Key Points

• Nvidia's data center revenue hit $39.1 billion in Q1 FY26 alone, with Blackwell shipments ramping and Rubin systems coming before 2028.

• AMD and Intel are winning share at the margins but can't break Nvidia's CUDA ecosystem and supply chain advantages by 2028.

• Even with a potential government stake in Intel, the AI infrastructure buildout measured in trillions supports Nvidia's pricing power through the decade.

• 10 stocks we like better than Nvidia ›

Wall Street is increasingly wary of growing competition in the artificial intelligence (AI) chip market. While Nvidia (NASDAQ: NVDA) continues to dominate with more than 80% of the AI training and deployment market, rivals are starting to score meaningful design wins. Advanced Micro Devices (NASDAQ: AMD) has secured adoption of its MI300X chips at Meta Platforms, Microsoft, and OpenAI. Meanwhile, Intel (NASDAQ: INTC) is in talks with the U.S. government about potential investment support to accelerate its manufacturing and foundry expansion.

Bears argue that Nvidia's market share is unsustainably high, especially in an industry prone to disruption, but that view misses the bigger picture. The AI hardware market is growing from hundreds of billions into the trillions, so even a smaller share of a much larger pie can drive enormous profit. More importantly, Nvidia retains a full-stack advantage that integrates hardware, Compute Unified Device Architecture (CUDA) software, ecosystem support, and developer adoption, creating a moat competitors have yet to match.

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Image source: Getty Images.

The trillion-dollar tailwind nobody's calculating correctly

Forget the hand-wringing about market saturation. The numbers tell a different story. The big four hyperscalers alone are on track to spend $300 billion on AI infrastructure in 2025, according to Morgan Stanley. Backend AI network switching, a direct proxy for graphics processing unit (GPU) cluster scale, will top $100 billion between 2025 and 2029, per Dell'Oro Group. Omdia forecasts that the cloud and data center accelerator market will reach $151 billion by 2029, with growth merely moderating, not reversing, after 2026.

Nvidia's first-quarter results of fiscal 2026 put this opportunity in perspective. Total revenue hit $44.1 billion for the quarter, with data center revenue alone generating $39.1 billion. That's not a typo -- $39.1 billion in three months from data centers. At this scale, even if Nvidia loses 10 points of market share, the absolute dollar opportunity keeps growing. When your addressable market is expanding by hundreds of billions annually, you don't need a monopoly share to compound revenue.

The moat everyone underestimates

Nvidia dominates not because it builds the fastest chips but because it owns the stack. CUDA has become the default environment for training large models, anchoring developers, frameworks, and tooling to Nvidia's ecosystem. NVLink and NVSwitch give its GPUs the ability to communicate at bandwidths PCI Express cannot match, allowing training to scale seamlessly across entire racks.

Upstream, the bottlenecks are even more decisive. Advanced packaging capacity for CoWoS at Taiwan Semiconductor is limited, even with output expected to roughly double in 2025 and expand again in 2026. Industry reports indicate that Nvidia has secured the majority of that allocation, leaving rivals with less room to ship at scale.

High-bandwidth memory is the second choke point. SK Hynix remains Nvidia's lead supplier, with Micron and Samsung Electronics still ramping up capacity. Priority access to next-generation High Bandwidth Memoty nodes ensures Nvidia's accelerators hit volume while others wait in line.

This combination of software lock-in, interconnect scale-out, and privileged supply allocation is not a fleeting edge. It is a structural moat measured in years. Even if competitors design strong alternatives, they can't reach meaningful volume without access to these same resources. That's why Nvidia's premium valuation is not just about market share. It's about owning the rails on which the AI economy runs.

Why AMD and Intel can't break the kingdom

AMD is real competition -- let's not pretend otherwise. Azure's ND MI300X instances are generally available, Meta publicly uses MI300-class chips for Llama inference, and OpenAI has signaled it will use AMD's latest chips alongside others.

ROCm 7 and the AMD Developer Cloud have genuinely improved software support. But here's the reality check: AMD's entire data center revenue was $3.2 billion last quarter, driven largely by EPYC central processing units, not GPUs. Nvidia does that in about a week.

AMD wins on price-performance for specific workloads, especially inference. It gives hyperscalers negotiating leverage and caps Nvidia's pricing at the margin. But breaking CUDA's gravity requires more than competitive hardware -- it needs a software revolution that won't happen by 2028.

