Key Points

• Quarterly-filed Form 13Fs provide a way for investors to track which stocks Wall Street's leading asset managers are buying and selling.

• Appaloosa's David Tepper has been a persistent seller of AI stocks over the last year, including hardware giants Nvidia and Advanced Micro Devices, as well as Taiwan Semiconductor.

• Only 11 public companies have ever reached the trillion-dollar valuation plateau -- and one of these companies has been on Tepper's buy list.

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

For some investors, earnings season is the pinnacle of each quarter. This six-week period, where many of Wall Street's most influential businesses lift the hood on their operating results, provides investors with invaluable information.

However, an equally strong argument can be made that the quarterly filing of Form 13Fs with the Securities and Exchange Commission is just as important as earnings season. A 13F offers investors a way to see which stocks Wall Street's top money managers have been buying and selling. In other words, these filings clue investors in to the stocks, industries, sectors, and trends that have piqued the interest of highly successful asset managers.

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Arguably no trend has been hotter than the rise of artificial intelligence (AI). Empowering software and systems with the tools to make split-second decisions without human intervention is a multitrillion-dollar global opportunity, which explains why AI stocks have soared.

Image source: Getty Images.

But not all of Wall Street's prominent billionaire fund managers are along for the ride.

Based on 13Fs filed in mid-May that detail first-quarter trading activity, Appaloosa's billionaire chief David Tepper has been a big-time seller of three red-hot AI stocks -- Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC -- over the previous year. Curiously, though, Tepper has been loading up on another AI stock that somewhat recently joined the exclusive trillion-dollar club.

Billionaire David Tepper has been a persistent seller of Nvidia, AMD, and TSMC stock

Tepper and his team tend to be fairly active and are regularly building up or reducing their existing stakes. Rather than looking at changes from the prior three-month period, more wisdom can often be gained by examining year-over-year changes to Appaloosa's more than $8 billion dollar investment portfolio.

Between April 1, 2024, and March 31, 2025, Tepper oversaw a significant reduction in, or the complete exit from, three of the AI revolution's top companies:

• Nvidia: 4,120,000 shares sold (93% reduction), which has been adjusted to account for Nvidia's 10-for-1 stock split in June 2024.
• Taiwan Semiconductor: 230,000 shares sold (46% reduction).
• Advanced Micro Devices: 1,630,000 shares sold (completely exited position).

All three of these companies have been successful in their own right within the AI arena. Nvidia's graphics processing units (GPUs) account for the bulk of GPUs deployed in AI-accelerated data centers, while AMD's Instinct series chips are slowly adding market share. Meanwhile, TSMC is the world's leading chip-fabrication company, with its chip-on-wafer-on-substrate capacity rapidly expanding to satiate growing enterprise demand for AI infrastructure.

If everything is going to well for Nvidia, AMD, and TSMC, the question that has to be asked is: Why did billionaire David Tepper sell over a 12-month period?

Simple profit-taking is one of the more logical answers. All three companies have seen their shares appreciate noticeably over the trailing-three-year period, and Tepper has demonstrated he's not shy about locking in gains. What's worrisome is there may be more to this persistent selling activity than just a desire to take some chips off the table.

For example, every next-big-thing technology since (and including) the proliferation of the internet in the mid-1990s has navigated its way through a bubble that eventually burst. In plainer English, investors continually overestimate the adoption rates and/or utility of game-changing technological advances. It's going to take time for AI to mature as a technology and for businesses to figure out how to optimize their solutions and generate a positive return on their investments. This suggests another bubble may be brewing.

Whereas Taiwan Semiconductor is a diversified company that generates a meaningful percentage of its net sales from fabricating chips for smartphones, Internet of Things, and automotive, Nvidia and AMD are increasingly reliant on enterprise GPU orders. If an AI bubble were to form and burst, these two companies would be hit hard.

Valuation may have also come into play for Appaloosa's billionaire chief. Historically, industry-leading businesses thriving on the heels of a next-big-thing trend have topped out at 30 to 40 times trailing-12-month sales. Nvidia's price-to-sales (P/S) ratio is 31, as of this writing.

With the stock market also historically pricey, Tepper may view Nvidia, AMD, and TSMC as being on shakier ground than their respective share prices would indicate.

Image source: Getty Images.

This trillion-dollar AI stock is bucking the trend in Tepper's fund

Whereas billionaire David Tepper has been an undeniable seller of artificial intelligence stocks over the trailing year, based on 13F filings, there's one trillion-dollar AI stock that's managed to buck the trend. During the March-ended quarter, Appaloosa gobbled up 130,000 shares of Broadcom (NASDAQ: AVGO), which is one of only 11 public companies around the world to have ever reached a $1 trillion valuation.

While Nvidia and AMD have locked down the lion's share of GPU market share in AI-accelerated data centers, Broadcom is the preferred choice for its host of AI networking solutions. Its products are capable of connecting tens of thousands of AI-GPUs in order to maximize compute capacity, as well as minimize tail latency. Put simply, Broadcom's hardware reduces lag, which facilitates the split-second decisions that need to be made by AI-empowered software and systems.

Broadcom is also making a name for itself thanks to its custom AI chips. During the company's fourth-quarter conference call in late 2024, CEO Hock Tan opined that a few of its hyperscaler clients could spend anywhere from $60 billion to $90 billion in fiscal 2027 (its fiscal year ends in late October or early November). As long as AI remains a hot trend, Broadcom is expected to be one of the more unstoppable stocks.

But what Appaloosa's Tepper might appreciate most about Broadcom is that it's much more than just an AI-driven company. While AI is, unquestionably, Broadcom's most meaningful growth driver at the moment, it has plenty of other channels that generate sales and positive operating cash flow.

Before AI became the hottest thing on Wall Street, Broadcom was known for its lead role in developing wireless chips and accessories used in next-generation smartphones. Even though smartphones aren't the growth story they were a decade ago, the ongoing expansion of 5G service globally provides a modest growth opportunity for Broadcom.

In addition, it offers an assortment of solutions for industrial product lines and automobiles, as well as owns an enterprise cybersecurity solutions division. The point being that if the AI bubble were to burst, Broadcom would, in all likelihood, be in better shape to navigate the coming storm than hardware giants Nvidia and AMD.

Lastly, Tepper may have found Broadcom's valuation more palatable than the likes of Nvidia. As of this writing on Aug. 5, Broadcom is valued at 35 times forward-year earnings, but appears to be sporting a sustainable annual growth rate of 20% or greater.

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• Duolingo's CEO said the company curbed 'edgy' social media posts after backlash over his AI memo.
• The backlash affected Duolingo's daily active user growth, hitting the lower forecast range.
• Duolingo reported 41% revenue growth and record profitability.

There's a reason Duolingo's meme-loving, sassy green owl has been blander lately.

Duolingo CEO Luis von Ahn said the company has been playing it safe online after his post on mandatory AI usage received harsh social media backlash. The post outlined how Duolingo was going to mandate AI usage and use it as an indicator for hiring and performance review decisions.

"The most important thing is we wanted to make the sentiment on our social media positive," von Ahn said on the company's earnings call on Thursday. He added: "We still are not posting the extremely edgy things that are more likely to go viral."

