Companies from Meta to Alphabet have recently increased spending forecasts.
The artificial intelligence (AI) boom has been going strong for the past few years as companies aim to apply the game-changing technology to their businesses. Excitement is high because AI could transform processes in offices, factories, and across delivery networks just to mention a few examples. AI also is leading to innovations in industries from pharmaceuticals to automotive, with companies aiming to create life-saving drugs and the safest and most efficient self-driving vehicles.
All of this could generate enormous revenue gains and cost savings for companies across industries. So, it’s not surprising that the world’s biggest tech players are pouring investment into this high-potential area. Meta Platforms and Alphabet both lifted capital spending forecasts in their recent earnings calls, citing ongoing investment in AI infrastructure. And Nvidia (NVDA -0.24%) chief Jensen Huang predicted the AI buildout could be worth $3 trillion to $4 trillion by the end of the decade.
Two semiconductor stocks in particular stand to gain the most from this spending boom. Let’s check them out.
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1. Nvidia
Nvidia is the world’s No. 1 designer of graphics processing units (GPUs), the chip needed to drive key AI tasks — but the tech giant hasn’t stopped there. It’s also developed an entire array of AI products and services to suit the needs of any customer, from the big tech player to the small start-up. So Nvidia is positioning itself to be the “go to” destination for companies as they set off on the AI path.
Though Nvidia serves a wide variety of AI players in the market, it’s important to note that a great deal of its sales comes from technology giants such as Meta, Alphabet, and Microsoft. Though Nvidia doesn’t name its biggest customers, these players each have publicly spoken of their relationship with Nvidia — and each of these companies is spending big on AI. For example, Meta predicts $66 billion to $72 billion in capital spending this year, and much of this investment will support AI buildout.
These technology powerhouses aim to build the best AI platforms and do so in the most efficient manner, and today, the company offering chips and related products and services to do so is Nvidia. In the latest quarter, Nvidia reported double-digit revenue growth and called demand for its latest chip Blackwell Ultra “extraordinary,” so it’s clear tech giants continue to flock to this AI leader. And Nvidia’s plan to update its chips annually should keep this trend going.
All of this means, as the AI buildout continues toward potentially $4 trillion, Nvidia is likely to be one of the biggest winners.
2. Taiwan Semiconductor Manufacturing
Nvidia may design chips, but to bring those chips to market, it relies on Taiwan Semiconductor Manufacturing (TSM 1.34%). And so do many other companies, from Advanced Micro Devices to Broadcom. In fact, TSMC produces about 90% of today’s advanced chips, according to an article in Wired. Therefore, the chip manufacturer benefits not only from Nvidia’s strength, but from every chip designer’s growth during this AI boom.
On top of this, TSMC is taking steps to invest more in U.S.-based production, a move that should shield the company and its customers from import tariffs down the road. TSMC this year announced $165 billion in investment in chip manufacturing in the U.S. — this includes the development of six advanced wafer production fabs in Arizona, two packaging fabs, and a research and development center. The first fab already is producing at volume, construction of the second fab is complete, and construction of the third has started. These moves should streamline the process of working with U.S. chip designers and help TSMC keep up with demand as infrastructure spending increases.
The chipmaker has a solid earnings track record, generating double-digit growth quarter after quarter, and in its recent earnings report said it expects ongoing strength in AI demand — this is as both companies and countries increase their spending on chips and related products and services. All of this bodes well for TSMC, making it a fantastic stock to buy and hold throughout the AI revolution.
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, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
