Over the next five years, investors will see much more spending on artificial intelligence (AI) than previously thought. While there are concerns about how much money AI hyperscalers are already spending, I think that amount will continue to increase.
If this were indeed the case, multiple companies would profit, i.e. NVIDIA(NASDAQ: NVDA), Broadcom(NASDAQ:AVGO), Micron(NASDAQ:MU)and TSMC(NYSE:TSM). All four companies expect to see data center spending surge.
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If spending continues to increase, as expected, all four companies will deliver big returns.
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The most common AI capex number you hear is $650 billion, but that’s only for the top four AI hyperscalers. This completely excludes some of the other large AI players, as well as many private companies that are also investing heavily in AI infrastructure, such as OpenAI or xAI. It also does not include spending in China or any other part of the world. So it’s easy to see that number approaching $1 trillion this year.
McKinsey & Company projects that cumulative AI spending will reach approximately $7 trillion by 2030, so there’s clearly a long way to go. NVIDIA’s forecasts are more aggressive, as they believe global data center capital expenditures will increase to $3 trillion to $4 trillion per year by 2030. Regardless, this is a huge amount of money being spent on AI infrastructure, and these four companies are well-positioned to capitalize on it.
From the beginning, the poster child for AI investing has been Nvidia. This makes sense, as it is the most popular provider of artificial intelligence computing units in the world.
The huge demand Nvidia is seeing isn’t going to slow down, and despite being the world’s largest company, its revenue grew 73% in the fourth quarter (ended January 25) and is expected to grow to 77% in the first quarter. Nvidia is still the leader, and everyone from AI hyperscalers to individual developers wants to be able to use Nvidia chips. That makes Nvidia one of the best options in the space, and at just 22 times forward earnings, there are few better stocks to buy right now.
Broadcom is competing with Nvidia, but not by offering its own GPUs. Instead, it works with AI hyperscalers to design its own custom AI chips. This allows end users to design chips around workloads and achieve impressive efficiencies as long as the workload is configured correctly.
These chips have their own use cases and are important, but they will never completely replace GPUs. Still, they’re carving a niche. In the first quarter of fiscal 2026 (ended February 1), Broadcom’s AI semiconductor division grew 106% to $8.4 billion. Within this sector, the AI ​​chip business grew even faster, reaching 140%.
By the end of 2027, Broadcom expects AI chip revenue to exceed $100 billion, so it’s clear that Broadcom will become an even more powerful force in AI computing in the coming years.
TSMC doesn’t care whose computing units end up being the most popular; it just wants to see AI spending increase. Since TSMC is a chipmaker, it will rise as more computing units are sold. Markets predict that AI spending will increase through 2030, so it’s perfectly positioned to take advantage of the massive spending boom.
Micron Technology is in a similar situation. It makes memory chips, and as supplies of memory chips dry up, the price of its main product is soaring. This has led to significant earnings growth for Micron Technology, but it’s not expected to slow down anytime soon.
The total addressable market for high-bandwidth memory (HBM) for AI is expected to grow from $35 billion in 2025 to $100 billion in 2028. So, just because we are facing a memory chip supply shortage now, it doesn’t mean that the situation will ease anytime in the future. This bodes well for Micron Technology stock, and it should continue to perform well over the next five years.
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Keithen Drury has worked at Broadcom, Nvidia and TSMC. The Motley Fool owns and recommends Micron Technology, Nvidia, and TSMC. “Motley Fool” recommends Broadcom. The Motley Fool has a disclosure policy.
4 Behemoth Stocks to Own for the Next 5 Years Originally published by The Motley Fool
