Many investors are watching large tech companies invest massive capital into artificial intelligence (AI) infrastructure. The big question is when, or even if, there will be an adequate return on those investments.
There are even concerns that massive capital allocation plans already announced may be cut or pushed out. But there are more and more signs that spending is continuing and even accelerating. If that indeed remains true, two of the biggest beneficiaries of that spending are no-brainer stocks to buy right now.
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“A ton” of AI data center demand
Currently, one of the main recipients of that capital is Nvidia (NVDA -0.62%). Its high-end chips are filling server stacks in many data centers being built globally. As a result, the AI boom has been of game-changing benefit to Nvidia and its investors. The stock has been under pressure, though, as questions surface about demand from a slowdown in AI infrastructure spending, and regulatory headwinds in the form of export restrictions.
The concerns related to capital spending may be overblown. Jonathan Gray, chief operating officer of asset manager Blackstone, recently told CNBC: “I think this trend is powerful. I think it will continue…overall, we still see a ton of demand.” That’s great news for Nvidia investors and supports what large Nvidia customers like Meta Platforms, Microsoft, and Amazon have been saying about maintaining, or even growing, their capital spending plans.
Export curbs could be more problematic for Nvidia. Management already said Nvidia plans to take $5.5 billion in charges after the Trump administration declared limits to exports and required licensing for Nvidia’s H20 AI chip sales to China. That chip was a modified product created specifically to comply with previous regulations for China shipments.
The China picture might be improving
China is an important market for Nvidia. Concerns surrounding that business are a big reason why Nvidia shares have declined this year. Sales there represented 13% of total revenue last year. That was down from 17% in the prior fiscal year, though, showing that Nvidia isn’t overly reliant on Chinese customers.
Recent reports say that President Donald Trump may even be ready to relax AI chip export curbs, too. Just as Biden-era export restrictions are getting ready to go into effect, Trump reportedly will overturn those rules. Potential rules and regulations going forward remain unclear, but the effect on Nvidia’s business may already be priced into the stock.
The takeaway is that investing in the AI leader should still make sense, especially as the stock has pulled back this year. With Nvidia’s business still flourishing, investors could also look to its biggest supplier for a winning investment right now.
Another global AI leader
Taiwan Semiconductor (TSMC) (TSM 0.87%) also considers Nvidia one of its most important customers. TSMC supplies semiconductor products, including microprocessors, graphics processing units (GPUs), microcontrollers, and other specialty and advanced technology packages. Nvidia is one of several big tech companies reliant on TSMC, but the Taiwan-based company has a diverse customer base. It supplied products to more than 500 customers last year.
Demand for its services is surging. Revenue soared 42% in the first quarter, and profits surged even more. Net income and diluted EPS (earnings per share) soared 60% year over year. That rapid growth is expected to continue. Management expects year-over-year revenue to jump another nearly 40% in the current quarter.
Yet, as with Nvidia, investors have pushed TSMC shares down by more than 10% year to date. That’s led to a very desirable valuation. The stock now trades at a forward price-to-earnings ratio below 20.
Nvidia and TSMC stocks have both been beaten down due to concerns about slowing growth. Yet based on customer demand and tech companies’ recent comments, the rise in AI development has not become a bubble. Even if capital spending on data center buildouts does slow, that doesn’t present the full picture either. AI also includes software that is likely going to run in almost every device for both consumers and many enterprises.
Taking that broader view should make most investors comfortable owning both Nvidia and TSMC at recent valuations.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Howard Smith has positions in Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Amazon, Blackstone, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
