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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.
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
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.
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.
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.
Before you buy stock in Nvidia, consider this:
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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!*
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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Arista Networks, Goldman Sachs Group, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom 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.
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.
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.
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.
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.
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 $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.
*Stock Advisor returns as of July 15, 2025
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.
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.
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.
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%.
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.
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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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:
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.
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A full transcript is below.
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.
*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.
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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.
*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.
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.
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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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 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.
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.
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.
*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.
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.
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.
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 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.
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.
Before you buy stock in Advanced Micro Devices, 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 Advanced Micro Devices 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.
*Stock Advisor returns as of July 7, 2025
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.
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.
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.
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Image source: Getty Images.
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.
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.
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.
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.
*Stock Advisor returns as of July 7, 2025
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.
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.
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.
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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.
|
Company |
Market Cap |
Dividend Yield |
Forward P/E Ratio |
Wall Street's Projected Annualized EPS Growth Over Next 5 Years |
5-Year Return |
|---|---|---|---|---|---|
| Taiwan Semiconductor Manufacturing |
$963 billion |
1.26% | 24.2 | 22.7% | 296% |
| IBM | $270 billion | 2.31% | 26.7 | 6.3% | 223% |
|
S&P 500 |
N/A |
1.24% | N/A |
N/A |
112% |
Data sources: Finviz.com and Yahoo! Finance. P/E = price to earnings. EPS = earnings per share. Data as of July 8, 2025.
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 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.
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.
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.
*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.
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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.
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.
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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.
In this podcast, Motley Fool analysts David Meier and Jason Moser join host Ricky Mulvey to discuss:
Stacey Vanek Smith, co-host of Everybody's Business, joins Ricky for a look at the tough job market facing college grads.
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This podcast was recorded on June 06, 2025.
Ricky Mulvey: It's the Motley Fool Money Radio Show. I'm Ricky Mulvey joining me on the Internet today, it's Motley Fool Senior Analysts, Jason Moser and David Meyer. Fools, great to have you both here.
David Meier: Ricky, it's awesome to be here.
Ricky Mulvey: We've got earnings from CrowdStrike in Lululemon, but I mean, come on, how are we not going to talk about the breakup between Elon Musk and President Trump? First up, though, we're keeping our eye on the ball. We're starting with some economic data before we get to the juicy stuff. J Mo, the unemployment rate stands at 4.2%. While jobs were added above estimates, this report also says that the US added almost 100,000 fewer jobs than estimates thought in the prior two months. Something almost embarrassing, as embarrassing as a vocal crack. I'm seeing headlines that the labor market is softening. I'm seeing headlines that this report is strong. What say you?
Jason Moser: Yeah, this is an economy. There's this duality. The reality of the situation is that things are OK. We've been worried that we're standing on a cliff here as of late, but employment, yes, it slowed down a little bit. Wage growth was there, albeit slower as well. All things put together, things are OK, and we're not close to teetering into a recession it would appear. But then there's this anxiety from consumers, from businesses as we work our way through exactly what the impacts of all of this tariff stuff will ultimately look like and how that could impact business activity. Will it increase inflation? For now, though, things look pretty good. I think the question that I get from this because it seems like everything's OK, it's going to be interesting to see how the Fed reacts to this in the back half of the year. There's a lot of analysts out there that are positing that we probably could see the Fed be a little bit more aggressive with interest rate cuts in the back half of the year, particularly as inflation continues to abate, but it all still hinges on what in the world is going to happen with this tariff talk. That still just remains entirely unclear.
Ricky Mulvey: Traders are optimistic to your point of a recession on the prediction market coal sheet, the odds of a recession this year are at 27%, something that remains surprising to me, since we are coming off a quarter of economic contraction. According to the book, two of those gives you a recession, and we also have fewer ships coming in to the port of Los Angeles. This is a very confusing economic time for any observer. We're going to dive into some jobs trends, tariffs, the economy with Bloomberg's Stacey Vanek Smith later in the show. I'll wrap up the economic talk there and stick with earnings. We're going to focus on the business. Starting with our earnings chatter, we've got CrowdStrike. David, the cybersecurity giant and Fool favorite reported earlier this week. Here's some of the numbers. Total revenue grew to more than one billion dollars. That was a 20% increase from the prior year. 97% gross retention for its services. That's pretty good for a company still coming off in outage. However, investors did not like the guidance going forward. What set out to you in the results?
David Meier: Two things. Almost $200 million of recurring revenue added during the quarter, bringing the total to more than 4.4 billion, and a free cash flow margin of 25%. When I put those two numbers together, that shows me that there's plenty of demand for its products and services, and that the company is generating value from that growth. That is a good report.
Ricky Mulvey: From CEO George Kurtz, he said, "What excites me the most is the necessity agentic AI is creating for CrowdStrike holding Inc's AI native security." If you're going to understand the business and the growth path moving forward, you need to understand the AI agents that this cybersecurity giant is implementing. We'll start here. Why is Kurtz so excited about agentic AI?
David Meier: Yeah, it's actually on the other side that he's excited because AI agents by customers of CrowdStrike, they actually create threat vectors for bad actors. The more agents that are being created and they're being created very quickly right now, the market opportunity is only going up from there. I would also be excited about an increase in a market opportunity of a market where I am a leader.
Ricky Mulvey: I heard a quote on search engine, which is PJ Votes podcast, that basically cybersecurity is the only business that gets worse every single year in technology, because you have so many new threat actors coming in that these businesses are trying to keep up with. Then when you look at the balance sheet here or the financials, CrowdStrike has authorized one billion dollars for share buybacks. This is also a company that likes to issue a lot of stock, and it makes sense. That's how you attract software talent, but how excited should the investors be us on the retail side about this one billion dollars in potential share buybacks?
