Custom AI Chips Are the Next Trillion-Dollar Opportunity. Here Are 2 Stocks to Buy Now.
At present, Nvidia‘s graphics processing unit (GPU) is the primary bit of hardware used by the artificial intelligence (AI) industry. But there are signs that won’t be the case for too much longer. Google’s parent company, Alphabet, has introduced its own competitor to the GPU with its Tensor Processing Unit (TPU), which is better suited…
At present, Nvidia‘s graphics processing unit (GPU) is the primary bit of hardware used by the artificial intelligence (AI) industry. But there are signs that won’t be the case for too much longer.
Google’s parent company, Alphabet, has introduced its own competitor to the GPU with its Tensor Processing Unit (TPU), which is better suited to Google Gemini, the company’s premier AI program.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Anthropic, the AI company responsible for Claude, has begun eagerly adopting the TPU. It’s hoping to bring 1 gigawatt of computing power online with it this year.
OpenAI, the creator of ChatGPT, is doing the same and has been looking to move away from Nvidia hardware.
And, of course, you have companies like Advanced Micro Devices and Qualcomm presenting a more upfront threat to Nvidia, with direct competitors to its chips.
The AI industry is moving toward custom-designed chips more catered to the needs and goals of their particular AI programs and away from the jack-of-all-trades that is Nvidia’s GPU.
Both of the companies in this article will be major beneficiaries of that change.
Image source: Getty Images.
The one company helping Alphabet, OpenAI, and Anthropic go their own way is Broadcom(NASDAQ: AVGO). The computer hardware design and production company has co-designed the TPU chip for Google for all seven of its generations.
It’s also targeting $100 billion in AI chip revenue by the end of 2027. It’s already anticipating that revenue to double over the course of 2026 to $8.4 billion, so that number is likely not all that much of a stretch.
Late last year, the company locked in a multiyear design partnership with OpenAI that will see it help the company develop 10 gigawatts of custom AI accelerators.
Shortly thereafter, Anthropic announced it would be adding 1 gigawatt of computing power through Google/Broadcom TPU chips through 2026.
That’s not all; Microsoft, Amazon, and Meta Platforms also work with Broadcom, and once you factor those in, it makes sense why the company is projected to control a 60% share of the AI server compute application specific integrated chip (AISC) market by the end of 2027.
And Broadcom’s latest results are about what you would expect for a company like it.
Net revenue for 2025 grew 24% over 2024 to $63.8 billion, and its diluted earnings per share (EPS) grew 40% over 2024 to hit $6.82.
The company also maintains a strong net profit margin of 36.57% and a healthy balance sheet with a debt-to-equity ratio of 0.83.
Broadcom is one to consider if you want to invest in the move away from Nvidia’s general-purpose GPU toward custom chips for the major AI algorithms.
All of those chips will need to be manufactured by someone somewhere. Broadcom makes some of the chips it designs, but it doesn’t have the manufacturing capacity to meet all of its demand.
For that, it turns to Taiwan Semiconductor Manufacturing (NYSE: TSM), the world’s dominant pure-play chip foundry. It controls 72% of the market while Samsung sits at a distant second with 7% market share.
Taiwan Semiconductor is why Taiwan makes 60% of the world’s semiconductors and 90% of its advanced chips.
As a pure foundry, it’s kind of the opposite of Broadcom. Taiwan Semiconductor doesn’t design any of the chips it manufactures. But it does manufacture chips for pretty much every big name in the chip industry, like Apple, Nvidia, Advanced Micro Devices, Qualcomm, and Broadcom itself, among others.
And given that it’s basically the world’s factory for not just AI chips but semiconductors in general, Taiwan Semiconductor has a gargantuan financial footprint.
For the whole of 2025, it brought in revenue of $122.42 billion, up 35.9% over 2024. Its diluted EPS surged 46.4% over the same time frame.
And it maintains an incredible net profit margin of 45% along with an incredible debt-to-equity ratio of 0.19.
Broadcom might be designing the chips, but Taiwan Semiconductor makes them. Put them both together, and you have the chance to profit no matter which company needs custom hardware for its latest and greatest AI algorithm.
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $497,659!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,095,404!*
Now, it’s worth noting Stock Advisor’s total average return is 912% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of March 26, 2026.
James Hires has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Forget GPUs: Custom AI Chips Are the Next Trillion-Dollar Opportunity. Here Are 2 Stocks to Buy Now. was originally published by The Motley Fool
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
