Artificial intelligence (AI) is a game-changing technology, but it will take years, maybe decades, to change the world. This means there is still plenty of time to take advantage of AI and position your portfolio to take advantage of this new technology and its long-term implications.
We know that AI chips are powering these innovations. Future blue-chip AI stocks may 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 for decades with confidence.
1. Winner of the AI chip war
AI chips are fundamental pieces of technology, so it's hard to mention any long-term stock list Nvidia (NASDAQ: NVDA ). The company has between 80% and 90% of the AI chip market today.
Such a move is a moat in itself as competitors must now convince companies developing AI architectures to switch to their own chips.
The long-term opportunity for Nvidia is based on how big the AI chip market can still grow. Studies have seen data center demand grow in the coming years, which could grow the market to $400 billion over the next several years — many times larger than where it stands today.
What will that chip market look like in 2030, 2040, or 2050? No one knows how powerful AI can become, but we do know that more powerful AI requires better chips, and when it comes to the latest, no one has the market like Nvidia.
It's a $2 trillion company, and steady demand for AI could keep cash flow strong enough to fund years of aggressive share repurchases and dividends that line shareholders' pockets. It's hard not to like Nvidia, even if its multibagger days are over.
2. The runner-up chip company with upside
It's hard to imagine a company completely running away from such a large market. Other companies may also seek a seat at the table.
One of the other competitors is my pick. Advanced Micro Devices (NASDAQ: AMD ). AMD has proven its ability to penetrate markets with CPU footprints in personal computers and data centers against incumbents. Intel.
There is already some evidence that AMD has also found success in AI. The company recently unveiled a new generation of AI chips, which CEO Lisa Su described as technologically superior to Nvidia's popular H100 chipset.
Technology keeps moving the goalposts, but AMD was able to let the market know that it had interest from the big AI players. Microsoft And Meta platforms. With data center revenue “only” hitting $2.3 billion in the first quarter, there's plenty of room for expansion, especially if the AI chip market reaches hundreds of billions of dollars.
AMD is a much smaller company with a market cap of $250 billion, a fraction of Nvidia's size. And it may only have a small share of the AI chip market compared to Nvidia. However, that doesn't mean it can't generate impressive investment returns on its own. Consider AMD a sneaky growth candidate for decades to come.
3. Who will make these chips?
Don't assume that all these chip companies make their own products — they don't. Instead, they use companies called fabricators to make the chips for them.
Taiwan Semiconductor (NYSE: TSM ) It is the world's largest chip maker. According to Statista, TSMC, as it is also known, makes about 61% of the world's semiconductors. That means it will have the most capacity and advanced tools to build the most advanced chips needed to power the best and brightest AI applications.
Buying stock in TSMC means you don't have to care whose chips reign supreme as long as they're making them. In investing parlance, this is called a pick-and-shovel investment. This can be a great way to play an AI battle that can last for years.
The company faces some risks, mainly geopolitical concerns about China invading the country. This could mean the stock never trades at a price that reflects TSMC's growth and fundamentals.
But if you have the stomach for such risks, it would be hard to find another company as essential to AI as Taiwan Semiconductor. If peace prevails in Asia, it could be a winner for decades.
Should you invest $1,000 in Nvidia right now?
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Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Justin Pope has no positions in any stocks. The Motley Fool has positions in and recommends Advanced Micro Devices, MetaPlatforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a Disclosure Policy.
3 Artificial Intelligence Stocks to Buy Now and Hold for Decades was originally published by The Motley Fool.