Intel's situation is even more interesting with reports that the Trump administration is considering a government stake. If that happens, Intel gets cheaper capital, stabilized fabs, and preferential treatment for government contracts.

But it doesn't solve CUDA lock-in, NVLink scale, or Nvidia's platform cadence. Gaudi 3 is shipping through Dell Technologies' AI Factory and IBM Cloud, targeting better price performance than H100 on selected workloads. But it's still behind H200 and Blackwell in absolute performance and ecosystem support.

The path to 2028

The base case through 2028 is straightforward: demand growth plus platform innovation keep Nvidia atop training workloads while AMD and Intel expand as cost-optimized alternatives. Nvidia maintains 70% to 80% share in training and loses some inference share to cheaper alternatives but grows absolute revenue on market expansion. The bears worry about customized chips, power constraints, or supply shocks, but none of these threats materialize fast enough to derail the story before 2028.

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George Budwell has positions in Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, International Business Machines, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short August 2025 $24 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Chip fabricators use ASML's machines.

• Management sees strong growth through 2030.

• These 10 stocks could mint the next wave of millionaires ›

A handful of companies have technological monopolies on some of the world's most important devices. Investing in these companies is a genius move, as they are vital.

One of them, in the artificial intelligence (AI) realm, is ASML (NASDAQ: ASML). ASML makes extreme ultraviolet (EUV) lithography machines used in the chip manufacturing process. Without ASML, the advanced chip technology used today wouldn't be possible. As a result, it's one of the most important companies in the world.

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However, ASML's stock is flat year to date and down around 35% from its all-time high. With other tech giants constantly hitting new all-time highs in the current market, is ASML well positioned to do the same?

Image source: Getty Images.

ASML's machines are used by foundries worldwide

ASML's technology is vital for cutting-edge chip fabricators. The chip foundry industry has only three major players: Taiwan Semiconductor, Intel, and Samsung. Taiwan Semiconductor has been the biggest winner by far and is constructing new fabrication facilities worldwide to meet rising chip demand, driven by AI, including a $165 billion investment in the U.S. alone. Demand for ASML machines is mainly coming from Taiwan Semi, because the other two have been losing business.

It's no secret that Intel's foundry business has struggled. It's currently losing money, and Intel's CEO has indicated that it isn't willing to invest heavily in the business in an attempt to revitalize it. It will invest in capacity only if it can find a customer first.

Considering Intel's poor track record in the foundry business recently, this is a terrible idea, as Intel needs to showcase its prowess before it can take such an approach. Intel's business will likely continue to deteriorate, which causes a headwind for ASML amid less demand for its cutting-edge machines.

Samsung isn't seeing as much success as TSMC, but it's also not struggling like Intel. Samsung has invested in new plants and recently partnered with Tesla to produce its AI6 chips. This partnership could cause increased demand, leading to more ASML machines being purchased.

With some of ASML's major customers not needing the capacity and TSMC, which is known for pushing ASML's machines to their technological limits, sometimes reluctant to upgrade them, the future isn't as bright for ASML as one might expect.

This pessimism showed up in ASML's financial results. Before Q2 earnings, management was adamant that 2026 would be a growth year, just as it had expected 2025 to be. Now management is taking this stance: "While we are still preparing for growth in 2026, we cannot confirm it at this stage."

That's concerning for investors, which is why ASML's stock has done so poorly. However, the outlook beyond 2026 is still bright, and long-term investors (those willing to hold for at least five years) should still be excited about the stock.

ASML's long-term outlook is still intact

One of the reasons ASML gave that 2026 might not be a growth year was uncertainty about tariffs. ASML is based in the Netherlands, so it is a potential target of U.S. tariffs. Management's commentary regarding 2026 was given before the U.S. and European Union reached a trade deal, so this outlook may shift now that a trade deal framework has been reached.

Regardless, management's long-term outlook of revenue between 44 billion euros and 60 billion euros by 2030 hasn't shifted, so whether the growth comes in 2026 or beyond is irrelevant as long as you're patient.

Over the past 12 months, ASML's revenue totaled 32.2 billion euros, so ASML's revenue could come in at the high end of the projection over the next five years. If it does, there's no doubt that ASML will be a market-crushing stock.