The Duolingo CEO said that "stopping edgy posts" helped turn social media sentiment positive. But he said the move may also have hurt the company's daily active users in the quarter that ended in June.

Before the quarter, the company predicted 40% to 45% year-on-year growth in daily active users, an important metric for consumer tech companies. Von Ahn said Duolingo reported 40% growth — at the lower end of the range — because of the controlled social media engagement.

"The effect of that was essentially all in the United States, including Canada and stuff like that," he said. "This impact is in the past."

In an April memo to employees shared on LinkedIn, von Ahn outlined his plan to make the company "AI-first." He wrote that AI fluency would determine who is hired and promoted at the company, and that Duolingo would stop hiring contractors for the work AI can handle. Von Ahn added that the AI push won't replace full-time employees with the technology.

"We can't wait until the technology is 100% perfect," the CEO wrote in the memo. "We'd rather move with urgency and take occasional small hits on quality than move slowly and miss the moment."

But the memo received an unforgiving fallout: Users posted concerns on X, TikTok, and Reddit that the company would let AI take jobs and that AI slop would spam their favorite language learning app. Duolingo, which has cultivated a big social presence, wiped its social accounts for a period.

"What I've learned as a leader is just don't post on LinkedIn. I'm kidding," von Ahn said on Wednesday. "What people understood from my message, which is not the intention, is that we just wanted to fire all our employees, which is not what we did and not what we want to do."

He added that Duo's signature posts will be coming back soon.

"We have recovered sentiment, but we are not taking as many risks because honestly, we're skittish about it," von Ahn said on Wednesday. "Over the next few weeks, I don't know exactly how many weeks, weeks slash months, we're going to be recovering or posting more edgy things that are more likely to go viral."

For the second quarter, Duolingo reported a 41% revenue growth to $252.3 million and a record profitability of $44.8 million, growing 84% year over year.

Duolingo's stock jumped nearly 19% after hours on Wednesday. Shares are up 113% in the past year on continued user growth and AI implementation.

Key Points

• C3.ai's business has benefited from organizations rushing to adopt AI solutions, such as the U.S. Air Force.

• The company reached record revenue in its fiscal fourth quarter, and forecasts more sales growth ahead.

• C3.ai is not profitable, and a change in CEO is on the horizon.

• 10 stocks we like better than C3.ai ›

Artificial intelligence (AI) stocks have been hot, and many experienced strong growth in 2025 alone. For example, this year, AI luminaries Nvidia and Broadcom saw shares soar more than 30% and 26%, respectively, through July 28.

But one lackluster AI stock has been C3.ai (NYSE: AI). Its shares are down about 25% this year through July 28. Could the price drop signal an opportunity to scoop up shares at a discount? After all, the global AI market is forecast to expand from $244 billion in 2025 to $1 trillion by 2031, providing a tailwind for C3.ai's business.

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The reality is that evaluating whether to purchase its stock requires digging into the company. Let's delve into C3.ai to help assess if it's a sound investment for the long run.

Image source: Getty Images.

A look at C3.ai's business

C3.ai is an enterprise AI applications business servicing the needs of corporate and government organizations. Its customers include the U.S. Department of Defense, Dow Inc., and ExxonMobil.

The company built a network of partnerships to assist in selling its solutions, which includes Microsoft and energy giant Baker Hughes. These alliances resulted in partners closing 73% of the customer agreements signed in C3.ai's 2025 fiscal year, ended April 30.

C3.ai's business model translated into record revenue of $108.7 million, a 26% year-over-year increase, in its fiscal fourth quarter. For the full year, sales grew 25% year over year to $389.1 million.

The company's offerings have proven popular with customers. In May, the U.S. Air Force expanded its contract with C3.ai from $100 million to $450 million to supply predictive analytics that proactively identify aircraft maintenance needs.

In June, Univation Technologies, a Dow subsidiary, adopted C3.ai's predictive maintenance capabilities to deliver to its petrochemical industry customers.

C3.ai's pros and cons

The company's customer wins this year suggest more revenue expansion to come. In fact, C3.ai forecasts fiscal 2026 sales to reach between $447.5 million and $484.5 million, another solid year of growth over fiscal 2025's $389.1 million.

Despite rising sales, C3.ai's business isn't profitable. It ended fiscal 2025 with an operating loss of $324.4 million, deepening from a $318.3 million loss in the prior year. Costs increased from adding employees to support its business growth.

On top of that, a health issue struck CEO Tom Siebel this year, and the company is now searching for a successor. This is unfortunate news, and it contributed to the decline in C3.ai's share price. The stock price drop is understandable, since a leadership change risks disrupting the company's future success.

However, C3.ai is striving to cut costs and strengthen its finances. Management expects to be free-cash-flow (FCF) positive by next year. It ended fiscal 2025 with negative FCF of $44.4 million, which is an improvement over the previous year's $90.4 million in negative FCF.

Its balance sheet shows C3.ai is well capitalized with total assets of $1 billion, $742.7 million of which represent cash, cash equivalents, and short-term investments. Total liabilities were $187.6 million.

Deciding whether to buy C3.ai stock

Although C3.ai isn't profitable, its strategy to prioritize business expansion over immediate profit follows a typical approach adopted by many companies in the technology sector. As long as year-over-year revenue growth remains strong and it continues to improve its financials, such as reaching positive FCF, C3.ai's operating loss isn't a major concern.

The impending departure of its CEO is regrettable, but Siebel intends to continue shepherding the company as executive chairman. This positions C3.ai for a smooth leadership transition.

With plenty of positives in its favor, does this mean now is the time to buy C3.ai's shares? To answer that, here's a look at its stock's price-to-sales (P/S) ratio with a comparison to Microsoft's, given Microsoft sells C3.ai's offerings, and is a prominent AI business in its own right.

Data by YCharts.

The chart reveals C3.ai's valuation has significantly improved, as evidenced by the substantial drop in its P/S multiple from its late 2024 peak. This multiple is now considerably lower than Microsoft's, further highlighting C3.ai's attractive valuation.

This, combined with growing sales, a robust balance sheet, and strengthening free cash flow, makes C3.ai stock a compelling investment opportunity.

Should you invest $1,000 in C3.ai right now?

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Robert Izquierdo has positions in Broadcom, C3.ai, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends Broadcom and C3.ai and 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.

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Key Points

• Nvidia's AI data center chips remain the gold standard.

• Amazon and Microsoft have been significant winners in AI due to their massive cloud infrastructure operations.

• Arista Networks and Broadcom have tremendous growth ahead in AI networking.

• 10 stocks we like better than Nvidia ›

It will be a massive undertaking to build out the hardware and support necessary to power increasingly advanced artificial intelligence and provide it at a global level where billions of people can access it.

According to research by McKinsey & Company, the world's technology needs will require $6.7 trillion in data center spending by 2030. Of that, $5 trillion will be due to the rising processing power demands of artificial intelligence (AI). These investments, though, will lay the groundwork for the next era of global innovation, which will revolutionize existing industries and create new ones.

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Some key companies have already been experiencing significant growth due to the AI trend, and there is still likely a long runway ahead for players in key AI infrastructure spaces, including semiconductors, cloud computing, and networking.

