The biggest trend driving the market right now is artificial intelligence (AI), and with the game-changing technology still in its early innings, there's no reason to think this won't continue over the next decade.
Let's look at two leading AI stocks to buy and hold for the next decade.
Image source: Getty Images.
1. Nvidia
The biggest AI winner thus far has been Nvidia (NVDA 0.98%), and the company is still one of the best positioned to benefit over the next decade. The company's graphics processing units (GPUs) have become the backbone of AI infrastructure, holding an approximate 90% share in the space. However, Nvidia isn't sitting still, as seen by two recent important acquisitions.
Its recent acquisition of SchedMD, the developer of Slurm, only widens its software moat. Slurm is an open-source software platform that's used to orchestrate AI chips, and while Nvidia will keep it open source, by controlling the platform, it can ensure that its chips will be managed the most efficiently using the platform.
NASDAQ: NVDA
Key Data Points
The company also made a smart deal for Groq, where it signed a technology license and will bring on the bulk of its employees. Groq was founded by the makers of Alphabet's popular Tensor Processing Units (TPUs) and has developed a chip designed specifically for AI inference called language processing units (LPUs). Nvidia will be able to tightly integrate these chips with its software and networking system to better take on the inference market, where cost-per inference becomes a much more important factor.
Nvidia's position in the AI data center market stems from the ecosystem it has built around its chips. Its CUDA software platform is where all early AI foundational code was written, and today, the libraries and tools built on top of CUDA to optimize its chips for AI workloads create a huge moat, especially when it comes to large language model (LLM) training. In addition, its proprietary NVLink interconnect system enables its chips to function as a single, powerful unit, discouraging the mixing and matching of chips in AI clusters.
Overall, Nvidia is set to continue to reap the rewards from the ongoing AI race and data center buildout that is likely to continue well into the future.
2. Taiwan Semiconductor Manufacturing
Another company uniquely positioned to benefit from the ongoing AI data center buildout is Taiwan Semiconductor Manufacturing (TSM +0.83%). TSMC is the largest semiconductor manufacturer in the world and has a tight grip on making advanced chips, like GPUs.
Making advanced chips is a difficult process, and Nvidia's competitors have struggled to manufacture advanced chips with high yields at scale. In fact, Reuters recently reported that Nvidia decided, after testing, not to go forward with using Intel's 18A production process. Rival Samsung, meanwhile, after struggling with yields, has turned its focus more toward high-bandwidth memory chips, a market that TSMC does not participate in directly.
NYSE: TSM
Key Data Points
This has made TSMC arguably one of the most important companies in the AI value chain, as without it, chip designers like Nvidia would not be able to produce their chips at scale. As such, TSMC has become a valued partner, working closely with advanced chipmakers to help them shrink the nodes of their chips and increase capacity to meet soaring demand.
The company sees AI chip demand increasing at an over 40% compound annual growth rate (CAGR) over the next few years, and it has also been raising prices for its services. This includes a nice price hike scheduled for 2026.
Overall, TSMC is one of the best-positioned companies to benefit from the ongoing AI infrastructure buildout. Meanwhile, it is set to win no matter which chipmakers gain share over the next decade.