David Meier: The first thing is, I actually agree with your previous statement. That's the paradox of cybersecurity. It's always needed and always growing because bad actors are always out there. But getting to your question about repurchases at today's prices, I am not excited about that buyback at all. There has to be better ways of investing that money than buying back very expensive shares. I get it, it's about trying to control dilution, but there has to be plenty of things for CrowdStrike to be investing in going forward.
Jason Moser: I'm just going to say, I bet you they really wish they executed this a year ago. It more than doubled since that outage. Like you, Dave, I'm definitely not excited by this, and I bet dollars to doughnuts that there is no way this even remotely brings that share account down. Now, that's not unique. We see that all of the time in this space. Still, it's worth remembering.
Ricky Mulvey: For those listening, you have a few options when you have that extra cash, you can keep that cash on the balance sheet or what's wrong with a special dividend? You can pay a special dividend to your shareholders from time to time if you think your share price is a little high. Other companies do that. J Mo, let's move to Lululemon. Lululemon, the maker of stretchy pants and other fashions, is down about 18% this morning. Man, how bad are tariffs for this business, Jason?
Jason Moser: Stretchy pants. Listen, it is exposed to this tariff environment like most others in its space. Now, I'm not sure that they necessarily have the same exposure. If you look at their 10K, for example, and they quantify their supply chain exposure there, 35% of fabrics originated from Taiwan, 28% from China mainland, and 11% from South Korea. Now, on the flip side of that, the raw materials that they use, things like content labels, elastics, buttons, clasps, draw cords. All of that really essentially originates from Asia Pacific and mostly the China mainland. They do have that exposure there, but they are also working on trying to mitigate that. It'll just remain to be seen how well they could pull that off. But it's worth noting, their inventories at the end of the first quarter were up on a dollar basis, 23%, $1.7 billion versus $1.3 billion a year ago, so definitely something to keep an eye on.
Ricky Mulvey: Well, something that has investors in Lululemon, like me, shaking in our ABC pants is that a lot of this growth is coming internationally. If you're buying shares of Lululemon, you have to recognize that a lot of that sales growth is coming from the mainland of China where it's selling finished products. If you're hanging on to Lululemon stock, you're buying into that story. But right now, Lululemon has gotten absolutely crushed. It's at basically a grocery store earnings multiple, which, to me, says, no growth is ever coming again for this company. What's the market saying about this about Lululemon right now, and maybe what say you?
Jason Moser: You're right about the international growth. China revenue is up 22% versus the Americas up only 2%. CEO Calvin McDonald noted on the call. He said that their sense is that US consumers remain very cautious and are being very intentional about their buying decisions, and that just flows right into discretionary spending and impacts a company like Lululemon. In regard to the multiple, I think the multiple makes sense today. You're right, this thing has gotten crushed, and at around 18 times full-year earnings estimates, that's low, historically speaking. However, it also is because essentially it's pricing and no earnings growth. They essentially are not going to grow earnings this year. So then the question you have to ask yourself is, what does it look like beyond just the year? If you think the company can return back to modest top-line growth and really bringing it down to the bottom line for more robust earnings growth, then today would make a lot of sense as a potential buying opportunity. My sense is the multiple will ultimately be assigned is somewhere in the middle. Eighteen seems low for a company that I think can still grow, but I don't know that I'd be buying this company at 70 times earnings, either.
David Meier: One thing to always remember about Lululemon is that these buyers have discretionary income, and they love this product. So over the long term, that has served the company well.
Ricky Mulvey: After the break, it's the rumble between President Trump, Elon Musk, in the impact on Tesla. Stay right here. You're listening to Motley Fool Money.
Welcome back to Motley Fool Money. I'm Ricky Mulvey here with Motley Fool senior analysts, David Meier and Jason Moser. JMo and David, we talk about businesses a lot on this show, what we don't talk about often is friendship. What we've learned this week is that some friendships don't last forever, and that is the case with Elon Musk and President Donald Trump. If you want the receipts of their beef, you can check out X and Truth Social. But Musk is throwing barbs over the big, beautiful bill in the impacts on the national debt. Turns out, Elon Musk really does care about that and President Trump, of course, likes his bill. During this, I don't even know if you say a fool out fist fight, sparring match, whatever metaphor you want to use, they're not happy with each other. Tesla stock has taken a fall. More than $150 billion gone in market cap in just one trading day. Fools, I'm going to give this to Jason first. What is the most expensive breakup you've ever had?
Jason Moser: Boy, that escalated quickly, and I'm not going to get into my personal life on this show, Ricky. But I think this is given what we know about both people, this seemed inevitable. Who knows what tomorrow brings, but both very strong-willed and probably stubborn as a word that works here, too. The back and forth has been entertaining, I guess. Unless you're a Tesla shareholder. I'm not, but I'd imagine they probably don't really care for these barbs going back and forth. But I think it's important to note that the impact here on Tesla could be significant in regard to the bill. The bill essentially eliminates a credit worth as much as $7,500 for buyers of certain Tesla models and other EVs by the end of the year. According to JP Morgan analysis here. That would translate to roughly 1.2 billion dollar hit to Tesla's full year profit. That's not insignificant. Then you couple that with separate legislation that's been passed by the Senate based on California's EV sales mandates. That's another potential two billion dollar headwind to Tesla's sales according to JP Morgan. You're looking at some legislation here that could have a meaningful impact on the business if it passes in its current form. But then I saw the tweet there from Musk. He was like whatever, let the credit expire. Go ahead and go as is, but fix the rest of the bill. Who knows how this will all shake out, but it's been quite a couple of days.
