Finding stocks that have the potential to set you up for life is no easy task. Currently, there's no better place to find that type of massive upside potential in the stock market than in the artificial intelligence (AI) sector. For investors looking to maximize their returns, I'm incredibly bullish on Nvidia (NVDA 0.01%) and Broadcom (AVGO 1.04%). Although they've delivered strong gains already in recent years, I can think of few better stocks to buy than these two.
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Nvidia and Broadcom are slated to make a fortune from the AI buildout
Although the market may be growing a bit wary about the vast sums of money being spent on AI infrastructure, the reality is that the hyperscalers cannot afford to underspend. Right now, less than 20% of all businesses are using AI, according to research done by The Motley Fool. AI resources are still generally hard to come by, so there's clearly a need to continue spending more on AI computing capacity because demand now isn't even close to what it's expected to be a few years down the road.
This means that there's still a ton of growth likely ahead on the capital expenditures front, and Broadcom and Nvidia are slated to cash in.
Nvidia makes graphics processing units (GPUs), while Broadcom partners directly with hyperscalers to make customized AI chips specifically designed for the workloads they'll face. Nvidia and Broadcom are going after the same market, but there is plenty of opportunity for both of them, as each device type has its strengths and weaknesses.
NASDAQ: NVDA
Key Data Points
By 2030, McKinsey & Company expects cumulative data center capital expenditures to reach $7 trillion. That's monster growth, and considering that the big four AI hyperscalers alone are spending around $650 billion in infrastructure this year, that figure seems reasonable. Nvidia believes global data center capital expenditures will reach $3 trillion to $4 trillion annually by 2030, which is a more aggressive projection than McKinsey & Company's. But Nvidia has far more information than the average investor about orders being placed and what AI demand will look like, and I think giving Nvidia the benefit of the doubt here would be a wise move.
A market of that size can lead to monstrous growth for both companies, and each is already experiencing it now.
Both companies are putting up impressive growth figures
During its last quarter, Nvidia's revenue rose 73% year over year, and management's projection is for its revenue to grow by 77% in Q1. In a vacuum, those numbers might sound incredible, but Broadcom outdid Nvidia.
During Broadcom's fiscal 2026 Q1, which ended Feb. 1, its AI semiconductor business grew at a 106% pace to $8.4 billion. Next quarter, management expects 76% year-over-year growth. Its AI semiconductor business also includes connectivity switches, so this segment has multiple products beyond its custom AI chips. For fiscal Q2, Broadcom expects its custom AI chip businesses to grow by 140% year over year.
NASDAQ: AVGO
Key Data Points
That growth isn't expected to slow down anytime soon. By the end of 2027, Broadcom expects its AI chip business to deliver over $100 billion in revenue. If the company can live up to that forecast and keep growing beyond it, the stock should follow suit and deliver years of impressive returns.
While Broadcom is growing faster than Nvidia, Nvidia is still a force to be reckoned with. Nvidia is far larger and has a firm grip on the AI training chip market. Management still isn't factoring the possibility of any exports to China into its revenue growth guidance, as its access to that market is unclear. But if its sales there resume in earnest, China could be another catalyst that pushes Nvidia's stock higher over the next few years.
Both stocks are well positioned to capitalize on massive AI infrastructure spending, and I think each could generate life-changing returns for shareholders over the next few years. While both have great performances behind them, don't underestimate what they could do next.
