Nvidia, Super Micro or Broadcom? Meet the Artificial Intelligence (AI) Stock-Split Stocks That I Think Are the Best Buy and Hold Over the Next 10 Years.

It’s no secret that semiconductor stocks have been particularly big winners during the artificial intelligence (AI) revolution. With stock prices skyrocketing, several high-profile chip companies have opted in stock splits this year. Some AI chip stocks you may recognize include Nvidia (NASDAQ: NVDA), Super microcomputer (NASDAQ: SMCI)And Broadcom (NASDAQ:AVGO).

Each of these stocks has worked wonders for many portfolios in recent years. However, I view one of these chip stocks as the superior choice compared to its peers.

Let’s take a look at the full picture of Nvidia, Supermicro, and Broadcom and determine which AI chip stock split could be the best buy-and-hold opportunity for long-term investors.

1. Nvidia

Over the past two years, Nvidia has not only been the biggest name in chips, but has essentially become the ultimate benchmark for AI demand in general. The company specializes in the design of advanced chips, also called graphics processing units (GPUs), and data center services. Moreover, Nvidia’s Compute Unified Device Architecture (CUDA) offers a software component that can be used in conjunction with its GPUs, giving the company an enviable and lucrative end-to-end AI ecosystem.

While this all looks great, investors can’t afford to be blinkered due to Nvidia’s existing dominance. The table below summarizes Nvidia’s revenue and free cash flow growth trends over the past few quarters.

Data source: Nvidia Investor Relations.

Admittedly, it’s hard to throw shade at a company that consistently generates triple-digit revenue and profit growth. My concerns about Nvidia are not about the level of growth, but rather its pace.

For the second quarter of fiscal 2025 (ended July 28), Nvidia’s revenue and free cash flow rose 122% and 125% year over year, respectively. This is a notable slowdown compared to recent quarters. It’s fair to point out that the semiconductor industry is cyclical, and such a factor could impact growth in a given quarter. Unfortunately, I think there is more beneath the surface with Nvidia.

Nvidia is facing increasing competition from direct industry forces such as Advanced micro devicesand tangential threats from its customers viz Tesla, MetaAnd Amazon. In theory, as chip competition increases, customers will have more options.

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This leaves Nvidia with less leverage, which will likely reduce some of its pricing power. In the long run, this could take a heavy toll on Nvidia’s revenue and profit growth. For these reasons, investors may want to consider some alternatives to Nvidia.

2. Super microcomputer

Supermicro is an IT architecture company that specializes in designing server racks and other infrastructure for data centers. In recent years, rising demand for semiconductor chips and data center services has served as a benchmark for Supermicro. Additionally, the company’s close partnership with Nvidia has proven particularly beneficial.

That said, I have some concerns about Supermicro. As an infrastructure company, the company is highly dependent on the capital expenditure of other companies. This makes Supermicro’s growth sensitive to external variables, such as demand for data center services, chips, server racks and more. Moreover, Supermicro is far from the only IT architecture specialist on the market.

Competition from Dell, Hewlett PackardAnd Lenovo (to name a few) bring their own level of expertise to the market. As a result of competing in such a commoditized atmosphere, Supermicro may be forced to compete on price, which takes a toll on profit generation.

For example, infrastructure companies do not have the same margin profile as software companies. Considering that the company’s gross margins are quite low and declining, investors should be cautious. While Supermicro management sought to reassure investors that the deterioration in margins is the result of some supply chain slowdowns, more recent news may indicate that gross margin is the least of the company’s concerns.

Supermicro was recently the target of a short report published by Hindenburg Research. Hindenburg claims that Supermicro’s accounting practices have some flaws. Following the brief report, Supermicro responded in a press release outlining that the company is delaying its annual filing for fiscal year 2024.

Given the unpredictability of demand prospects, fluctuating margin and profit dynamics, and the allegations surrounding accounting practices, I think investors now have better options in the chip space.

3. Broadcom

By process of elimination, it’s clear that Broadcom is currently my top buy-and-hold pick among chip stocks. However, this isn’t because Broadcom’s returns have lagged their peers this year. The underlying reasons why Broadcom stock has paled in comparison to other chip stocks could shed some light on why I think its best days lie ahead.

I see Broadcom as a more diversified company than Nvidia and Supermicro. The company is active in a large number of growth markets, including semiconductors and infrastructure software. Grand View Research estimates that the total addressable market for systems infrastructure in the US was valued at $136 billion in 2021 and would grow at a compound annual growth rate of 8.4% between 2022 and 2030.

System infrastructure includes capabilities in data centers, communications, cloud computing and more. As businesses of all sizes increasingly rely on digital infrastructure to make data-driven decisions, I see the role Broadcom is playing in network security and connectivity as a major opportunity and think its recent acquisition of VMware is particularly smart and will help unlock new growth potential. .

Looking at the growth trends in the chart above, it’s clear that Broadcom isn’t currently experiencing the same level of demand as Nvidia and Supermicro. I think this is because Broadcom’s position in the broader AI domain has yet to see commensurate growth compared to buying chips and storage solutions en masse.

While I’m not saying Nvidia or Supermicro are bad choices, I think their future looks bleaker than Broadcom’s right now. I believe Broadcom is in the very early stages of a new growth frontier with many different themes (AI being just one of them). For these reasons, I consider Broadcom the best option explored in this piece and think long-term investors have a lucrative opportunity to snap up shares and hold on tight.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon, Meta Platforms, Nvidia and Tesla. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has one disclosure policy.

Nvidia, Super Micro or Broadcom? Meet the Artificial Intelligence (AI) Stock-Split Stocks That I Think Are the Best Buy and Hold Over the Next 10 Years. was originally published by The Motley Fool