Key Points
Nvidia is the world’s premier GPU designer.
Taiwan Semiconductor’s chips power countless products.
ASML is a key supplier of machines used in chip fabrication.
10 stocks we like better than Nvidia ›
Many investors today are focused on companies participating in the artificial intelligence (AI) trend, and among the more popular ones are those in and connected to the chip industry. These are the businesses that are making money from AI right now as AI hyperscalers and cloud infrastructure providers are rapidly building out their capacity to support AI training and inference.
Even though many chip stocks have undergone massive growth over the past few years, I think their futures are still incredibly bright. In particular, I think these three are still no-brainer buys right now.
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Nvidia
Nvidia (NASDAQ: NVDA) is a fabless chip company — it designs chips, but doesn’t fabricate them internally. Instead, it farms out the manufacturing work. Its most in-demand products are its graphics processing units (GPUs), which have become the primary computing unit for AI, primarily because, as parallel processors, they are ideally suited to handle the types of computing tasks AI systems perform. Further, GPUs can be connected in clusters to amplify this effect.
Over the past few years, Nvidia has delivered impressive and fairly steady sales growth on a dollar basis, although on a percentage basis, that growth rate has naturally moderated a bit lately.
NVDA Revenue (TTM) data by YCharts
Still, 69% revenue growth is nothing to be disappointed about, and the 50% growth that management is projecting for Q2 is also impressive considering Nvidia’s sheer size.
Some investors may be worried that demand for its chips may slow, but projections from the AI hyperscalers — its largest customers — indicate that 2026 will be another record year for capital expenditures, which bodes well for Nvidia. Additionally, under a deal President Trump announced Monday, Nvidia will receive a license to export its H20 chips to China, in exchange for which the company will pay the U.S. government 15% of the revenues from those chips. With the U.S. imposing restrictions on the sales of top-of-the-line, cutting-edge chips to China, the H20 was designed specifically to be somewhat less powerful, and thus exportable without running afoul of Washington’s trade policy.
Although over the long term, Nvidia has been one of the best-performing stocks of all time, it still has plenty of room to continue growing at a rapid pace, making it a great stock to buy now.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor (NYSE: TSM) is Nvidia’s chip fabricator, but it also produces chips for other tech giants like AMD (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), and Apple (NASDAQ: AAPL). Its manufacturing technology is second to none, and it has become the leading semiconductor foundry worldwide.
While some may be concerned that its headquarters are so close to mainland China, on an island that the government in Beijing still lays claim to, Taiwan Semiconductor is working to diversify its production away from Taiwan by building fabrication facilities worldwide. Its biggest investments of this type are in the U.S., where it plans to spend $165 billion on expanding its facilities in Arizona.
Management sees strong growth in demand for its services for the foreseeable future: It expects its AI revenue will grow at a 45% compound annual rate over the next five years, and projects that total revenue will increase at a 20% compound annual rate. Strong growth like that should allow Taiwan Semiconductor to remain a market-beating stock.
ASML
ASML (NASDAQ: ASML) is a critical supplier of tools for the chip industry. It has a technological monopoly on extreme ultraviolet (EUV) lithography machines, which are irreplaceable in the production of cutting-edge chips. These machines lay the microscopic electrical traces on chips, and ASML’s technology allows fabricators to make smaller transistors and other components — and thus denser, more powerful chips.
With ASML being the only company in the world able to build EUV lithography machines, any time you hear about new production facilities for high-end chips being built, you can assume that ASML is benefiting. However, because it’s based in the Netherlands, any ASML machine coming into the U.S. will be subject to tariffs, which management noted is making it difficult to make sales and earnings forecasts for 2026. However, on its second-quarter earnings call, management reaffirmed its longer-term 2030 guidance for revenues of 44 billion euros to 60 billion euros, indicating it expects the turbulence to be a short-term phenomenon.
ASML’s technological moat is currently unassailable, and the company is a key partner for chip producers worldwide. As long as demand for cutting-edge silicon continues to rise over the long term, so will ASML’s stock, making it a no-brainer buy today.
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Keithen Drury has positions in ASML, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
