Looking to Buy Your First AI Stock? This Is the Best Choice (Hint: It’s Not Nvidia).

Nvidia (NASDAQ: NVDA) dominated the artificial intelligence boom thus far, and it’s easy to see why.

The company has a monopoly-like share of the data center GPU market with an estimated 98% in 2023. Those are the components that cloud hyperscalers like Amazon and Microsoft and AI start-ups like OpenAI depend on to run intensive generative AI applications like ChatGPT.

Demand continues to outstrip supply for its chips, and its new Blackwell platform is already sold out for the next 12 months, as Nvidia CEO Jensen Huang described demand for the new chips as “insane.”

Nvidia delivered monster returns since the start of 2023, shortly after the launch of ChatGPT, adding roughly $3 trillion in market cap since then, and the stock has increased by nearly 1,000%.

However, Nvidia faces a number of risks such as incoming competition. Advanced Micro Devices, for example, just launched its new MI325X accelerator, which is aiming to challenge Nvidia’s Blackwell platform. Its top customers, like Amazon, Microsoft, and Meta Platforms, are also developing their own chips that could relieve some of their need for Nvidia’s components.

Additionally, some investors are skeptical of the AI boom, believing that the tech giants are overspending on AI as they still haven’t found a way to make a profit from the new technology. Nvidia’s business is cyclical and prices can change quickly according to supply and demand for its components, and its results have changed quickly in the past.

Finally, the stock is expensive at a price-to-earnings ratio of 64, meaning that if its results come up short, the stock could fall substantially.

If you’re looking for a lower-risk way to get exposure to artificial intelligence, especially if you’re buying your first AI stock, there’s another dominant chip company that presents a better alternative. That’s Taiwan Semiconductor Manufacturing Corporation (NYSE: TSM), or TSMC, as it’s also known.

Image source: Getty Images.

What is TSMC?

Taiwan Semiconductor is the world’s biggest manufacturer of semiconductors, and it handles more than half of all contract chip…

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