AI Spending Is Set to Boom Over the Next Five Years. Here Are 3 Stocks That Will Lead the Way.
- - AI Spending Is Set to Boom Over the Next Five Years. Here Are 3 Stocks That Will Lead the Way.
Keithen Drury, The Motley FoolFebruary 2, 2026 at 5:50 AM
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Key Points -
Taiwan Semiconductor is the primary chip supplier.
Nvidia is the go-to computing unit provider.
Broadcom's custom AI chips are an emerging alternative.
10 stocks we like better than Taiwan Semiconductor Manufacturing ›
Although there are fears of an AI bubble forming, one area where that isn't happening is in the computing space. The reality is, AI hyperscalers are spending as much money as they can get their hands on to build out their computing footprint. After that's accomplished, we'll see what the true return on investment for AI spending is. It may or may not pan out.
Yet there's one thing for sure: The companies that are selling the computing equipment are bound to thrive. I think that's the best place to look for investments in the AI sector, and I've got three stocks that will lead the way.
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Engineer works in a data center.
Image source: Getty Images.
Taiwan Semiconductor
No matter where you start analyzing AI spending, nearly all roads circle back to Taiwan Semiconductor Manufacturing (NYSE: TSM). Taiwan Semiconductor is the world's largest chip foundry, and makes logic chips that power essentially every computing device used in artificial intelligence.
While there are some other foundry options, none are as large or technologically advanced as TSMC (as the company is known). With each company involved in the AI buildout pushing the limits of what's possible, it makes little sense to explore an alternative supplier, so most go with the best regardless of cost, which is why Taiwan Semiconductor has excelled as of late.
TSMC's management foresees massive AI chip demand and announced its expectation to spend between $52 billion and $56 billion on increased production capacities. CEO C.C. Wei noted that he was "nervous" about spending that much money on increasing production capacities, but after meeting with several of his clients over the past few months, he's confident in that decision. This is reflected in their long-term outlook, as they expect AI chip revenue to grow at nearly a 60% compound annual growth rate (CAGR) between 2024 and 2029.
That's unreal growth, and Taiwan Semiconductor will continue to deliver strong growth over the next few years as its chip demand increases and it launches new technologies that revolutionize the industry.
Nvidia
Nvidia (NASDAQ: NVDA) is probably the most famous name in AI, as its graphics processing units (GPUs) have nearly become synonymous with discussing AI buildouts. Nvidia's GPUs account for the majority of computing equipment filling AI data centers, and their performance is unlike anything else on the market.
Wall Street analysts expect monster growth again from Nvidia this year, projecting 52% revenue growth in FY 2027 (ending January 2027). This is expected to persist for several years, as Nvidia believes that global data center capital expenditures will rise to $3 trillion to $4 trillion annually by 2030. Considering that figure was around $600 billion in 2025, Nvidia's party is just getting started.
Broadcom
Broadcom (NASDAQ: AVGO) is taking a different approach to AI computing than Nvidia. Nvidia's GPUs are broad-purpose computing units that can handle a wide variety of workloads. However, these GPUs likely only see a handful of workload types throughout their lifespan. So, Broadcom is partnering directly with AI hyperscalers to design an ASIC, an application-specific integrated circuit. These chips are purpose-designed and built for AI workloads, and can offer better performance at a lower price tag, as long as the workload is configured correctly.
These units are growing in popularity, and Broadcom expects revenue from AI semiconductors to double during Q1. This shows huge momentum, and that will only accelerate throughout the rest of 2026 and into 2027 when more AI hyperscalers start purchasing increased quantities of these alternative computing units. Broadcom is the company to watch to take ground from Nvidia, but I think both stocks, alongside Taiwan Semiconductor, are the best ways to invest in AI right now.
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Keithen Drury has positions in Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Source: “AOL Money”