Ricky Mulvey: I think, once you start accusing the president of being on certain lists and threatening to release those lists, I would guess that he is not going to take your calls anymore. David, I am not going to ask you about your personal life. I'll just assume that you've never had a $150 billion breakup. But Tesla is in a very weird spot right now. Because we have seen what happens when brands get political. Usually, it's brands going to the left. We've now seen it with brands going to the right. Tesla has managed to upset people on both sides. If you like Trump, you may not be happy with Elon Musk right now. If you're on the left, you may not like what he has done when he was in the White House during his one-month tour of DOGE.
Jason Moser: Do you think Tesla can break this trend of brands getting hurt for the long term when they get political?
David Meier: That's a very interesting question. I think the answer is yes, but only if Musk stops focusing [LAUGHTER] on the soap opera, and starts focusing on the things that will drive the future value of Tesla here. What do I mean? Let's get full self driving. Let's get that out. Let's get the cyber cabs out. Let's get progress with the optimist robots. All the things that are going to drive the future value of the company, put your attention there. Stop this nonsense. You work for the shareholders, and you're a huge shareholder. I realize that money may not matter to him, but it does matter to the people that have invested in his company, so he can break the cycle. Get focused on what is important for the future value of the company. Ultimately, I think, at some point he will do that.
Jason Moser: You know what? If I can give him advice if you're both listening. If you got an issue with someone, a phone call is always better. A coffee is always better. It's always tough once you start airing it out on social media. Let's get back to earnings. Let's get back to earnings because maybe the quietest trillion dollar company on the market reported this week, and that is Broadcom. David, revenue rose 20% on the year here. This is an AI fueled growth story that I think not a ton of people are talking about. But what did we learn about the chip business from Broadcom's report this week?
David Meier: We learned that the demand for AI chips remains high and is growing fast. Within its AI semiconductor revenue, that increased 46%, which easily outpaced the entire chip segment that it has a 17% growth. Quite frankly, that's good for Broadcom and anybody supporting that industry.
Jason Moser: Broadcom's chips, we talk about Invidia and the GPUs that allow these, like, AI LLMs to run. Broadcom's chips are more of a connective tissue. They're working in the background doing memory and networking for running these AI workloads. Their customers include the big tech companies we talk about more often on the show. For listeners that are less familiar with this space, why do these big tech companies need Broadcom chips?
David Meier: It's a great question that can be answered with a question. Do you want your AI to work? If so, you need to be able to spread the computing around the data center and stitch it back together to deliver the answers you're looking for. That's what Broadcom's Chips does. You know, that's pretty important. That's got to be done. If we want this to work, that Broadcom's chips make it happen.
Jason Moser: Then as we wrap up on the Broadcom topic, anything else in the report really stand out to you?
David Meier: No, that 46% growth in the AI semiconductor part of their business, that's phenomenal. I mean, it just really is. That steals the show.
Jason Moser: Let's wrap up with DocuSign. JMO, DocuSign's revenue. This may surprise you. It's actually up from a year ago, and many investors have been out on this COVID fallen angel. I've clicked on Docusigns. What's happening with the business?
David Meier: This is a bit of a good news, bad news quarter, and, we'll get into the good news here in a minute. But why is the stock down? It really is about the Billings and the subsequent guidance for the coming quarter. Now, it's worth noting that they actually raised guidance for the full year, but I think the outlook for the coming quarter maybe has the market wondering how that's exactly going to play out. Management misfecast the Billings number, and that came in a little bit later. It's worth noting. We've seen this before with this company. It is partly a billing story. Billings that's ultimately a timing issue, so it can be difficult to predict. I wonder if they shouldn't just eliminate from even guiding on Billings, to be honest with you. But I mean, talking about the good news, like you said, top line revenue up, we saw what, 8%? We saw $1 net retention rate of 101%. The positive trend there continues, total customers up 10%, surpassing 1.7 million in large customers. We talk about this metric a lot with Docusign large customers spending over $300,000 annually with the company grew 6% from the year ago quarter. I mean, I understand the billings concerns, but there was also a lot to like in the report.
Jason Moser: Then quickly, this company has been telling investors a turnaround story for a while now. You can lose a lot of money waiting on turnaround stories. We've got 20 seconds left. Yes, no, maybe are you buying the turnaround story at DocuSign.
David Meier: Cautiously optimistic. I think all of the metrics that matter point toward this company still growing, and that's ultimately encouraging.
Jason Moser: David Meyer and Jason Moser, gentlemen, we will see you a little bit later in the show, but up next, we're going to make sense of the economy. This strange economy with Bloomberg Stacey Vanek Smith stay right here. You're listening to Motley Fool Money.
Ricky Mulvey: You're listening to Motley Fool Money? I'm Ricky Mulvey. The economy is in an interesting spot. The labor market looks hot on the surface, but it's a different story for college grads. As tariffs came online, inflation actually cooled. Helping me make sense of this is Stacey Vanek Smith. You may have heard her on Marketplace or the indicator from Planet Money. She's the co host of a new show called Everybody's Business. VanikSmith joined me earlier this week to make sense of the job market and tariffs. Stacey Vanek Smith co hosts the podcast Everybody's Business from Bloomberg Business Week. Welcome to Motley Fool Money.
Stacey Vanek Smith: Thanks, Ricky. It's great to be here. It's great to see you.
Ricky Mulvey: What an interesting time to check in on the job market. What we're seeing is this very healthy picture at the surface. The U-6 rate, which includes marginally attached workers.
Stacey Vanek Smith: You're going deep. The U-6 Rates. Let's go all in, yes.
Ricky Mulvey: Because that's people who want to work a little bit more. It's the biggest, broadest understanding of the labor market. As we look at the April numbers, and we'll have new numbers by the time you're hearing this, but not when we're recording this. That was down April to April. You heard at the last press conference from Jerome Powell, the unemployment rate remains low, and the labor market is at or near maximum employment. Stacey, this sounds like a labor market that is firing all cylinders, but there seems to be a lot of issues and problems under the surface.