Here are five top stocks to buy and hold for the next wave of AI innovation.

Image source: GETTY IMAGES

Nvidia: The data center AI chip leader

Inside these colossal AI data centers are many thousands of AI accelerator chips, usually from Nvidia (NASDAQ: NVDA). The company's graphics processing units (GPUs) are the only ones that can make use of its proprietary CUDA platform, which contains an array of tools and libraries to help developers build and deploy applications that use the hardware efficiently. CUDA's effectiveness -- and its popularity with developers -- has helped Nvidia win an estimated 92% share of the data center GPU market.

The company has maintained its winning position as it progressed from its previous Hopper architecture to its current Blackwell chips, and it expects to launch its next-generation architecture, with a CPU called Vera and a GPU called Rubin, next year. Analysts expect Nvidia's revenue to grow to $200 billion this year and $251 billion in 2026.

Amazon and Microsoft: Winning in AI through the cloud

AI software is primarily trained and powered through large cloud data centers, making the leading cloud infrastructure companies vital pieces of the equation. They're also Nvidia's largest customers. Amazon (NASDAQ: AMZN) Web Services (AWS) has long been the world's leading cloud platform, with about 30% of the cloud infrastructure market today.Through the cloud, companies can access and deploy AI agents, models, and other software throughout their businesses.

AWS's sales grew by 17% year over year in Q1, and it should maintain a similar pace. Goldman Sachs estimates that AI demand will drive cloud computing sales industrywide to $2 trillion by 2030. Amazon will capture a significant portion of that, and since AWS is Amazon's primary profit center, the company's bottom line should also thrive.

It's a similar theme for Microsoft (NASDAQ: MSFT). Its Azure is the world's second-largest cloud platform, with a market share of approximately 21%. Microsoft stands out from the pack for its deep ties with millions of corporate clients. Businesses rely on Microsoft's range of hardware and software products, including its enterprise software, the Windows operating system, and productivity applications such as Outlook and Excel.

Microsoft's vast ecosystem creates sticky revenue streams and provides it with an enormous customer base to cross-sell its AI products and services to. Microsoft has also invested in OpenAI, the developer behind ChatGPT, and works with it extensively, although that relationship has become somewhat strained as OpenAI has grown increasingly successful.

Regardless, Microsoft's massive footprint across the AI and broader tech space makes it a no-brainer.

Arista Networks and Broadcom: The networking tech that underpins AI

Within data centers, huge clusters of AI chips must communicate and work together, which requires them to transfer massive amounts of data at extremely high speeds. Arista Networks (NYSE: ANET) sells high-end networking switches and software that help accomplish this. The company has already thrived in this golden age of data centers, with top clients including Microsoft and Meta Platforms, which happen to also be among the highest spenders on AI infrastructure.

Arista Networks will likely continue benefiting from growth in AI investments, as these increasingly powerful AI models consume ever-increasing amounts of data. Analysts expect Arista Networks to generate $8.4 billion in sales this year (versus $7 billion last year), then $9.9 billion next year, with nearly 19% annualized long-term earnings growth.

Tightly woven into this same theme is Broadcom (NASDAQ: AVGO), which specializes in designing semiconductors used for networking applications.

For example, Arista Networks utilizes Broadcom's Tomahawk and Jericho silicon in the networking switches it builds for data centers. Broadcom's AI-related semiconductor sales increased by 46% year-over-year in the second quarter.

Looking further out, Broadcom is becoming a more prominent role player in AI infrastructure. It has designed custom accelerator chips (XPUs) for AI model training and inference. It has struck partnerships with at least three AI customers that management believes will each deploy clusters of 1 million accelerator chips by 2027. Broadcom's red-hot AI momentum has analysts estimating the company will grow earnings by an average of 23% annually over the next three to five years.

Should you invest $1,000 in Nvidia right now?

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Key Points

• Tepper originally bought shares of the two biggest GPU makers in 2023: Nvidia and AMD.

• As GPUs face growing competition in data centers, he is shifting to a different chipmaker.

• Broadcom is a more diversified tech giant, giving its business more downside protection.

• 10 stocks we like better than Broadcom ›

David Tepper is one of the most successful investment managers on Wall Street. His Appaloosa Management hedge fund has produced gross annualized returns of more than 28% since its inception in 1993. That far outpaces the S&P 500's annualized return over the last 32-plus years of about 10.6%.

Tepper is best known for buying distressed debt from companies close to bankruptcy. In fact, Appaloosa was considered a junk bond investment boutique in the 1990s. That contrarian approach often extends to his stock portfolio as well.

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That said, he's not so set on swimming against the current that he won't buy stocks that are part of an obvious trend like artificial intelligence (AI). AI stocks like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) have soared in value over the last few years. And Tepper made quite a bit of money on those stocks.

But he's been selling them recently in favor of another AI chipmaker instead, possibly taking a bit of a contrarian stance against the two big GPU makers.

Image source: Getty Images.

The essential infrastructure behind the AI revolution

Graphics processing units (GPUs) are computer chips or systems that have proven exceptionally adept at crunching all the data that goes into training and running large language models. GPUs are designed to do the types of calculations needed for training AI algorithms, and they can run the processes in parallel, making them far more efficient than a standard CPU, which uses serial processing.

Nvidia has long been a leader in GPUs, dating back to the days when they were mostly just used for high-end visuals in gaming (hence why the G stands for "graphics"). As the processing needs of large language models grew exponentially larger, it's seen incredible demand for its leading GPU systems.

Even after the strong growth in 2023 and 2024, Nvidia's data center revenue climbed another 73% year over year last quarter. With strong operating leverage, the company has seen its earnings zoom higher, and investors have rewarded it. It's now the most valuable company in the world by a substantial margin, worth over $4 trillion.

But AMD is starting to make progress in catching up to Nvidia. The company's MI400 chips coming next year could offer better price performance than Nvidia's current Blackwell line of chips. While Nvidia will be on to its next-generation Vera Rubin platform by then, AMD is offering Nvidia's biggest customers a viable alternative, which could keep its pricing from climbing substantially higher.

AMD's stock hasn't performed nearly as well as Nvidia's. After peaking in early 2024, the stock crashed more than 60% to its low in April this year. The first quarter could have been a great opportunity to buy the stock, especially for a contrarian investor looking to take a stance against Nvidia's continued dominance.

But Tepper sold his entire stake in AMD during the first quarter, a position first established in the second quarter of 2023. He also continued to cut his Nvidia stake, leaving him with just 3% of the shares he held for Appaloosa in mid-2023. Instead, he's betting on a different chipmaker that poses an increasing threat to the dominance of GPUs in AI data centers.

The AI chipmaker Tepper's buying instead

While GPUs are extremely flexible and capable of handling all sorts of tasks, many of the biggest companies developing leading-edge AI capabilities are working on custom-made silicon that can handle specific tasks far more efficiently than power-hungry GPUs. These application-specific integrated circuits, or ASICs, represent a significant threat to GPUs, as hyperscalers like Meta Platforms and Alphabet's Google design more advanced chips capable of handling AI training and inference.

