Tesla (TSLA -1.11%) is more than just an auto company. It has aspirations to be a serious powerhouse in the artificial intelligence (AI) world as well. Being a dominant force in AI requires having powerful supercomputers to train models, which is where Tesla's Dojo computer comes in. The first Dojo computer cost around $300 million to build and is powered by 10,000 GPUs.
However, Tesla recently announced plans to build another one, expected to cost $500 million, at its Gigafactory in Buffalo, New York. While Tesla will benefit from this increased computing power, there are two other winners that investors should be aware of. With both of them at the heart of the AI movement, they may make a better investment than Tesla.
Nvidia makes the GPUs for Tesla's Dojo Computer
The hallmark of an AI data center is the presence of thousands of graphics processing units (GPUs). These hardware pieces are perfect for crunching loads of data, which is necessary when creating an AI model.
Nvidia (NVDA 6.18%) supplied the GPUs for the first Dojo computer, and with its best-in-class GPUs, it will benefit from the sales of thousands more. The GPUs will represent a significant portion of the $500 million cost, so it's not unreasonable to assume Nvidia will capture the lion's share of the revenue.
Image source: Tesla. Image of Tesla Dojo Computer.
In the third quarter of fiscal 2024 (ending Oct. 29, 2023), Nvidia posted revenue of $18.1 billion. For reference, if this $500 million sale happened in Q3, it would have made up about 3% of revenue.
While that's not a massive chunk, continual buildout of AI supercomputers is vital for Nvidia, as it must continue growing to make its premium valuation make sense.
The chipmaker behind the GPU is another great investment
Another beneficiary of this buildout is one of Nvidia's suppliers, Taiwan Semiconductor Manufacturing (TSM 1.26%). Taiwan Semiconductor is the world's largest contract chip manufacturer. This means it doesn't make chips for its products; it takes in designs from other companies (like Tesla and Nvidia) and makes chips to their specifications.
Tesla uses its Dojo computers to train AI models and full self-driving capability. The benefit for Taiwan Semiconductor is two-fold, as it produces chips for both Nvidia's GPUs and Tesla's vehicles. While Taiwan Semiconductor's CEO C.C. Wei openly admits that semiconductors only make up a small fraction of the cost of a data center, the demand is high enough that it expects AI chip revenue to grow at a 50% compound annual growth rate (CAGR).
This will allow these chips to make up a high-teens percentage of TSMC's revenue by 2027.
Both companies are set to benefit from Tesla's Dojo computer buildout, but this is just the beginning.
On Tesla's Q4 conference call, CEO Elon Musk mentioned plans for additional Dojo computers, discussing Dojo 1.5, Dojo 2, Dojo 3, and more if the investment continues to pay off.
That's huge news for Nvidia and Taiwan Semiconductor, as they need to continue seeing demand for supercomputers grow at the current pace.
This second Dojo computer won't be built overnight, so the business boosts it's providing each company won't be recognized for a while. But it's a key insight into a trend taking the business world by storm.
As a result, having some exposure to key suppliers like Nvidia or Taiwan Semiconductor is a smart investing strategy as the world learns how to integrate AI.