If ASML's revenue comes in on the lower end of that guidance, though, ASML's returns could lag the market's, making it a poor stock pick. Time will tell which of these paths ASML's stock takes, but considering the sheer demand for chips and the stabilization of trade relations, I think it's likely that ASML will come in on the high end of that range, making it an excellent stock to buy today.

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Keithen Drury has positions in ASML, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has positions in and recommends ASML, Intel, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• TSMC has become the undisputed foundry leader.

• This essentially makes it the arms dealer in the AI chip battle, making it a winner no matter who comes out on top.

• The company could be one of the biggest beneficiaries of autonomous driving as well.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Taiwan Semiconductor Manufacturing (NYSE: TSM) may not design artificial intelligence (AI) chips, but it's a company that every AI chipmaker relies on. The AI giants rely on TSMC to manufacture their number-crunching chip designs. That's why TSMC is the safest long-term play in the AI infrastructure space.

Let's look at what makes the company so special.

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The foundry leader

TSMC is the world's most advanced semiconductor foundry, and it counts the world's leading chip designers among its top customers, including Nvidia, Advanced Micro Devices, Broadcom, and Apple. It has the scale and technological leadership that rivals can't match. Intel has been burning cash trying to establish its foundry business, while Samsung's yield issues continue to be an issue. That has given TSMC a huge market share lead in the advanced node market, and it's not particularly close.

Nodes refer to the size of the transistors used on a chip, measured in nanometers. The smaller the node, the more transistors can be packed onto the chip, which boosts performance and power efficiency. Smaller nodes are becoming a bigger part of TSMC's mix. Chips made on 7nm and smaller nodes made up 73% of its revenue in the first quarter, up from 65% a year ago. Its 3nm node accounted for 22% of revenue, and Apple has booked much of its 2nm supply for future products. Even Intel has been using TSMC's 3nm tech for some of its most advanced chips. That says a lot.

TSMC's clear leadership in the space has also given the company strong pricing power. Between increasing demand and higher prices, this is driving both strong revenue growth and improved gross margins. Last quarter, its revenue jumped 35% to $25.5 billion, led by growth in high-performance computing (HPC). That continued in Q2, with the company reporting preliminary revenue growth of 39% to $31.9 billion, as estimated by Reuters.

Margins remain strong despite new fabs ramping. Gross margin rose 190 basis points to 58.8% in Q1 despite its Arizona and Japan fabs still ramping up and weighing on profitability. TSMC expects these newer facilities to dilute margins by 2 to 3 percentage points this year, but the company is already raising prices to offset the pressure. According to reports, TSMC will increase AI chip prices this year, with Arizona-made chips potentially commanding a 30% premium.

TSMC's business risks

TSMC is not entirely without risks. Geopolitical tensions around Taiwan will always be part of the story, and it's not immune to tariffs and policy shifts in the U.S. However, TSMC is already addressing both by expanding its footprint globally. The company has been building new fabs in the U.S., Japan, and Europe in partnership with its largest customers.

However, what makes TSMC the safest AI semiconductor stock is its position in the semiconductor value chain. It ultimately doesn't matter which company wins the AI chip race. TSMC's success is tied to overall AI chip demand, not any one company's products.

AI chip demand isn't slowing down, either. TSMC previously projected AI-related revenue to grow at a mid-40% compounded average growth rate (CAGR) over the next five years, starting in 2024. It's also working closely with customers to time its capacity expansion accordingly. With its top customers booking future supply, it has solid visibility into future growth.

Meanwhile, it could see a tailwind beyond AI with autonomous driving. Robotaxis are beginning to take off and gain traction, and all of those vehicles will need to be fitted with advanced chips. It's still early, but if robotaxis and autonomous driving become commonplace, TSMC will be a big beneficiary.

A semiconductor wafer being manufactured.

Time to buy the stock

In the AI chip battle, TSMC is essentially the AI arms dealer. It doesn't need to bet on who will dominate the chip market, because it sells manufacturing services to all of them. For investors who want exposure to AI semiconductors without betting on a single chipmaker, TSMC is the safest way to play it.

The stock is also attractively valued, trading at a forward price-to-earnings (P/E) ratio of 24 times based on analysts' 2025 estimates and a price/earnings-to-growth ratio (PEG) of less than 0.7. Stocks with PEG ratios below 1 are typically considered undervalued.

Taken all together, TSMC is one of the best and safest stocks to buy in the semiconductor space right now.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

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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, Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.