The capabilities of ASICs are expanding. Meta says its custom chips, which have historically handled machine learning AI, are expanding to training large language models after starting with machine learning algorithms and moving on to AI inference. Google trained its large language model Gemini on its own chip designs, and it just released its first Tensor Processing Unit (TPU) designed for AI inference in April.

The company helping Meta and Google design their ASICs is Broadcom (NASDAQ: AVGO). On top of that ASIC business, Broadcom is also the leading networking chipmaker. Networking is an essential piece of AI data centers, as solid network performance ensures all the data gets to the expensive GPUs or ASICs quickly and efficiently. These businesses are spending billions on those chips, so they don't want them sitting idly any longer than necessary.

Broadcom also has an enterprise software business, led by virtual machine software VMWare.

That is to say, Broadcom offers a more diversified chipmaker compared to Nvidia or even AMD (which also has a strong CPU business). That may be why Tepper took a small stake in the company during the first quarter, as it's a leading competitor in AI chips while offering some downside protection with its VMWare business.

Still, Broadcom stock is expensive. It trades for a forward earnings multiple close to 40. That's right in line with Nvidia and slightly less expensive than AMD. The company arguably holds more upside if ASIC designs capture more real estate in data centers over time. Consider the potential efficiency gains of ASICs versus GPUs, which seems likely to happen in the long run.

But investors may have to settle for more slow and steady growth compared to Nvidia or AMD. As such, it's worth keeping an eye on Broadcom's stock to see if it falls back down to a more attractive price before following Tepper into the stock.

Should you invest $1,000 in Broadcom right now?

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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Suzanne Frey, an executive at Alphabet, 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. Adam Levy has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Key Points

• AngioDynamics beat on sales and beat on earnings this morning -- sort of.

• The company reported a smaller-than-expected adjusted loss, but its GAAP loss was much bigger.

• AngioDynamics lost money in fiscal 2025 and will probably do that again in 2026.

• 10 stocks we like better than AngioDynamics ›

Tuesday started off well for AngioDynamics (NASDAQ: ANGO), maker of such medical devices as the NanoKnife tool for "electrocuting" cancer, as well as multiple devices for treating peripheral vascular disease. In the morning, AngioDynamics reported stronger-than-expected Q4 2025 sales and earnings, with sales of $80.2 million and an adjusted loss of $0.03 per share (instead of the $0.12-per-share forecast).

By the end of the day, however, the rally fell completely apart. AngioDynamics ended up closing down almost 10% for the day. So what went wrong?

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Image source: Getty Images.

AngioDynamics' Q4 earnings

Q4 sales grew 13% year over year, although gross profit margins on those sales declined by 160 basis points, to 52.7%. Adjusted earnings still ended up better than expected, and AngioDynamics cut its loss as calculated according to generally accepted accounting principles (GAAP) by more than half, from $0.33 per share a year ago to just $0.15 per share this time around.

Still, a loss is a loss. That's part of the reason investors probably weren't 100% thrilled with this report. For the full-year fiscal 2025, moreover, AngioDynamics lost $0.83 per share according to GAAP, and its sales grew only 8.1%.

Is AngioDynamics stock a sell?

A second reason is guidance. AngioDynamics told investors it expects fiscal 2026 sales to range from $305 million to $310 million, which is ahead of Wall Street forecasts -- so far, so good. Problem is, management then proceeded to warn its losses for the year will range from $0.25 to $0.35 per share, adjusted for one-time items.

That's more than the $0.23 per-share loss Wall Street was forecasting -- and AngioDynamics still hasn't told us how much it will really end up losing under GAAP. Until we know that, the stock probably remains a sell.

Should you invest $1,000 in AngioDynamics right now?

Before you buy stock in AngioDynamics, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AngioDynamics wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of July 15, 2025

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool contributors Tyler Crowe and Matt Frankel discuss:

• Taiwan Semiconductor's most recent earnings report.
• The torrid pace of AI spending.
• Lower mortgage rates are taking the cork off existing home sales and refinancing.
• Insulation contractor TopBuild now does roofs.
• Ferrero will acquire WK Kellogg.
• Two stocks worth watching this earnings season

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

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

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

This podcast was recorded on July 10, 2025.

Tyler Crowe: Taiwan Semiconductor's earnings say full steam ahead for AI, and the housing market is getting some of its best news in a while. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, and joining me today is Motley Fool analyst Matt Frankel. Matt, thanks for being here.

Matt Frankel: Thanks for having me. It's always fun to be on with you.

Tyler Crowe: We do a lot of conversations. Offline and doing one here is going to be great. On today's show, the snacking industry is actually coming for the breakfast aisle. The housing market saw its first green shoots in a while. There's merger talk in the building supply industry, and Matt and I are going to give some earnings watches for the upcoming quarter. But we're going to start today's show with Taiwan Semiconductors because they just released their second quarter or June earnings earlier today. Taiwan Semiconductor manufacturing's revenues rose about 39% in the quarter, and TSMC CEO C.C. Wei said that AI chip demand still, they think is outstripping the current supply that they have, and the company has pledged to spend $100 billion ramping up manufacturing. Now, Matt, I'm probably not alone in being flabbergasted, every time I hear a projection about spending and CapEx related to AI. NVIDIA just passed the four trillion dollar market cap threshold a couple days ago, and it's still hard to wrap my head around. I think the easy question is, will AI spend, continue to grow? I think that's a little too easy. I want to ask you, do you see AI CapEx spending continuing at this rate?

Matt Frankel: Well, a 40% year over year growth rate is only sustainable for so long. This is an acceleration. It's worth mentioning. Last year, in 2024, Taiwan Semi reported 30% year over year revenue growth. This is a pretty big acceleration after an already very strong year. I think over the past 30 years, Taiwan Semi's revenue's grown at about 18% annualized rate. It's really picked up in the past couple of years because of all this AI spending. This is a massive business, especially for one that doesn't make any of its own products. It makes products on behalf of other companies. All of their customers, just to mention some on their customer list, Apple is their biggest one. But they also make chips for NVIDIA, AMD, Broadcom, Tesla there are a lot of companies they make chips for on a third party basis, and these are deep pocketed companies that are all committing a lot of money to AI investment. When you ask will this continue if you're asking over the next five years, I could see that growth rate actually being sustained. But if you're asking beyond, at some point, we're going to hit a peak, but I don't think we're there just yet.

Tyler Crowe: The interesting thing is a lot of the companies I follow are like in the construction industry related to AI, like all the electrical supply contractors and the builders and things like that. Their backlogs for AI data centers and all that stuff is still growing at really large rates. Their remaining performance obligations, their word for backlogs, have been growing at similar rates, which is also, to me, a leading indicator for a lot of this because you got to build the data center before you can put any chips in it. Beyond the same thing, beyond the five years, it starts to get really murky because we're 40% for five years straight is a lot, but certainly over the next 2-3 year window, it doesn't seem unrealistic to continue to keep doing this.

Matt Frankel: One of the really good ways to get ahead of demand is to look at what the data center industry is doing, and I'm glad you brought up building for that reason because so many data centers are being built right now. There's a lot of if you look at, Digital Realty Trust or Equinix's, construction activity, there's a lot going on, and it creates like a forward looking projection, if you will, because, the company will order a new data center, start building it. At some point later, it's going to be filled with chips and things like that. That's a really good forward indicator of how demand is doing.

