It cannot be denied; Nvidia is in a historic period, but here are 2 tech stocks I’d buy instead

There hasn’t been a more talked about act on the market in the past two years than Nvidia (NVDA -4.08%). The rise of artificial intelligence (AI) has made Nvidia’s graphics processing units (GPUs) one of the most sought-after products due to their role in shaping AI.

It also made Nvidia one of the best stocks on the market. From September 2022 to early September 2024, its stock rose more than 750% — 18 times more than S&P 500his earnings during that period. No easy feat for a company whose market cap was around $300 million at the time.

Nvidia also posted financial results to back up the hype, growing revenue and operating income by 122% and 174%, respectively. The praise is well deserved. That said, there are two companies that I would be more likely to invest in right now because there seems to be more long-term certainty around their businesses.

1. Taiwan Semiconductor

Taiwan Semiconductor Manufacturing Company (TSM -4.20%) (TSMC) is one of the world’s leading technology companies, despite not being a household name like other big tech companies. It operates the largest semiconductor (chip) foundry in the world, producing chips for the specific needs of companies.

Companies come to TSMC with a chip design, and TSMC manufactures the chip at the company’s request. It may sound simple enough, but making chips with that level of precision and at that scale requires complex processes (to put it mildly) and advanced technology that no other company has been able to match.

One company that relies heavily on TSMC is Nvidia. TSMC makes Nvidia chips for its GPUs, data center processors and other AI-related chips. Without TSMC’s manufacturing capabilities, there is a strong case that Nvidia’s products would have an impact on quality. This is largely why Nvidia hasn’t embraced other chipmakers and is comfortable relying on TSMC.

Nvidia’s dependence on TSMC is why I prefer it at this stage. Much of Nvidia’s high valuation is based on expectations of what it is should becomes, and its ability to do so will depend on TSMC’s production capacity. The ceiling may not be as high for TSMC, but its trajectory is seemingly more reliable.

TSMC also has an attractive dividend that reduces some of the risk of the investment. Its dividend yield is currently above the S&P 500 average, making it easier for investors to stay patient during tough times and have confidence in its long-term potential.

2. Apple

Apple (AAPL -0.70%) it didn’t accidentally become the world’s most valuable public company; it took decades of discontent and disciplined execution. With Apple’s track record of discipline, it was surprising why so many Wall Street investors were seemingly shocked, as Apple has remained relatively quiet during the recent AI mania.

Apple has a history of letting other companies create something and then venturing into that area with a much better design and making it easier to use. We’ve seen it with smartphones (iPhone), tablets (iPad), smartwatches (Apple Watch), virtual reality (Apple Vision Pro), and many other tech hardware.

Of course, Apple isn’t just in the business of copying others; rather, the tech giant does a great job of letting others be the guinea pigs and then learning from their mistakes before bringing their own products and services to market. This seems to be the same approach they take with AI as well.

Apple hasn’t rushed into AI like most other big tech companies. In fact, it doesn’t even refer to its future AI capabilities as “artificial intelligence”; is “Apple Intelligence”. (It’s just smart enough to work.) Nvidia is in a volatile position; as fast as it has risen, it can fall if it does not meet expectations. Apple doesn’t have quite the same risk, though it’s not immune to volatility.

AAPL earnings data (quarterly annualized growth) by YCharts.

Ideally, Apple Intelligence will give Apple an immediate financial boost as consumers rush to buy its next-generation products because they will only be accessible on newer hardware models. After a decline in Apple’s smartphone market in recent years, I’m sure the company wouldn’t mind an extra lift from somewhere.

Short-term momentum aside, there aren’t many companies I have more faith in long-term than Apple. The upside always seems to outweigh the potential downside.