Artificial intelligence (AI) is transforming the technology landscape, presenting significant investment opportunities. Investors can gain valuable insights by following the stock picks of experienced billionaire investors, who conduct thorough research before investing.
Recently disclosed Form 13F filings have revealed that prominent billionaires continue to invest in two high-growth chip stocks: Taiwan Semiconductor Manufacturing (TSM) and Nvidia (NVDA). These investors have a track record of making informed decisions after exhaustive research into a company’s competitive position, risks, and potential returns.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing is the world’s leading chip manufacturer, controlling over 60% of the global foundry market. The company produces chips for major clients like Nvidia, and its stock has surged 279% over the past five years due to growing demand for AI-capable chips in data centers. Notable billionaires David Tepper, Stephen Mandel, and Chase Coleman increased their stakes in TSM during the first quarter.
TSMC’s strong first-quarter performance amidst economic uncertainty underscores the robust demand for AI chips. The company reported 35% year-over-year revenue growth and 60% earnings growth. TSMC is expanding its capacity to meet long-term demand and has unveiled its A14 logic process technology, promising a 15% performance increase and 30% power savings over its current 2-nanometer process. Production is set to begin in 2028.
These billionaire investors are betting on TSMC’s sustainable growth in the AI market, aware of the semiconductor industry’s historical cyclicality. While TSMC faced some challenges, such as seasonal softness in smartphone demand and a recent earthquake disrupting operations, the long-term outlook remains positive. The increasing use of advanced devices and data centers for AI should create opportunities for TSMC. The company forecasts AI chip sales to double in 2025 and grow at an annualized rate of 40% through 2028.
Nvidia
TSMC’s positive outlook for AI chip sales bodes well for Nvidia, as its graphics processing units (GPUs) are the gold standard in the AI chip market. Nvidia’s stock has risen 1,400% over the past five years, yet billionaires like Chase Coleman and Daniel Loeb continue to see upside potential. Coleman added to his stake, while Loeb established a new position in the stock.
Nvidia is coming off an exceptional year with revenue more than doubling to $130 billion. Analysts expect revenue to increase by 53% to nearly $200 billion in the current fiscal year, driven by strong demand for its new Blackwell computing platform designed for advanced AI workloads. Even Nvidia’s automotive chips for self-driving cars are seeing significant demand, with revenue expected to triple to $5 billion this year.
One risk for Nvidia is the development of custom chip solutions by some of its customers, including Amazon and Alphabet’s Google. However, Nvidia’s software capabilities allow companies to tailor its GPUs to various use cases, maintaining its competitive edge. Recent announcements at the Computex conference, such as NVLink Fusion, demonstrate Nvidia’s commitment to expanding its market reach while protecting its lead in the AI market.
Despite a forward price-to-earnings ratio of 30, Nvidia’s expected earnings growth rate of 35% per annum justifies its valuation. Given Nvidia’s dominance in GPUs, the stock is poised for further growth and market-beating returns over the next few years.