Tyler Crowe: Let's put the rubber of the road here really quick regarding Taiwan Semi. It's a recommendation in the Hidden Gems dividend service and several other molecule services. After seeing these results and the current valuation that we're looking at for Taiwan Semi, do you still see the stock as a buy?

Matt Frankel: Given how quickly its revenue is growing, it trades for about 24 times forward earnings, there's not a lot to dislike about this company. That 1.2 trillion dollar valuation sounds high, but it really isn't when you look at how the business is doing.

Tyler Crowe: If we're looking at these numbers for 2, 3, 4 years, a company can grow into a 26 times forward earnings valuation or forward earnings valuation pretty quick. It's hard to see it being an awful investment from here at current valuations. Next up, mortgage rates are on the decline, and the housing market is responding quick.

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Tyler Crowe: The housing market has been looking for something, anything resembling good news lately. Finally, it got a little bit. The average rate for a 30 year mortgage in the United States has declined five weeks in a row, and it's now down to 6.77%. Now, that certainly isn't the sub 3% mortgages that we saw in the 2021 period, but it is a nice improvement from the greater than 7% mortgage rates we've seen so far this year, and I know I have been like mortgage rate shopping for quite some time. Matt, the housing market appears to be taking advantage of this situation much faster than we've seen other mortgage rate movements lately, and something you've been following is like housing volume is really picking up because of this.

Matt Frankel: You mentioned the other mortgage rate moves. This isn't the first time we've seen mortgage rates cool off from the highs, which is why this move is a surprise to a lot of people. Mortgage rates peaked at about 8% when inflation was really high. But even they've come down a little bit, then they go up, then they come down, they go up, and they have oscillated between 7.5% and like six and three quarters in recent times. All the other times it's happened, this is a key difference. All the other times it's happened, there hasn't been a lot of housing inventory. Now that's changed. There's a lot more inventory on the market with this decline. People who want to buy houses are taking advantage, just to name some of the statistics just last week alone, week over week, application volume was up more than 9%. Refinancing is 56% higher than it was a year ago. People who got mortgages in the 8% range are finding it valuable to refinance right now. Purchase applications are up 25% year over year on a seasonally adjusted basis. The numbers really look surprisingly strong, given that, you know, over the past week, the average mortgage rates down two basis points. It's not like it's been a sharp decline in the past week, but now buyers are suddenly coming into the market.

Tyler Crowe: Following the housing move for the past couple of years, it's been trying to poke somebody a stick and say, Come on, do something and it's funny to actually see it finally happening. Part of me wonders if it's a little bit mortgage and also our mortgage rates, excuse me, and a little bit of just like the people have been putting it off and using this as that time to start taking the lid off, especially with the buying season here in the spring and summer. Now, you and I and a couple other people, longtime Motley Fool contributors, analysts. We spend way too much time talking about housing, investing in housing, investing in real estate. There's some side channels that get a little unhinged. But with mortgage rates are declining, the probability of a rate cut actually looks to be in sight something that I have been hesitant to say for quite some time. There is pent up demand for homes. Matt, with this backdrop, what stocks in this particular market look interesting to you?

Matt Frankel: I've been saying the Home Builders forever, and so have you, but it's really tough to gauge the dynamics of Home Builders when existing homes are becoming more appealing than they had been for a long time. I won't say that. I'm really looking at rocket right now, RKT the largest lender. They're a very profitable company. I think refinancing in particular is a big opportunity. I mentioned refinancings up 56% year over year, and that's because rates fell to 6.77%. Imagine if rates fall to 6% or 5% in the next couple of years, Americans are sitting on $35 trillion in home equity that's the most ever, and a lot of it's just waiting to be tapped. A lot of people want to do big projects, but won't because it's expensive.

Tyler Crowe: Actually, the Refi number was the one that really stood out to me, as well. I didn't go to the mortgage originators, like Rocket. I actually went to the home repair and remodel industry because, again, this is everyone stared at their walls in 2020, 2021, did all those projects, and now it's been like three or four years. Everyone's starting to get that itch to do projects again and lower mortgage rates. A refinancing is a good opportunity to that. I've been looking at companies like Home Depot that have underperformed just about the time the interest rates started to climb a few years ago, we had that big pull forward in remodel activity and things like that. Home Depot and a lot of other building supply companies, and one company in particular is TopBuild. It's an insulation distribution and installation contractor specifically for insulation. That company just so happens to be the company we're going to be talking about next. Continuing on our theme of the housing market, home repair, building products, there's a company Top bill. They just mentioned it as a distribution installation contractor. They recently announced it's going to acquire Progressive Roofing. Matt, can you just give a quick breakdown of what this deal looks like?

Matt Frankel: Progressive Roofing, as the name implies, they're one of the largest commercial roofing installers in the United States. They make about 70% of their money from what's called reroofing, which is people like me needing a new roof and maintenance and 30% from new construction homes, both of which can get pretty nice tailwinds, if the real estate market keeps going as it's going. The deal is it's $810 million in cash. It looks like a great deal for TopBuild if if the market heads in the right direction. That's about nine times progressives EBITA over the past 12 months. They expect there to be some synergies, like whenever you acquire two businesses that have some overlap, you can usually combine some operations and things like that and get some cost savings. It looks like a strong acquisition. They're going to have to take on debt to do it. TopBuild has about 300 million in cash right now. Another roughly half a billion dollars will need to come up with through debt, but they have a really healthy balance sheet, about 1.4 billion in debt with $11 billion market cap business and highly profitable. I like this deal. I think this is not the last consolidation we're going to see in the industry in 2025.

Tyler Crowe: We've seen some more splashy things when it comes to acquisitions here. Brad Jacobs of XPO Logistics and United Rentals and a bunch of other we'll call it the boring economy guy who rolls up companies is getting into building supplies with QXO. It seems to be a hot activity lately as mergers acquisitions roll ups in this industry. TopBuild as I said, installation of insulation the real dirty work. Anybody that's done contracting work knows that insulation stinks as a job to do. But it's been a spectacular investment after it got spun out of Masco Corporation in 2015, several Motley Fool recommendation services. You and I have been following this company in this industry for quite a while. For TopBuild, much of its success has come from rolling up those small distributors and installation contractors across North America. It's been their calling card is going and buying out mom and pops who are maybe coming to the end of their time of wanting to run a business or some small regionals that success story of Bolt-on acquisitions. Now, roofing isn't insulation. Honestly, I'm a little anxious when a company makes an acquisition that is slightly tangential to what they're doing. Am I being a little too apprehensive here, because, I do tend to be a little bit more nervous than you.

Matt Frankel: Well, insulation and roofing are related parts of the building process. It's not like they're an insulation company, and they're acquiring a concrete manufacturer or something like that. It's a very related part of the business. But I do get your point. Some of the synergies I mentioned come from the fact that there's a lot of overlap in the processes. You generally don't put in a new roof without checking your insulation at the same time. There is a lot of overlap here. But no, I definitely get your point when companies start to step outside of their wheelhouse a little bit. It'll be worth watching, but it looks like the price is right, so they have some wiggle room to have a learning curve in there, if you will.

