AI Spending Could Soar 500%: 3 Brilliant AI Stocks to Buy (Hint: Not Nvidia)

Key Points

• Broadcom has a massive opportunity in custom chips.

• Inference should be a growth driver for AMD.

• TSMC is a winner regardless of which chip companies take market share.

• 10 stocks we like better than Broadcom ›

Nvidia (NASDAQ: NVDA) recently predicted that artificial intelligence (AI) infrastructure spending could rise fivefold over the next several years. While it surely will benefit, it's not the only one.

Let's look at three AI stocks set to benefit from this surge in spending and why they might be buying opportunities.

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1. Broadcom

Broadcom (NASDAQ: AVGO) has emerged as one of the most important players in AI. With large hyperscalers (owners of massive data centers) looking for alternatives to Nvidia to help reduce costs and diversify their supply chains, more and more have been turning to Broadcom to help design custom application-specific integrated circuits, or ASICs, for their AI workloads. Custom chips are generally more efficient and cheaper to operate than graphics processing units (GPUs), which is critical as inference demand takes off.

Broadcom first proved itself in this area when it helped Alphabet design its tensor processing units, which are now a key part of Google Cloud. That success led to design wins with customers like Meta Platforms and ByteDance. Broadcom management has said these three customers represent a $60 billion to $90 billion opportunity by fiscal 2027 (ending October 2027).

However, Broadcom has not stopped with those three customers, and it recently revealed that a fourth customer, widely believed to be OpenAI, has placed a $10 billion order for custom chips that will be delivered next year. While it was well known that the two companies were working together, how quickly it was able to develop the chips and have them ready for next year was a huge surprise. With OpenAI and Oracle (NYSE: ORCL) having an agreement in place to spend $300 billion on data centers over the next five years, this will be a massive opportunity for Broadcom.

2. AMD

While Broadcom looks poised to be a huge inference winner, Advanced Micro Devices (NASDAQ: AMD) is also set to benefit. Building custom AI chips involves a lot of upfront costs and takes time, and as such, they are not an option for every company. AMD, meanwhile, has carved a solid niche in inference with its GPUs, and it should also benefit as the market heads in this direction.

AMD has already been making inroads in inference. The newest version of its software platform, ROCm 7, was designed with inference in mind, and while it is not as good as Nvidia's CUDA, it is generally viewed as good enough for inference. One of the largest AI operators is already running a big portion of its inference traffic on AMD's GPUs, and seven of the top-10 AI players now use some of its hardware.

AMD and Broadcom are also a part of the UALink Consortium, which is pushing an open standard interconnect alternative to Nvidia's NVLink. NVLink has given Nvidia a big advantage, as it essentially allows its GPUs to act as a single unit. An open interconnect standard would allow customers to more easily mix and match AI chips from different vendors.

Given AMD's much smaller AI revenue base, it should have a huge opportunity as the market shifts toward inference. If it can just take a little share in this fast-growing market, the stock should have plenty of upside from here.

3. Taiwan Semiconductor Manufacturing

With AI infrastructure spending set to continue to soar in the coming years, Taiwan Semiconductor Manufacturing (NYSE: TSM) is one of the best and safest ways to play this phenomenon. The reason is that it doesn't matter who takes share in the AI chip race -- it wins regardless.

TSMC is the largest manufacturer of semiconductors in the world, serving all the top chip designers. The company has taken a huge lead with advanced chips, which need to be manufactured at smaller node sizes, referring to how many transistors can fit onto a chip. The company has become an important partner to chip companies, as rivals Intel and Samsung have struggled with yields at smaller nodes. That leaves TSMC as the only real option for producing high-performance semiconductors reliably. It also gives it strong pricing power, with reports saying it plans to raise prices by 10% next year.

TSMC expects AI chip demand to grow at an over 40% compounded annual growth rate (CAGR) through 2028. The company is already moving toward 2nm production, which will make chips even more efficient and keep it ahead of rivals. Beyond AI, autonomous driving, robotics, and quantum computing are all long-term tailwinds since they will all need advanced chips.

As such, TSMC is one of the best ways to invest in the continuing AI infrastructure spending boom.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Meta Platforms, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.