Stacey Vanek Smith: I completely agree. I think this is just one of the most interesting job markets I've ever seen. I don't think I would have ever even imagined a disconnect like this would be possible because everything from my training, and I've been looking at business and economic issues for a long time, you know, it usually the job market is something that you feel. There's a reason I think that people know about the unemployment number. It's probably the most easy to talk about of all economic indicators, I think. I feel like it's the one people pay attention to the most because it's the one you feel and affects our day to day lives. I tend to think of it as something that connects very easily with my lived reality. it just does not feel at all like the job markets in a good place. It feels like it's in a bad place, and all the signs would point to a bad job market. But you're so right. If you look at the numbers, this job markets super strong. Unemployment's near historic lows. We just got the Jolts report, maybe the best name of an economic report that I know, but it's like I think it's job openings, labor turnover, something. But that report came out, and it looks great. Like, job openings are up. Hiring went up more than expected. I don't know, Ricky. I don't know. I have some thoughts, but it's is such a disconnect.
Ricky Mulvey: The good news is you're on a podcast, so you're welcome to share those thoughts. The Jolts report is an interesting one. That's one that I've called before the take your job and stuff it index because it's people voluntarily quitting their job usually with the belief that you can go out and find another job if you're willing to do that. You've also done some reporting with college grads right now. You looked into how the job market is looking for entry level workers, which is at the most risk of getting cut out by AI, especially for white collar jobs. What have you heard from them?
Stacey Vanek Smith: I did I'm based in New York, and so Colombia had their graduation last week. I went up and talked to some of the graduates about how they were feeling. Everyone I talked to felt pretty bad about the job market, except for one woman who was in engineering, who said she felt like everyone she knew had a job. Everybody else I talked to, when I talked to, like, a dozen people, everybody felt terrible about it. The computer science graduates felt terrible about it. I talked to one young man and he had a job, but he said about 40% of his fellow graduates in computer science did not have jobs. The electrical engineering graduates I spoke to said the market was terrible. Everybody just said, Universities are cutting funding, research is going down. Our job for computer science getting replaced by AI, like you said, they were feeling terrible about the job market.
Ricky Mulvey: Can you make any sense of that disconnect then? You have this very healthy surface number. You have college grads feeling not great. In the last quarter, GDP went down. Economic growth slowed a little bit, and you would expect to see jobs really reacting to that and yet, it is a full employment picture in the economy, according to our Fed Chief.
Stacey Vanek Smith: Well, I think there are few things going on. I mean, the short answer is, I don't know. I just don't know. I'm so puzzled. A couple of things to keep in mind is that sometimes jobs are a little bit of a lagging indicator because companies will often wait a little bit to lay people off if times get tough. Especially because we had that really hot job market during the pandemic and so it was a lot. It was hard for businesses to find workers in a lot of cases so they might be more hesitant than they would have been before to let people go, just knowing that it can be hard to find good people. There's a lot of uncertainty right now. I think maybe companies are waiting and seeing a little bit, so maybe they are just holding their cards close to their vest and waiting to make moves. But, I mean, another part of it is maybe the sectors that are hiring versus the sectors that are experiencing layoffs. I looked into the Joel report a little bit, and sectors like healthcare and social assistance. Those are hiring. A lot of the jobs are that and business services. The ones laying people off are like manufacturing and leisure and hospitality. Specially leisure and hospitality, I think is pretty visible. It could just be the sectors that are hiring might be less visible than the other ones. Also, as humans, we tend to be oriented more toward the bad news a little bit. I do think there tends to be a little bit of a negativity bias sometimes. We went through such a trauma with COVID. So maybe that's part of it. I have trouble believing that, but I don't know. I'm looking at the numbers. I can't I don't know. It doesn't make any sense to me. What about you?
Ricky Mulvey: I mean, some of its vibe from looking at LinkedIn, I see a lot of, like, job searching posts on LinkedIn. But then I realize, there's a tremendous amount of bias in that sample. One of which is because LinkedIn has this feature of the open to work sticker.
Stacey Vanek Smith: Yes. That's a good point.
Ricky Mulvey: It used to be not as visible if someone was looking for a job or just posting on LinkedIn. Then there's also a selection bias there where if one is posting regularly on LinkedIn, they are more likely to be looking for a job, and then I think there was a lot of gains. I haven't looked at the JOLTS report, but I would guess, with the slowdown in white collar work, the only way that that makes sense is if there is some makeup in what you said as healthcare work and then service and hospitality, even if it's not travel and leisure. That part would be my guess.
Stacey Vanek Smith: We're also journalists, and media is a hot mess right now. We might have a skewed view because the people we know and our colleagues, it's a difficult moment for media.
Ricky Mulvey: I'll also be curious to see what the long-term effects of a lot of these moves are. One of my buddies, who is a software engineer, a lot of the work that he's done at an entry level is talent development for a lot of big organizations. When that's passed to AI, his point is you're just going to have a slow leakage because everyone who knows things is going to move to different organizations or retire. Then you're going to be stuck with this longer term problem where you've developed no internal talent to take on the roles that middle managers and senior leaders need to do at your company, and you've eviscerated your firm system to use a baseball metaphor. I don't know if that'll entirely be true. Businesses are pretty nimble, but I do wonder if a lot of these companies are creating long-term problems for themselves by getting rid of the entry level positions.
Stacey Vanek Smith: I think that's probably true. That could account for why it's such a hard moment for recent grads in computer science to get jobs because the one young man, I keep wanting to say the kid that I talked to, but he was not a kid. He was a graduate in computer science with a job that he had lined up, but he said a lot of the entry level coding jobs were just being done by AI. He said he was using AI to do a lot of his coding, and I was like, do you think you would have had an assistant for that? He's like, maybe. He certainly would have taken a lot more of my time and he, I think, was at a little bit of a higher level, so he was OK, but I think you're right. A lot of the jobs that would have gone to people starting out that helped to build a pipeline, that help to funnel people into a career, I think a lot of those, especially in certain fields are getting snapped up by AI, for sure.