Tyler Crowe: I'm probably a little too nervous by nature, but I do have to admit, as I've looked at this deal, I think overall, we can talk about the business stuff. But more importantly, for me, I think management has developed enough of a track record that I'm willing to give them the benefit of the doubt right now or tie goes to the base runner, I guess, if you will. With the refinance market picking up so could activity in the roofing business along with installation. It might be a good time to be making this acquisition. Speaking of M&A, we're going to move on to our next store here, which is going from roofing to the breakfast aisle because that seems to be getting a hot market that also just happens to be getting a little bit sweeter. Earlier today, Ferrero Rocher or Ferrero International, the Italian private company has agreed to acquire WK Kellogg for about an enterprise value of 3.1 billion. WK Kellogg, of course, was the cereal business that was split out of Kellanova I believe it was either last year or a couple of years ago. It was a relatively recent split for the two companies where Kellanova wanted to focus on the snacking industry. WK Kellogg was going to take the cereals.

But Ferrero Rocher is very much a candy company, and it's interesting to see them going in this direction. It's about $23 per share for WK Kellogg in cash. About 31% premium Keeling's closing price today. Matt, what did you actually think about this deal? I know it's hard to really put a pin on private companies, especially an Italian one. We don't seem to have a lot of information on private Italian companies here in the US public markets. But we've seen tons of M&A activity and flirting with M&A activity. We saw Mondelez and Hershey talking about getting together early or late last year. Do you have any insights as to why you think there's so much talk and commotion in particular in the package food industry lately?

Matt Frankel: Well, in this particular case, there's a couple key takeaways. One is that Ferrero has been building out its US portfolio for some time. They acquired all of Nestle's US candy business a couple of years back, for example. You might have some of their products in your house right now and not know it. It's summertime. A lot of people keep those bomb popsicles in their fridge. That's a Ferrero product. They have a lot of brands that are very well known to Americans. Second, and this goes more to the broad package food industry that you were talking about. The definite trend is to not only diversify your product portfolio, but diversify it in a way toward healthier products. Now, I know a lot of Kellogg cereals, frosted flakes are not health food, but things like Kashi and raisin bran and rice krispies. We've seen a lot of the companies that specialize in sweets, like Coca-Cola, Pepsi, really diversifying to not necessarily health foods, but to more healthy brands that are that consumers seem to want more nowadays than their traditional products. I think it's a diversification maybe anticipate some changing tastes in the market to insulate themselves from being just a sweets company. That's a common trend that we've been seeing throughout the packaged food industry.

Tyler Crowe: Seems like it's an industry that has been struggling with debt, with trying to figure out a lot of what they're doing with their maybe some brands that are getting a little stale, trying to do some refreshes at the same time. For a lot of these snacking companies, really high cocoa prices haven't exactly helped them along the way when it comes to trying to make a lot of this work. A lot of dividend stalwarts have been really, I would say struggling to really grow the business, and we've seen it in their valuations of late. Honestly, with the package food company industry, I don't know if I'm that interested in any stocks right now, but it's certainly much more fascinating to watch with a lot of these portfolio reshufflings. Is there anyone in particular that is on your radar?

Matt Frankel: I honestly think Pepsi and Coca-Cola are the two standouts in the industry still and have done the best job of adapting to changing tastes over time out of all the package food companies. I'd probably give it to Pepsi because they have a lot more food than beverage.

Tyler Crowe: On our way out here, let's take a quick 30 seconds. Second quarter earnings is coming up. What are you watching?

Matt Frankel: Well, banks are the obvious answer just because they're reporting first, but they're also a really good proxy for just general consumer health. By looking at things like loan defaults, by looking at, trading volume trends, how volatile things have been there. There's a lot you can tell from bank earnings that have implications on pretty much every other company in the United States. That's really what I'm watching next week. Prologis is another company that reports early that we've talked about that is on my radar. They say they're nearing an inflection point. I want to see if we're there yet.

Tyler Crowe: This quarter, I'm actually going to be watching Home Depot for a lot of the reasons that we mentioned when we're talking about mortgage rates. Less for the actual earnings, but I really want to dive into the earnings transcript and see if some of this activity that we just talked about with Refi is translating into increased demand. If management thinks that this is a continuing trend or a little bit of a short term blip that we've been hoping would actually last longer than a couple of quarters here with the mortgage market. Matt, thank you so much for joining me today on Motley Fool Money. As always, people on the program have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. See our Fool advertising disclosure. Please check out our show notes. I'm Tyler Crowe. Thanks for listening. We'll see you tomorrow.

Matt Frankel has positions in Advanced Micro Devices, Digital Realty Trust, Prologis, and Shopify and has the following options: short January 2026 $135 calls on Shopify. Tyler Crowe has positions in Prologis. The Motley Fool has positions in and recommends Advanced Micro Devices, Digital Realty Trust, Equinix, Hershey, Home Depot, Nvidia, Prologis, Shopify, Taiwan Semiconductor Manufacturing, Tesla, and TopBuild. The Motley Fool recommends Broadcom, Nestlé, WK Kellogg, and XPO and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.

In today's video, I discuss recent updates affecting Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and other semiconductor companies. To learn more, check out the short video, consider subscribing, and click the special offer link below.

*Stock prices used were the after-market prices of July 14, 2025. The video was published on July 14, 2025.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

Jose Najarro has positions in Advanced Micro Devices and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Arista Networks, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

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?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

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.

Key Points

• Nvidia is the dominant player in AI infrastructure, but its size could limit some of its upside.

• AMD and Broadcom, meanwhile, have huge opportunities.

• Given their smaller sizes, the stocks have the potential to outperform Nvidia in the coming years.

• 10 stocks we like better than Advanced Micro Devices ›

Nvidia is the undisputed king of artificial intelligence (AI) infrastructure. The company has a dominant share in the graphics processing unit (GPU) market, where its chips provide the processing power necessary to run AI workloads. Its CUDA software platform has helped create a wide moat, giving the company over 90% market share in the GPU space.

That said, Nvidia has become a mammoth company, recently hitting a $4 trillion market cap. As such, it now faces the law of large numbers. It can keep growing, but it will get more difficult to keep up the same pace.

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That's why the stocks of Advanced Micro Devices (NASDAQ: AMD) and Broadcom (NASDAQ: AVGO) could outperform the GPU leader over the next five years. Both have smaller revenue bases to work from and big potential tailwinds.

Image source: Getty Images.

Advanced Micro Devices

AMD, as the company is also known, has been seeing strong revenue growth, but its AI opportunity could just be getting started. While it's still a distant second to Nvidia in GPUs, it has been able to carve out a niche in AI inference.

On its last earnings call, AMD said that one of the largest AI model companies in the world is using its GPUs to run a significant chunk of its daily inference workloads. Major cloud providers have been using its chips to run search, recommendation engines, and generative AI tasks. The company's ROCm software platform still trails CUDA, but it's generally considered good enough when it comes to inference.

The reason the stock can outperform, though, largely comes down to size. Nvidia's data center revenue hit $39.1 billion last quarter, while AMD's was just $3.7 billion. It doesn't have to take massive share from the leader to see explosive growth, as even modest wins can make a big impact.

