Big Tech's $4 Trillion Artificial Intelligence (AI) Spending Spree Could Make These 2 Chip Stocks Huge Winners

Key Points

• AI infrastructure spending is estimated to reach up to $4 trillion in five years.

• As the leading chip supplier for data centers, Nvidia is well positioned to benefit.

• Broadcom just won a $10 billion custom chip deal with a major AI customer.

• 10 stocks we like better than Nvidia ›

Leading tech companies are spending billions on data centers to support growing demand for artificial intelligence (AI) compute capacity. AI chip leader Nvidia (NASDAQ: NVDA) recently said it expects spending on AI infrastructure to reach between $3 trillion to $4 trillion by 2030.

This estimate suggests the current bull market for tech stocks could extend for several more years. If your portfolio is light on AI exposure, here are two chip stocks to consider buying right now.

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Image source: Getty Images.

1. Nvidia

For investors looking for the best chip stock to benefit from this opportunity, Nvidia still has to be considered the top choice. It's the most valuable company in the world for a reason. It continues to grow at impressive rates, as its graphics processing units (GPUs) remain the benchmark for AI workloads.

Nvidia's latest Blackwell chips are experiencing robust demand. In the most recent quarter, management said the Blackwell platform grew 17% sequentially over the previous quarter. Strong demand contributed to the company's total revenue increase of 56% over the year-ago quarter.

Nvidia's largest customers are the big tech giants, including Meta Platforms, Amazon, and Google Cloud. These companies have tens of billions of dollars they can afford to spend on AI infrastructure, which benefits Nvidia. Google alone plans to spend $85 billion this year on data centers and technology to support its growth.

Nvidia's advantage can be seen in how leading cloud service providers are transitioning to Nvidia's new Blackwell GB300. Management described it as a "seamless" upgrade over the shared architecture, software, and physical footprint of the GB200. The GB300 is a liquid-cooled rack that houses 72 Blackwell Ultra GPUs and 36 Arm-based Nvidia Grace central processing units (CPUs).

Large data centers install thousands of these racks to run AI training and inference workloads, and Nvidia's shareholders are cashing in. "The scale and scope of these build-outs present significant long-term growth opportunities for Nvidia," CFO Colette Kress said on the fiscal Q2 earnings call.

Nvidia is one of the most profitable companies in the world, with $86 billion in trailing-12-month net income. The high margins Nvidia earns on its data center business should translate to significant earnings growth and return potential for investors as spending on AI infrastructure increases.

Image source: Getty Images.

2. Broadcom

For a second chip stock that complements Nvidia, investors could consider Broadcom (NASDAQ: AVGO). It supplies networking, software, and specialized chips for a range of markets, including smartphones, industrial applications, and data centers.

The demand for high-performance computing in data centers is driving significant growth for the company. Broadcom's custom AI accelerators are in high demand due to their power efficiency and performance relative to Nvidia's costlier, and more power-hungry GPUs.

Both Nvidia and Broadcom can thrive because the AI opportunity is that big. There are simply not enough chips to go around. Companies have literally begged Nvidia for more GPUs, and when they can't get them, they consider alternatives. Broadcom just recently announced a $10 billion deal to build custom AI chips for an undisclosed customer, but analysts believe that customer is ChatGPT's OpenAI.

Broadcom stock is surging, up 55% year to date, and for good reason. Business is booming. AI-related revenue grew 63% year over year to $5.2 billion, or about a third of its total business, and management expects AI chip revenue to accelerate next quarter.

Meanwhile, Broadcom's networking products, such as high-performance Ethernet switches, are also in high demand, since AI workloads require massive data throughput and transfer speeds. Broadcom also has a high-margin infrastructure software business that is used to monitor and secure data center operations.

The company has a long history of delivering profitable growth that rewards shareholders, and it's certainly delivering for investors as the AI boom heats up. Revenue is expected to increase 22% this year, before accelerating to 32% next year. Investors should expect the stock to outperform the market over the next five years.

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John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.