Keithen Drury has positions in Alphabet, Amazon, Broadcom, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.