AMD is also a leader in data center central processing units (CPUs), where it has gained meaningful share against Intel. CPUs act as the brains of the operation, so as AI workloads expand, demand for high-performance CPUs will also grow.

Meanwhile, the UALink Consortium which was formed by AMD, Intel, Broadcom, and others, is looking to challenge Nvidia's NVLink and its proprietary interconnects. It wants to develop an open standard for high-speed, low-latency interconnects for AI accelerators in data centers. If successful, it could erode one of Nvidia's biggest advantages and open the door for companies to use clusters of multiple vendors. That would be huge for AMD.

With AI inference expected to eventually eclipse training in size, AMD has a big opportunity.

Broadcom

Broadcom isn't directly chasing Nvidia in the GPU market. Instead, it's competing against the company in AI networking and by helping customers design custom AI chips.

Broadcom makes networking components -- like Ethernet switches and optical interconnects -- that are essential in transferring huge data volumes across large AI clusters. As these clusters get bigger, so do networking demands. This is helping drive the company's revenue growth, and last quarter its AI networking revenue surged 70%.

However, the company's biggest opportunity is in application-specific integrated circuits (ASICs). It helped Alphabet develop its highly successful Tensor Processing Units (TPUs) and is now designing custom AI chips for several other hyperscalers (companies that operate huge data centers). These custom chips can deliver better performance and power efficiency than off-the-shelf GPUs, and demand is growing fast.

Management has said that its three custom AI chip customers that are the furthest along in their development are planning to deploy up to 1 million chip clusters each by its fiscal 2027, representing a $60 billion to $90 billion opportunity. That doesn't even include newer wins like Apple. And given the up-front costs of designing custom chips, they are typically used in large deployments.

Broadcom also owns VMware, which is becoming increasingly important in AI cloud environments. Its Cloud Foundation platform helps enterprises manage AI workloads across hybrid and multi-cloud environments, and it is seeing strong upselling to this platform.

With its networking portfolio, custom chips, and virtualization software, the company has a lot of growth in front of it.

The bottom line

Nvidia is still a great company, and its stock has room to move higher. However, it just saw its data center revenue increase more than ninefold in two years. At some point, it gets harder to keep posting that type of breakneck growth.

Meanwhile, AMD and Broadcom both have much smaller AI-related revenue streams today. If AMD can take some GPU market share in inference, that would be a huge growth driver. And if Broadcom's customers start producing a huge amount of custom chips based on its intellectual property, it could unlock tens of billions in high-margin revenue.

As such, I think both AMD and Broadcom stocks are well-positioned to outperform Nvidia over the next five years.

Should you invest $1,000 in Advanced Micro Devices right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Intel, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• Nio is still thriving in China’s crowded EV market.

• EVgo continues to expand its charging networks and is locking in more customers.

• Navitas' more advanced GaN and SiC chips could replace silicon chips in the future.

• 10 stocks we like better than Nio ›

Many electric vehicle (EV) stocks soared in 2020 and 2021, but a lot of them fizzled out over the following years as rising interest rates chilled the hot market. Price wars, supply chain disruptions, inflation, higher tariffs, and intensifying trade wars exacerbated that pressure.

However, investors who can look past those near-term headwinds might find some promising plays in what has become an out-of-favor sector. I believe these three EV-oriented stocks -- Nio (NYSE: NIO), EVgo (NASDAQ: EVGO), and Navitas Semiconductor (NASDAQ: NVTS) -- could turn a modest $500 investment into a few thousand dollars in just a few years.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

1. Nio

Nio is a major producer of electric sedans and SUVs in China. Its core Nio brand sells higher-end vehicles; its Onvo brand sells cheaper SUVs; and its Firefly brand sells compact EVs. It differentiates itself from its competitors with swappable batteries which can be switched out at its own battery stations as a faster alternative to EV chargers.

Nio faces tough competition in China, but it's gradually expanding into Europe. From 2019 to 2024, its deliveries surged nearly 11-fold from 20,565 to 221,970; its vehicle margin improved from negative 9.9% to positive 12.3%; and its revenue grew at a compound annual growth rate (CAGR) of 53%.

That growth was fueled by its robust sales of its higher-end sedans and SUVs, the expansion of its swapping network and battery-as-a-service (BaaS) subscriptions, and its rising shipments in Europe. Government subsidies in China also helped it survive a severe credit crunch in early 2020.

From 2024 to 2027, analysts expect Nio's revenue to grow at a CAGR of 26%. They also expect its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in the final year as it sells a higher mix of premium vehicles, expands its battery subscriptions, and streamlines its spending.

But with a market cap of $7.8 billion, Nio trades at just 0.6 times this year's sales. Its valuations are being compressed by the trade war and tariffs, but it could soar higher on any hint of a trade deal or milder macro and competitive headwinds.

2. EVgo

EVgo is a leading builder of EV charging stations in the U.S. with 4,240 charging stalls serving 1.4 million customers at the end of the first quarter of 2025. Its drivers can pay for each individual charge or sign up for discounted plans, which start at $6.99 a month.

Since the end of 2022, EVgo's number of charging stations increased by more than 50% as its total number of customers grew by over 150%. From 2022 to 2024, its revenue grew at a CAGR of 117%. That expansion was fueled by its acquisition of Recargo, which coincided with its special purpose acquisition company (SPAC) merger in 2021; its partnerships with General Motors, Berkshire Hathaway's Pilot Flying J, and Chevron; and federal and state incentives for the construction of more charging stalls.

From 2024 to 2027, analysts expect EVgo's revenue to grow at a CAGR of 32% as those tailwinds pick up again. They also expect its adjusted EBITDA to turn positive in 2024 and continue climbing through 2027 as economies of scale kick in. With a market cap of $462 million, EVgo trades at just 1.3 times this year's sales. The softness of the U.S. EV market is likely squeezing its valuations, but it could command a much higher valuation once the macroenvironment improves.

3. Navitas

Navitas is a leading producer of gallium nitride (GaN) and silicon carbide (SiC) chips. These types of chips can resist higher voltages, switch at higher speeds, and operate at higher temperatures than traditional silicon chips. Its GaN integrated circuits (ICs) are widely used in EV chargers, and it produces SiC devices for EV platforms. It also supplies chips for laptop adapters, data center power supplies, solar inverters, industrial motor drives, and energy storage solutions.

From 2020 to 2024, Navitas' revenue grew at a CAGR of 62% as its adjusted gross margin expanded from 33% to 42%. It achieved that growth even as the EV, solar, and industrial markets -- which were expected to generate robust demand for its GaN and SiC chips -- faced tough macroheadwinds over the past few years.

From 2024 to 2027, analysts expect Navitas' revenue to increase at a CAGR of 17% as its adjusted EBITDA turns positive by the final year. That growth should be driven by a new artificial intelligence (AI) data center deal with Nvidia, the mainstream adoption of fast chargers in the consumer electronics market, and the broader usage of SiC chips in EV chargers.

With a market cap of $1.2 billion, Navitas might seem a bit pricey at 19 times this year's sales. However, it could be well positioned to profit from the secular expansion of the nascent GaN and SiC markets. So not only is Navitas a near-term play on the EV market's recovery, it's also a long-term play on the disruption of traditional silicon chips.

