2 stocks that are better buys than the “magnificent seven”.

The “Magnificent Seven” cohort has become a popular investment group over the past few years. This group has had some impressive stock gains over the past decade, and many stocks in this group are still solid investments. It is made up of:

1. Nvidia

2. Apple

3. Alphabet

4. Microsoft

5. Amazon

6. Meta Platforms

7. Tesla

However, I think investors can do better. Two stocks that are not too different from the Magnificent Seven, but far above the average member, are Taiwan Semiconductor Manufacturing (NYSE: TSM ) and Broadcom (NASDAQ: AVGO ). Both of these stocks are big beneficiaries of increased AI spending, and I think they will outperform many members of the Magnificent Seven.

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If you don’t own shares of these two, now is the perfect time, as each stock is at its all-time high and looks like an incredible bargain.

Although not as talked about as Nvidia or one of the AI ​​hyperscalers, Taiwan Semiconductor is one of the most important companies in AI. It is the largest chip foundry in the world, and often has the best technology available. This makes it a major company to partner with, because it’s the company to go to if you want the best chip technology.

TSMC, as it’s also known, is a chip foundry, which means it doesn’t design any products; It’s just a design build from other companies. Businesses like Apple and Nvidia send it their chip designs, and it builds them on their behalf. It also allows it to make money from competitors, as it makes chips for both Nvidia and Broadcom.

In the next few years, Taiwan Semiconductor’s management team expects strong AI growth. From the period starting in 2024 and ending in 2029, it expects AI chip revenue to grow at a mid- to high-50% compound annual growth rate (CAGR). That’s a big increase, but Taiwan Semiconductor doesn’t just make AI chips. It expects an overall revenue growth rate of around 25% over the same period.

Outside of Nvidia, none of the stocks in the Magnificent Seven are expected to deliver that level of growth, making TSMC easily a better investment choice than most stocks in that group.

Broadcom is the new kid on the block in the AI ​​computing unit battles, and it’s already seeing monster success. Instead of offering a general-purpose GPU like Nvidia, Broadcom is targeting a different segment of the market. It is partnering with AI hyperscalers to design customized AI chips tailored to their workloads. Although these are not as flexible as GPUs from Nvidia, they can provide higher cost effectiveness than GPUs in some situations.