Ricky Mulvey: The other biggest economic story is tariffs. This is a tough topic to pre-record, but we shall try. We've had to make some edits in the past to let the listeners know because you record something one day, and then it turns out by Friday, when you're listening, that things get a little trickier. But from your economic lens, what are your biggest questions about this tariff story right now?
Stacey Vanek Smith: Tariffs, I'm so interested in this, and simultaneously also, so a little bit scared of it. You're so right. I do a lot of work for Marketplace, the public radio show, and I was talking to my editor there, and she said they will not assign any feature stories on tariffs anymore because things change so fast. She's like, we keep having to kill stories. I think Trump has changed tariff policies more than 50 times since he's taken office, 50 times. Usually trade deals, these are slow creaking wheels in the economy. They spend years hammering them out, and then they're in place forever. These are sleepy topics. There's this trade economist, Chad Bown, who's wonderful, and he has this podcast called Trade Talks. I remember, during Trump won, calling him and he was just like, this used to be the sleepiest job, and everyone would be like, what is there to even talk about? Do you ever get tired of talking about NAFTA? Now his phone is ringing off the hook because there are so many changes. I think the change is one of the big stories, honestly, all the back and forth, all the uncertainty. I think that there's a lot of speculation as to why Trump is doing that. Part of it's just that he likes making deals, and he changes his mind, and it's the threat that he can use.
To me, what it shows us, the American consumer has been the powerhouse of the global economy for decades now. American consumer spending is two-thirds of the US economy, but it's also almost 20% of the global economy, and so that is a lot of muscle to flex. I think Trump likes having that muscle to flex, but also the entire world's economy has accommodated itself around us buying tons of stuff. If that actually changes or even changes a little, I think the ripples from that are going to be immense. If these tariffs do go through at the scale that I think Liberation Day introduced, then I think we're in for a real problem. I always think about Argentina because I've done some reporting on Argentina. They put a whole bunch of protectionist tariffs in place in 2010. It completely destroyed their economy, and that is what keeps me up at night, I guess.
Ricky Mulvey: This is subject to change, but consumers are probably going to spend if prices don't rise dramatically. Right now, the economy is pretty much in the soft landing that the Fed wanted a while ago throughout this tariff spat. You had maximum employment mentioned by Fed Chair Powell, and you're also pretty close to that 2% inflation rate.
Stacey Vanek Smith: I know.
Ricky Mulvey: 2.1%, we round it. I would have thought that through Liberation Day, through these tariff policies, you would see prices rise immediately. I know you've done reporting on small businesses that are trying to figure out how to adjust prices, but what do you make of inflation staying pretty cool even throughout these economic tariff spat, economic dispute, trade war, whatever you want to call it?
Stacey Vanek Smith: This was a big shock to me too. This was another layer of vibe session because when the inflation report was coming out, the consumer price index, the CPI, this last one, I was like, here we go, because the tariffs have now been in place for a few months. Even though there's been a lot of back and forth, businesses have been padding their prices, businesses have had to try to find a way to cope with all the change too. I talked to one florist who was putting a flat fee on all of his bouquets because the tariffs on each of his flowers, which all came from different countries, was changing all the time. I still can't wrap my head around the fact inflation came down, and everyone's like, well, it's just a month of reprieve because businesses were able to stockpile stuff, like Apple. Tim Cook airlifted 600 tons of iPhones out of China, airlifted it. There is potentially some lag there. I just don't know anymore. I feel curiouser. It's like the Through the Looking-Glass economy. It is like the Lewis Carroll economy. Nothing seems to match up with what I think. Every time a report comes out, I'm like, here we go. Now we're going to see the stuff that I know we will see, we don't see it, and it could be that there is a lag in the case of the CPI and inflation numbers, I don't know.
Ricky Mulvey: I need to get my own phrase, like Kyla Scanlon got with vibecession. I need the opposite because you got economic growth slowing down, and yet the job market still appears to be strong on the surface. Also, the market is pretty close to all-time highs.
Stacey Vanek Smith: I know.
Ricky Mulvey: As we record this week, the S&P is pretty much made up from all of the losses that it initially withstood from Liberation Day. Its traders have completely brushed it off, but I think we are in a more volatile market. Stacey, as we wrap up, any other economic story lines you're watching that you're curious about right now?
Stacey Vanek Smith: Well, the thing that I'm watching, and maybe I'm watching it because it's the thing that lines up with the reality I've been observing, but it is the bond market. The bond market does seem to be flashing red, especially with the big beautiful bill, the tax cut extension going through Congress, which could potentially add $4 trillion to the deficit. The bond market does seem to be flashing red; like you said, nothing else is. Yes, we've got to come up with our anti-vibecession word, Ricky, but I will be watching the bond market, along with the markets and the job's numbers and inflation.
Ricky Mulvey: Stacey Vanek Smith, she's got a show, Everybody's Business. You can find it on Podcasts. Appreciate your time and your insight. Thanks for joining us on Motley Fool Money.
Stacey Vanek Smith: Thanks, Ricky. Great to be here.
Ricky Mulvey: As always, people on the program may have interests 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 are sponsored content provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. Up next, Radar Stocks, stay right here. You're listening to Motley Fool Money.
