If I could only buy 1 artificial intelligence (AI) semiconductor stock in the next decade, it would be this one (hint: it’s not Nvidia)

Believe it or not, semiconductor chips are used for applications far beyond powering smart devices and electronics. Because of this, it’s not entirely surprising that semiconductor stocks have been particularly big winners as the artificial intelligence (AI) revolution moves forward.

Among the top chip companies, Nvidia (NASDAQ: NVDA) he stands out as the 800 pound gorilla right now. But with the stock up 651% since August 2022, investors may want to consider what opportunities exist in the chip space beyond Nvidia.

Let’s examine how Nvidia propelled itself to become the world’s largest chip business and assess why another stock might be the best long-term buy.

Nvidia is great but…

Chips known as graphics processing units (GPUs) are used for a range of artificial intelligence-based applications, such as training large language models, self-driving software development and machine learning. Nvidia’s GPU lineup includes its wildly popular H100 and A100 chips, and the company’s new Blackwell series is already tipped to be a smash hit (but more on that later).

Indeed, Nvidia seems downright unstoppable, with a nearly 80% share of the AI-powered chip market.

However, I caution investors against going all-in on a single company — even if it’s the de facto leader. Below, I’ll break down why Nvidia’s heyday may be coming to an end.

The competitive landscape is starting to intensify

Many of the world’s largest companies are currently Nvidia customers. In fact, many “Magnificent Seven” companies such as Microsoft, adze, Amazon, Metaand Alphabetwere touted as some of Nvidia’s biggest customers.

While a client list of this caliber is impressive, I wonder if it’s encouraging. Tesla CEO Elon Musk recently explained to investors that his electric vehicle company is exploring ways to compete more directly with Nvidia as Tesla tries to move away from a heavy reliance on H100 chips.

In addition, many of the aforementioned Magnificent Seven companies have made it clear that they too are investing significantly in capital expenditures (capex) to develop in-house chips.

For example, I see Amazon’s $11 billion data center infrastructure project as a clear sign that the company is looking to increase investment in Trainium and Inferentia chips.

What’s amazing is that all the competitors discussed above are tangential to Nvidia. Semiconductor design is not a core component of any business.

Perhaps Nvidia’s most direct competitor at the moment is Advanced microdevices (NASDAQ: AMD). While AMD’s growth during the AI ​​revolution wasn’t even in the same universe as Nvidia’s, I think that dynamic could soon change.

The story continues

Nvidia’s momentum has hit some turbulence following a recent announcement that new Blackwell chips will be delayed due to a design flaw. While I suspect Nvidia will still sell off these chips when they finally hit the market, I think AMD has an opportunity to capture some new business right now.

With all that said, I think it’s only a matter of time before Nvidia’s growth starts to slow down. Subsequently, I wouldn’t be surprised to see the stock give back some of its record gains.

This company will win regardless

Given the sheer number of competitors and the risks involved in marketing new products and services, you’re probably wondering which chip stock I actually have full confidence in.

Enter the chip manufacturing company Taiwan Semiconductor (NYSE: TSM). You see, Nvidia, AMD and many others make very little of their own production. Instead, after designing the state-of-the-art hardware, they outsource the actual manufacturing capability to Taiwan Semiconductor.

Taiwan Semiconductor manufactures products for Nvidia, AMD, Amazon, Broadcom, Intel, Qualcomm, Sonyand many others.

According to data from Market.us, the total addressable market (TAM) for the global AI chip market is expected to grow at a compound annual growth rate (CAGR) of 31.2% between 2024 and 2033 — reaching a size of 341 billion dollars.

To me, Taiwan Semiconductor will benefit regardless of which company sells its chips. Moreover, given the high likelihood of additional GPUs coming to market from big tech and the bullish forecast for the AI ​​chip market in general, I see Taiwan Semiconductor as a clear winner over the next few years.

Investors with a long-term horizon looking for alternatives to AI’s most obvious opportunities among megacap technology may want to seriously consider a position in Taiwan Semiconductor right now.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, chief executive at Alphabet, is a member of the Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing and Tesla. The Motley Fool recommends Broadcom and Intel and recommends the following options: long $395 January 2026 calls on Microsoft, short $35 August 2024 calls on Intel, and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

If I Could Buy Only 1 Artificial Intelligence (AI) Semiconductor Stock in the Next Decade, It Would Be This (Hint: It’s Not Nvidia) was originally published by The Motley Fool