If you've got some undeployed cash that you're looking to invest in the stock market, I've got two fantastic stocks that look like excellent buys. However, there is a disclaimer on these stocks: you'll need to hold them for at least three to five years to get the full benefit.
The tailwinds in the industries that these two operate in are long-term trends. However, the stocks will be disrupted occasionally due to fears of how the economy is doing, President Donald Trump's tariff plans, or some other unknown issue that has yet to be uncovered.
If you can keep that mindset, then I think that Nvidia (NVDA +1.73%) and Taiwan Semiconductor Manufacturing (TSM 0.84%) are top buys right now. If you've got $1,000 to invest, I can think of few better stock picks, and I believe that over that three- to five-year time frame, it's not unreasonable to expect your money to double.
NASDAQ: NVDA
Key Data Points
Both companies' growth trajectories are larger than tariff impacts
Both Nvidia and Taiwan Semiconductor are at the center of a major technological shift: artificial intelligence (AI). AI has the power to transform how we do business and tasks in our daily lives and is likely the biggest innovation since the internet became widespread. This makes this trend a must-invest area, and focusing on suppliers is a great way to make a solid profit.
TSMC and Nvidia make key components in the AI value stream and are making lots of money from the trend right now. Nvidia's graphics processing units (GPUs) are the computing muscle behind many of the AI models that are used today. These devices can process multiple calculations in parallel, making them more suited for arduous computing tasks like AI. Additionally, GPUs can be combined in clusters to further amplify that effect, which is why you'll hear about AI hyperscalers placing over 100,000 GPUs in a data center.
Nvidia may design and combine components to produce a GPU, but it doesn't make the chips that go into them; that's where Taiwan Semiconductor shines.
TSMC is a chip fabricator and takes designs from clients like Nvidia or Apple and produces them on their behalf. This is a great position because TSMC can sell to companies competing against each other, as it does with Nvidia and Advanced Micro Devices. Although most of its chips are produced in Taiwan, which was a target of Trump's tariffs, it is working on expanding production in the U.S. However, semiconductors are specifically exempt from tariffs, so this isn't a concern right now -- but it could be at some point.
NYSE: TSM
Key Data Points
Taiwan Semi recently announced a $100 billion investment in U.S. production facilities, which will include three fabrication facilities, two packaging facilities, and one research and development center. This announcement put TSMC in Trump's good graces, as the company is doing exactly what he wants: moving production capabilities within U.S. borders.
The investment case for these two is strong, but what kind of growth can investors expect?
Both Nvidia and Taiwan Semi expect monster growth over the next five years
Management teams for Nvidia and Taiwan Semiconductor have openly discussed their growth trajectories.
Right now, Nvidia estimates that data center capital expenditures reached around $400 billion. However, Nvidia CEO Jensen Huang expects that figure to rise to $1 trillion by 2028. Over the past 12 months, Nvidia generated around $130 billion in revenue. So, if Nvidia could maintain its current revenue share of the build-out expenses (around 33%) and the projection comes true, Nvidia's revenue could double by 150% from now to 2028, when it would be producing $325 billion. Even if its market share slips to a quarter of total buildout spend, Nvidia's revenue would still nearly double in four years, which would be excellent news for shareholders.
Taiwan Semiconductor's management sees a similar growth trajectory. Over the next five years, it expects AI-related revenue to increase at a compound annual growth rate (CAGR) of 45%. This boosts its overall growth rate, which management believes will be near 20%. If TSMC can grow its revenue at a CAGR of 20% over the next five years, that would mean its revenue would rise around 150% in the next five years.
That's huge growth for both of these companies, and with each off their all-time highs by around 30%, now is an excellent time to scoop these two up.