I'm Ricky Mulvey, joined again by Jason Moser and David Meier. Before we get to Radar Stocks, I just want to point out, this is Rick Engdahl's final radio show. Rick is in the studio with us, the online studio, a longtime Fool, multimedia extraordinaire behind Rule Breaker Investing, Motley Fool Money, and Motley Fool Answers. He is a folk artist who somehow ended up at the Fool and an artist who's fixed problems that you, the listener, will never know existed. Rick, you are a total joy to work with. I will miss having you in recordings, and I look forward to seeing you in Colorado, man. I'm going to miss you. You'll hear him.
Rick Engdahl: Thank you very much, and I will miss all too.
Ricky Mulvey: Enough with the sentimentality. Let's get to stocks on our radar. That's promised every show, we got to do it. Our man behind the glass for the final time, Rick Engdahl is going to hit you with a question. Jason, you're up first. What are you looking at this week?
Jason Moser: Sure, a little company called Amazon, you may have heard of it, their ticker is AMZN, and coming off a pretty good core. But in news that is both fascinating and a little scary at the same time. Amazon's reportedly close to beginning testing human-like autonomous delivery methods, or in simpler terms, robots that deliver packages to your door. This is certainly quite futuristic and likely a ways away from becoming reality, but they're starting to test this stuff out. Given that it's working on humanoid robots for its warehouses, it's not that big of a leap to see how the technology could proliferate in time. Of course, agentic AI is behind it all in allowing these robots to actually understand and act on natural human language. It seems the future is now.
Ricky Mulvey: Rick, you got a quick question about Amazon or humanoid robots.
Rick Engdahl: Well, as you know, I tend to ask a little bit offbeat and witty questions. Since I have to hand this off, I'm going to have ChatGPT ask these questions for me, so I ask for some witty questions. Here you go. Is Amazon still a buy now or just a warehouse full of investor hopes?
Jason Moser: I think given the number of ways this company makes its money, I got to consider this thing a buy, still even today.
Ricky Mulvey: Real quick, David. Was that witty enough for you? Because it's your last show, I'll give you a 7 out of 10. David, quickly, what's on your radar this week?
David Meier: Mine is workflow management software company, Asana. Ticker is ASAN. This was a high flyer pre-pandemic that has come back down to Earth, and it's a more mature company today. It's still growing, but now it's generating cash, and it has a very bright future with its AI-related software that it's selling. Multiples are, I think, attractive today, so this is one that I am going to be looking at after letting go of the company in 2022.
Ricky Mulvey: Rick.
Rick Engdahl: This one's even better. Let's see. Is Asana the future of work or just working on its future?
Ricky Mulvey: Wow.
David Meier: It's a little of both because customers are using the software more and more, and that's a good thing for both the user and Asana.
Rick Engdahl: I appreciate you guys actually answering my questions there because they were really bad. I'm sure that AI will improve over time.
Ricky Mulvey: What are you putting on your watch list?
Rick Engdahl: I should, hold on a second, type in. Apparently, I'm going with Amazon.
Ricky Mulvey: We'll leave it there. Rick Engdahl, Jason Moser, David Meyer, thank you for being here. Thank you for listening to this week's Motley Fool Money.
JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Meier has no position in any of the stocks mentioned. Jason Moser has positions in Amazon and Docusign. Rick Engdahl has positions in Amazon and Tesla. Ricky Mulvey has positions in Lululemon Athletica Inc. The Motley Fool has positions in and recommends Amazon, CrowdStrike, Docusign, JPMorgan Chase, Lululemon Athletica Inc., and Tesla. The Motley Fool recommends Asana and Broadcom. The Motley Fool has a disclosure policy.
Broadcom (NASDAQ: AVGO) revealed must-know insights during a conference call with Wall Street analysts.
*Stock prices used were the afternoon prices of June 14, 2025. The video was published on June 16, 2025.
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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 $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,386!*
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*Stock Advisor returns as of June 9, 2025
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
Nvidia (NASDAQ: NVDA) CEO Jensen Huang thinks that data center operators will spend $1 trillion every year on chips and infrastructure by 2028 to meet growing demand for computing capacity from next-generation artificial intelligence (AI) models.
That spending will be an enormous tailwind for Nvidia, which supplies the world's most powerful data center chips for AI development. But the benefits will also flow through to the company's competitors, not to mention suppliers of other data center hardware components. There is an opportunity for investors to profit from this tech revolution, and buying an exchange-traded fund (ETF) might be the simplest way to do so.
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 »
The iShares Semiconductor ETF (NASDAQ: SOXX) invests exclusively in suppliers of chips and components, and its top holdings happen to be three of the biggest names in AI: Nvidia, Broadcom (NASDAQ: AVGO), and Advanced Micro Devices (NASDAQ: AMD). The ETF has outperformed the broader stock market since its establishment in 2001, and here's how it could turn an investment of $250,000 into $1 million within the coming decade.
Image source: Getty Images.
Some ETFs hold thousands of different stocks, but the iShares Semiconductor ETF holds just 30. It aims to offer investors exposure to companies that design, manufacture, and distribute semiconductors, primarily those that stand to benefit from megatrends such as AI.
Since the ETF was established in 2001, it has helped investors successfully navigate several tech revolutions driven by the internet, enterprise software, smartphones, and cloud computing. It's now heavily geared toward AI, and its top five holdings are among the biggest names in the hardware side of the industry:
|
Stock |
iShares ETF Portfolio Weighting |
|---|---|
|
1. Broadcom |
10.07% |
|
2. Nvidia |
8.74% |
|
3. Texas Instruments |
7.49% |
|
4. Advanced Micro Devices (AMD) |
7.30% |
|
5. Qualcomm |
5.83% |
Data source: iShares. Portfolio weightings are accurate as of June 4, 2025, and are subject to change. ETF = exchange-traded fund.
Nvidia's graphics processing units (GPUs) are the most popular data center chips among AI developers. The company's latest GPU architectures, Blackwell and Blackwell Ultra, are designed for a new generation of AI models capable of 'reasoning,' which means they spend time thinking in the background to generate the most accurate responses.
