The Motley Fool·2025-12-19 06:30Core Viewpoint - Continued investment in artificial intelligence (AI) hardware is expected to drive growth in chip stocks, particularly for Nvidia, AMD, and Taiwan Semiconductor Manufacturing [1][2]. Group 1: Nvidia - Nvidia has been a leading performer in the AI sector, benefiting significantly from increased spending on data center capital expenditures, projected to reach record levels in 2026 [5][8]. - The company reported a 63% year-over-year revenue increase and a 67% rise in diluted earnings per share (EPS) for the third quarter of fiscal 2026 [7]. - Nvidia's GPUs are in high demand, with CEO Jensen Huang stating that the company is "sold out" of cloud GPUs, indicating strong market positioning [7]. Group 2: AMD - AMD has not matched Nvidia's success in the AI market but is working on improving its technology and partnerships to enhance its competitive position [8][10]. - The company aims for a 60% compound annual growth rate in its data center business over the next five years, a significant increase from the 22% growth reported in the most recent quarter [10]. - There is potential for AMD's stock to rise as the market begins to recognize its improving prospects [11]. Group 3: Taiwan Semiconductor Manufacturing - Taiwan Semiconductor is the largest chip foundry globally and plays a crucial role in manufacturing chips for companies like Nvidia and AMD [12]. - The foundry's neutral position allows it to benefit from the overall growth in AI infrastructure spending, regardless of which company leads in chip design [12][13]. - With a projected growth in the AI infrastructure market, Taiwan Semiconductor is expected to perform well over the next five years, trading at a lower valuation compared to GPU designers [13][15].