Should you invest $1,000 in Nio right now?

Before you buy stock in Nio, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nio wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, and Nvidia. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.

Key Points

• Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) and IBM have crushed the S&P 500's returns over the last one year, three years, and five years.

• And TSMC stock has absolutely pulverized the broader market over the 10-year period.

• Shares of TSMC and IBM are currently yielding 1.26% and 2.31%, respectively.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Artificial intelligence (AI) is the biggest secular growth trend today. The global AI market will soar from $189 billion in 2023 to $4.8 trillion by 2033 -- a 25-fold increase in a decade -- according to a recent projection by the United Nations Conference on Trade and Development.

As with technology stocks in general, the vast majority of stocks that could be considered AI stocks either do not pay dividends or pay very small ones.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

While they are relatively rare, there are some top-performing AI stocks that pay decent dividends and have a good dividend payment history. These include the world's largest semiconductor (or "chip") foundry Taiwan Semiconductor Manufacturing Corp., or TSMC (NYSE: TSM), and International Business Machines, or IBM (NYSE: IBM), one of the world's oldest large tech companies.

So, folks who like dividend-paying stocks and want to invest in AI -- forgive the cliché -- can have their cake and eat it too.

Image source: Getty Images.

2 Top AI stocks that pay decent dividends

Data sources: Finviz.com and Yahoo! Finance. P/E = price to earnings. EPS = earnings per share. Data as of July 8, 2025.

TSMC: The world's largest chip foundry

Taiwan Semiconductor Manufacturing produces chips for companies that contract out all or some of the manufacturing of chips that they design. As the world's largest chip foundry, TSMC is the dominant company in the production of advanced AI chips, so it's been significantly benefiting from the growth of the AI market and should continue to benefit.

TSMC's customers includes most of the big names in chip companies -- such as Nvidia, Broadcom, and Arm Holdings. It also produces chips for big tech companies that have designed their own chips, including Apple, which is widely considered TSMC's largest customer, followed by Nvidia.

The company is off to a great start in 2025. In the first quarter, its revenue jumped 35% year over year to $25.5 billion, driven by continued strong AI-related demand. Better yet, its EPS surged 54% to $2.12. Its EPS growing faster than its revenue reflects its expanding profit margin.

On the Q1 earnings call, management reaffirmed its 2025 guidance that its revenue from AI accelerators will double year over year.

TSMC started paying cash dividends in 2004 and has never halted or reduced its dividend per share.

TSMC stock is trading at 24.2 times its forward projected EPS, which is reasonable for a stock of a company that Wall Street expects will grow EPS at an average annual rate of nearly 23% over the next five years.

IBM: Successfully transitioning to AI and other high-growth markets

IBM has been in a years-long transitioning mode, divesting of legacy businesses and investing in growth markets, notably cloud computing and AI. This transitioning resulted in its revenue declining, which in turn caused its profits and cash flows to also decrease. But Big Blue is back in growth mode.

In 2024, IBM's revenue increased 3% in constant currency to $62.8 billion, driven by a 9% rise in software revenue, offset by declines of 1% and 3% in its consulting and infrastructure segments, respectively. Adjusted earnings per share (EPS) from continuing operations was up 7% year over year. Free cash flow (FCF) rose 13% year over year to $12.7 billion.

IBM's generative AI book of business ended the year at $5 billion inception to date. (Generative AI enables users to quickly generate new content based on a variety of inputs. It's the type of AI that's largely powering the AI boom.)

The AI business is growing fast, increasing $2 billion from the third to the fourth quarter 2024. Moreover, it tacked on another $1 billion-plus in the first quarter of 2025 to bring its total to more than $6 billion. About one-fifth of this business comes from software and four-fifths from consulting, CEO Arvind Krishna said on the Q1 earnings call.

The company expects revenue growth to accelerate in 2025. For the year, it guided for annual revenue growth of at least 5% in constant currency and FCF of about $13.5 billion, or over 6% growth year over year.

IBM has a great dividend history. It's increased its quarterly cash dividend for 30 consecutive years.

IBM stock is trading at 26.7 times forward projected EPS. This might seem quite pricey for shares of a company that Wall Street expects will grow EPS at an average annual pace of 6.3% over the next five years. However, investors can expect to pay a premium for stocks of companies that have great track records of raising their dividends.

Moreover, the stock might turn out to be less pricey than it currently seems. IBM has solidly beat the analyst consensus estimate for earnings in the last four quarters, with two of the beats being quite large. Given how fast the company's AI business is growing, it could continue to solidly surpass earnings estimates.

Mark your calendars

TSMC is slated to release its Q2 2025 results before the market open on Thursday, July 17.

IBM is scheduled to release its Q2 results after the market close on Wednesday, July 23.

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

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $980,723!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Apple, International Business Machines, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Shares of Broadcom (NASDAQ: AVGO) rallied 4.2% on Tuesday, as of 1 p.m. ET.

Semiconductors were broadly higher, based on new data that confirmed strong growth in the sector. In addition, one Wall Street sell-side analyst wrote a very positive note on Broadcom specifically, and the outlook for its custom artificial intelligence (AI) ASICs.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Broadcom to $400?

Today, research firm Counterpoint Research released its final data for the semiconductor foundry industry's first quarter of 2025. Counterpoint's data showed a solid 13% increase in foundry revenue, which the firm noted was powered by artificial intelligence chips, especially those made by Taiwan Semiconductor Manufacturing.

That includes Broadcom, which has a large part of its semiconductors produced by TSMC, especially its custom AI ASIC chips that it co-produces for the large cloud giants. And if foundry revenue grew strongly in the first quarter, that could likely mean strong chip sales in the second quarter, given that foundries produce chips before they're sold.

On that note, HSBC semiconductor analyst Frank Lee raised his price target on Broadcom today from $240 to a whopping $400 per share, representing 53% upside from today's stock price.

The massive jump is based on Lee's conviction that AI ASICs will now achieve better-than-expected growth relative to prior expectations, perhaps taking more AI market share from Nvidia and Advanced Micro Devices. Lee increased his estimates for Broadcom's ASIC revenue to $28.4 billion in 2026 and $42.8 billion in 2027, which are 42% and 69% above the average analysts' expectations, respectively.

Image source: Getty Images.

But investors may want to be wary of valuation

No doubt, Broadcom has defied skeptics over the past five years and has regularly trounced expectations. That being said, the stock already has a premium valuation. Lee's $400 target is based on 32 times 2027 earnings estimates. That's actually a 10% premium to Broadcom's peak P/E ratio over the past three years. So not only does Lee predict better-than-expected growth, but he also puts an all-time high valuation on future earnings estimates to get to $400.

That's not to say Broadcom can't do it; however, the stock is no longer a no-brainer to reach new heights in the very near term. But even skeptics would have to say the chip giant is extremely well positioned in the AI era.

Should you invest $1,000 in Broadcom right now?

Before you buy stock in Broadcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $676,023!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,692!*

Now, it’s worth noting Stock Advisor’s total average return is 793% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

HSBC Holdings is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients have positions in Broadcom and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and HSBC Holdings. The Motley Fool has a disclosure policy.