Jensen Huang says some of these models consume up to 1,000 times more computing capacity than traditional one-shot large language models (LMs), hence his lofty spending forecast mentioned earlier.
Amazon, Microsoft, and Alphabet are three of Nvidia's biggest customers. They are seasoned data center operators because of their industry-leading cloud platforms, but they are now racing to build AI infrastructure to meet surging demand from developers.
But these companies are also trying to diversify their hardware portfolios by designing their own chips in collaboration with suppliers like Broadcom, which helps with the design and manufacturing processes. Broadcom is targeting a $90 billion market opportunity for its custom AI accelerator chips by 2027, with just three customers already on board and more in the pipeline. Plus, the company is a leading supplier of networking equipment, which helps to extract the most performance from AI chips.
Then there is AMD, which released a line of GPUs to compete directly with Nvidia in the data center. This year, the company will start shipping its latest chips based on its CNA (Compute DNA) 4 architecture, which was designed to rival Blackwell. AMD is also already a leader in AI chips for personal computers, which could be a major growth area in the future.
Investors will also find other leading AI chip stocks, such as Micron Technology, Taiwan Semiconductor Manufacturing, and Arm Holdings, outside the top five holdings in the iShares ETF.
The iShares Semiconductor ETF has delivered a compound annual return of 10.4% since its establishment in 2001, outperforming the average annual gain of 7.9% in the S&P 500 over the same period. But the ETF has delivered an accelerated annual return of 20.9% over the past decade, driven by the accelerating adoption of technologies like cloud computing and AI.
If the iShares ETF continues to deliver annual gains of 20.9%, it could turn a $250,000 investment into over $1.6 million in the next decade. It won't be easy, but if AI infrastructure spending grows to $1 trillion per year by 2028, as Jensen Huang expects, it certainly isn't out of the question.
However, even if the ETF averages an annual gain of 15.6% over the next 10 years, that would be enough to turn $250,000 into $1 million:
|
Starting Balance |
Compound Annual Return |
Balance in 10 Years |
|---|---|---|
|
$250,000 |
10.4% |
$672,404 |
|
$250,000 |
15.6% (midpoint) |
$1,065,413 |
|
$250,000 |
20.9% |
$1,668,026 |
Calculations by author.
Last year, Huang said data center operators could earn $5 over four years for every $1 they spend on Nvidia's AI chips and infrastructure by renting the computing capacity to AI developers. If those economics are accurate, data center operators like Amazon, Microsoft, and Alphabet are likely to continue investing heavily in new infrastructure long into the future.
Plus, every new generation of AI models typically requires even more computing capacity than the last, so it's possible that Huang's spending forecasts will prove to be conservative when we look back on this moment. In any case, the iShares ETF could be a great addition to a diversified portfolio.
Before you buy stock in iShares Trust - iShares Semiconductor ETF, 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 iShares Trust - iShares Semiconductor ETF 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 $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*
Now, it’s worth noting Stock Advisor’s total average return is 792% — 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.
*Stock Advisor returns as of June 2, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, Texas Instruments, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom 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.
The U.S. equity market made a strong recovery in May 2025, fueled by robust earnings, decreasing trade tensions, and rising investor confidence in the U.S. economy -- a significant improvement compared to the market's performance in April 2025. Now, Deutsche Bank analysts have raised the target for the benchmark S&P 500 index from 6,150 to 6,550 by the end of 2025.
Given this renewed market optimism, artificial intelligence (AI) stocks are poised to be key beneficiaries of the next wave of capital inflows. Long-term investors can benefit from this trend by investing in these high-quality, artificial intelligence (AI)-powered companies that offer significant growth potential in the evolving market landscape. June is a good time to take a closer look at these three top AI stocks.
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Image source: Getty Images.
Nvidia (NASDAQ: NVDA) has reported stellar results for the first quarter of fiscal 2026 (ended April 27, 2025). The company reported revenue of $44.1 billion, representing a 69% year-over-year increase. Nvidia also generated a solid $26 billion in free cash flow.
Nvidia currently accounts for nearly 80% of the AI accelerator market. While a dominant presence in AI training workloads, the company is also focused on inference (real-time deployment of pre-trained models) workloads. The company is at the forefront of handling reasoning workloads (computationally intense and complex inference workloads) with its Blackwell architecture systems. Major cloud providers are already deploying these chips at a massive scale -- almost 72,000 GPUs weekly -- and plan to ramp up even more in the coming quarter. Hence, Blackwell is powering the next phase of AI where technology is thinking longer, solving problems, and giving better answers than just responding with pre-written answers.
Besides hardware leadership, Nvidia's robust software ecosystem has ensured developer lock-in and a sticky customer base. With the CUDA parallel programming platform, TensorRT for deployment, and NIM microservices for inference, clients find it extremely costly and time-consuming to switch to competitors. The company has also built a healthy networking business, with this segment's revenue growing 64% quarter over quarter to $5 billion in the first quarter.
Thanks to the technological superiority of its comprehensive ecosystem, Nvidia managed to provide a healthy outlook for fiscal 2026's Q2, despite its revenue being negatively affected by nearly $8 billion due to export restrictions for the Chinese market.
Nvidia stock trades at 31.8 times forward earnings, which is not a particularly cheap valuation. But considering its growth trajectory and competitive advantages, Nvidia is a smart AI pick now, even at elevated valuation levels.
Broadcom (NASDAQ: AVGO) has emerged as a prominent AI infrastructure player in 2025. The company's custom AI chips and networking solutions are being increasingly used by three prominent hyperscaler clients -- rumored to be Alphabet, Meta Platforms, and Chinese company ByteDance -- to optimize the execution of their specific workloads.
