Artificial intelligence (AI) is a game-changing technology, but it will take many years, perhaps decades, to change the world. This means there is still time to position your investment portfolio to benefit from AI and reap the benefits of this new technology and its long-term impact.
We know that AI chips power these innovations; Blue chip AI stocks of the future could depend on this need for AI chips and which companies come out on top. Here are some AI chip stocks you can buy today and hold with confidence for decades.
1. Winner of the AI chips battle
AI chips are the building blocks of Technologyso it's hard to mention any long-term stock list without starting with it Nvidia (Nasdaq: NVDA). The company has between 80% and 90% of the AI chip market today.
Such a head start is a moat in itself, because competitors must now convince companies building AI architecture to switch to their chips.
Nvidia's long-term opportunity depends on how big the AI chip market can get. Studies see an increase in demand for data centers over the coming years, which could lead to the market size increasing to $400 billion over the next several years – many times what it is today.
What will the chip market look like in 2030, 2040 or 2050? No one knows how powerful AI is, but we do know that more powerful AI requires better chips, and no one corners the market like Nvidia when it comes to cutting-edge technology.
It's a $2 trillion company, and continued demand for AI could keep cash flow strong enough to fund years of aggressive stock buybacks and dividends that line shareholders' pockets. It's hard not to like Nvidia, even if it is multibagger The days are over.
2. Runner-up chip company with upside
It's hard to imagine a single company completely escaping such a large addressable market. Other companies can find a seat at the table, too.
My choice for one of the other competitors is Advanced micro devices (NASDAQ:AMD). AMD has proven its ability to penetrate markets by establishing a CPU foothold in PCs and data centers against incumbents. Intel Corporation.
There is already some evidence that AMD has also achieved success in artificial intelligence. The company recently unveiled a new generation of AI chips, which CEO Lisa Su described as technically superior to Nvidia's popular H100 chips.
Technology continues to move the needle, but AMD has been able to let the market know that it has received interest from major players in the AI space Microsoft And Meta platforms. With data center revenue reaching “just” $2.3 billion in the first quarter, there is plenty of room for expansion, especially if the AI chip market grows into the hundreds of billions of dollars.
AMD is a much smaller company with a market cap of $250 billion, a fraction of Nvidia's size. It may only get a small portion of the AI chip market compared to Nvidia. However, this does not mean that it cannot generate excellent investment returns in its own right. Consider AMD as a sneaky candidate for growth in the coming decades.
3. Who will build these chips?
Don't assume that all of these chip companies make their own products, they don't. Instead, they use companies called manufacturers to manufacture chips for them.
Taiwan Semiconductor Co., Ltd (NYSE: TSM) It is the largest chip manufacturer in the world. According to Statista, TSMC, as it is also known, builds approximately 61% of the world's semiconductors. This means it will have the most advanced capabilities and tools to build the cutting-edge chips needed to run the best and brightest AI applications.
Buying shares in TSMC means you don't need to care whose chips prevail as long as they build them. In investing vernacular, this is called pick-and-shovel investing. This could be the smart way to fight an AI war that could last for years.
This company faces some risks, primarily geopolitical concerns about China invading the country. This could mean that the stock is never trading at a valuation that reflects TSMC's growth and fundamentals.
But if you have the audacity to take such risks, it will be difficult to find another company as important to AI as Taiwan Semiconductor. This could be a winner for many decades if peace continues in Asia.
Should you invest $1,000 in Nvidia now?
Before you buy shares in Nvidia, consider the following:
the Motley Fool stock advisor The analyst team has just defined what they think it is Top 10 stocks Let investors buy it now… and Nvidia wasn't one of them. The 10 stocks that made this cut could deliver massive returns in the coming years.
Think when Nvidia I prepared this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $566,624!*
Stock advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. the Stock advisor The service has More than four times The return of the S&P 500 since 2002*.
*Stock Advisor returns as of May 13, 2024
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Justin Pope He has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long $45 January 2025 calls on Intel, long $395 January 2026 calls on Microsoft, short $405 January 2026 calls on Microsoft, and short $47 calls US May 2024 on Intel. The Motley Fool has Disclosure policy.
3 AI stocks you can buy now and hold for decades Originally published by The Motley Fool
