The hottest part of the market right now is artificial intelligence (AI) infrastructure. Five companies are set to spend a total of a whopping $700 billion on AI data centers this year. Meanwhile, famed portfolio manager Cathie Wood has predicted that AI infrastructure spending will rise to $1.4 trillion in 2030.
This is great news for the chip industry, but four semiconductor stocks in particular look like no-brainer buys.
1. Nvidia
NASDAQ: NVDA
Key Data Points
With an estimated 90% market share of graphics processing units (GPUs), the main chips used to power AI workloads, Nvidia (NVDA 1.53%) is the dominant player in the AI infrastructure market. As such, spending growth is going to nicely benefit it. Meanwhile, its CUDA software platform, where most foundational AI code has been written, continues to give it a strong moat, especially in AI training.
2. Broadcom
NASDAQ: AVGO
Key Data Points
The biggest challenger to Nvidia's dominance is Broadcom (AVGO 1.63%), which is helping customers develop custom AI ASICs (application-specific integrated circuits). While ASICs lack the flexibility of GPUs, these hardwired chips can be more energy-efficient and cost-effective. Broadcom helped Alphabet create its popular Tensor Processing Units (TPUs), which it uses for its internal workloads, and is starting to let customers deploy. The growth of TPUs has been helping drive Broadcom's growth, as has its networking portfolio.
Meanwhile, hyperscalers have been increasingly turning to Broadcom to help them develop their own custom chips. With the AI infrastructure market growing and ASICs taking share, Broadcom should see explosive growth.
3. Micron
NASDAQ: MU
Key Data Points
For AI chips to achieve peak performance, they need to be packaged with high-bandwidth memory (HBM), which is a specialized form of DRAM (dynamic random-access memory). With the data center buildout, demand for HBM is exploding. However, HBM needs upward of three times the wafer capacity of ordinary DRAM, which is causing an overall DRAM shortage.
As one of three big DRAM makers -- along with Korean companies SK Hynix and Samsung -- Micron (MU 3.21%) is seeing both huge revenue growth and ballooning gross margin. With demand for DRAM expected to outstrip supply into the foreseeable future, Micron is set to benefit from an ongoing supercycle for years to come.
Image source: Getty Images.
4. Taiwan Semiconductor Manufacturing Co.
With a virtual monopoly on the manufacturing of advanced logic chips, like GPUs and AI ASICs, Taiwan Semiconductor Manufacturing (TSM 4.96%) is set to ride the AI infrastructure spending wave. Best of all, it doesn't matter how much share AI ASICs or GPUs take, as it manufactures both.
At the same time, the company's position has given it strong pricing power, with reports that it has already informed customers of upcoming price hikes for the next four years. With higher prices and TSMC building out more capacity, the stock is set to be a continued AI infrastructure spending winner.