CEO Hock Tan expects the three hyperscalers to generate a serviceable addressable market (SAM) of $60 billion to $90 billion in fiscal 2027. Additionally, the company is engaging with four additional hyperscalers to develop custom chips, underscoring the even larger market potential.
Beyond custom chips, Broadcom is building the critical networking infrastructure that enables the training and deployment of large and powerful frontier AI models. The company's recent $69 billion acquisition of VMware positioned it as a key player in the enterprise software and hybrid cloud infrastructure space. With VMware's cloud orchestration and virtualization technologies, Broadcom can offer full-stack AI infrastructure solutions to its clients.
Broadcom stock currently trades at 37.8 times forward earnings. However, considering its critical role in building global AI infrastructure, the company is an excellent pick, despite the rich valuation.
Previously a cryptocurrency mining operator, CoreWeave (NASDAQ: CRWV) has now positioned itself as a prominent "AI Hyperscaler."
Unlike traditional hyperscalers such as Amazon's AWS, Microsoft's Azure, or Alphabet's Google Cloud Platform, which are primarily designed for general-purpose applications, CoreWeave's cloud infrastructure has been specifically designed for AI and machine-learning workloads. The company has established an extensive network of 33 purpose-built AI data centers across the United States and Europe.
Solid demand for CoreWeave's specialized AI-first cloud infrastructure is directly driving its exceptional financial performance. The company reported $982 million in revenue in the first quarter of fiscal 2025, up 420% year over year. At the same time, the company's adjusted operating income rose 550% year over year to $163 million. This highlights that the company is on its way to becoming profitable, despite the high level of capital expenditures typical in the AI data center business. The company had a massive $25.9 billion revenue backlog from multi-year contracts at end of the first quarter.
CoreWeave's strategic partnership with Nvidia is proving to be a significant competitive advantage. The deep relationship has given the company preferential access to Nvidia's cutting-edge GPUs and advanced networking technologies. With Nvidia having more than a $2.5 billion equity stake in CoreWeave (at current prices), the latter is practically assured of continued access to next-generation GPUs in the coming years.
CoreWeave stock currently trades at 37.5 times sales, which seems quite rich. However, the elevated valuation is justified considering the company's huge addressable market, robust contract backlog, and impressive financial performance, making it a buy 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 $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*
Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of June 2, 2025
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom 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.
Though Apple has been Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) top holding for several years, Warren Buffett has historically avoided tech stocks.
The renowned value investor has said that he can't forecast earnings for tech companies as they are less predictable, due in part to the changeable nature of technology, than other sectors. Buffett has historically preferred to invest in sectors like insurance, banking, utilities, energy, and consumer staples that have predictable cash flows, and whose industries don't change much over time.
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 »
Based on that philosophy, it's not a surprise that Buffett has mostly avoided artificial intelligence (AI) stocks. However, there are some that fit in well with his approach to investing -- buying companies with sustainable competitive advantages at attractive valuations.
Keep reading to see two stocks that fit the bill.
Image source: The Motley Fool.
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has one of the strongest economic moats in business history.
Google has had more than 90% market share in the web search industry for the last two decades. The brand is synonymous with search, and underpins Alphabet's larger, highly profitable tech empire that includes products like YouTube, Google Cloud, the Chrome web browser, and "moonshots" like the Waymo autonomous vehicle program.
Google Search has now reached a revenue run rate of $200 billion, and Google Services, of which search makes up most of its business, has an operating margin of more than 40%.
Alphabet is also still delivering steady growth with revenue up 12% in the first quarter.
You might think that a company like Alphabet with evident competitive advantages, solid growth, and massive profits would trade at a premium valuation, but that's not the case. Alphabet currently trades at a price-to-earnings ratio of just 18.6, a substantial discount to the S&P 500.
There are two primary reasons for the discount in valuation.
First, investors are fearful that the company could get broken up or face a substantial fine or a related punishment as it's been found to have a monopoly in both search and adtech. Separately, Alphabet also seems to be trading at a discount because of the risk that its search empire could be disrupted by an AI chatbot like ChatGPT or Perplexity.
While those are risks for Alphabet, shares have long traded at a modest valuation, meaning investors have historically underestimated the stock. Given that, investors may want to borrow from Buffett's mentality and buy Alphabet stock.
Berkshire Hathaway invested in Taiwan Semiconductor Manufacturing (NYSE: TSM) in 2022, buying $4.1 billion of the stock, but it sold out of that position completely just two quarters later. It wasn't clear why. It could have been because of the risk of an invasion by China into Taiwan.
Like Alphabet, Taiwan Semiconductor (also known as TSMC) has one of the strongest economic moats in the business world.
The company is the leading third-party semiconductor manufacturer with a market share of more than 50% in contract chips and more than 90% of advanced chips that are crucial for AI.
TSMC is the company that Apple, Nvidia, AMD, Broadcom, and other top semiconductor and tech companies turn to to manufacture their chips. In the first quarter, advanced chip technologies accounted for 73% of its total wafer revenue.
Its technological lead in a highly technical industry with high capital expenditures, and its customer relationships, give the company a significant competitive advantage. TSMC is also growing quickly, with revenue up 35% in the first quarter to $25.5 billion, and its operating margin improved to 48.5%, showing the company has significant pricing power.
Like Alphabet, TSMC is also cheaper than you'd expect for a company that's so dominant. The stock currently trades at a price-to-earnings ratio of 24, which is an excellent valuation for a business growing as fast as TSMC, and one that is a linchpin in the artificial intelligence boom.
It may never be clear why Berkshire Hathaway sold TSMC, but it's not surprising that Buffett's conglomerate bought it. In many ways, it looks like a classic Buffett stock.
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 $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*
Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of June 2, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Advanced Micro Devices, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Berkshire Hathaway, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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