NvidiaIt is (NASDAQ:NVDA) the stock has risen approximately 27,340% over the past 10 years. The explosive growth of its data center business, which sells high-end GPUs for processing complex artificial intelligence (AI) tasks, has fueled much of these gains and made it a mainstay and bellwether of the booming AI market.

Market demand for Nvidia’s data center GPUs continues to outstrip its supply, as more companies upgrade their servers to handle the latest developments. AI applications. Its revenue jumped 126% in fiscal 2024 (which ended in January 2024), and analysts expect it to continue growing at a compound annual growth rate ( CAGR) of 57% from FY2024 to FY2027 as its earnings per share (EPS) increases. at a CAGR of 345%.

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Based on these optimistic expectations, Nvidia’s stock does not appear overvalued at 31 times next year’s earnings. But its long-term growth could still be hampered by competition from cheaper chip makersthe development of first-party AI accelerator chips, tighter U.S. export restrictions against Chinese companies, and a recent antitrust investigation in China.

So while Nvidia may still play a significant role in the AI ​​market, investors should recognize these potential risks and closely monitor other promising AI stocks. Let’s look at two of these other names: Innodata (NASDAQ:INOD) And Semiconductor manufacturing in Taiwan (NYSE:TSM) – and see if these are interesting alternatives to Nvidia.

A small-cap hypergrowth stock: Innodata

Innodata went public in 1993 and was considered a slow-growing IT services and enterprise software company for many years. However, its stock has risen from around $1 in late 2019 to almost $35 as of this writing. This massive rally was driven by the deployment of its new generative AI training services for five of the “Magnificent Seven“companies.

In the past, Innodata primarily provided business process, technology and consulting services, as well as digital data management and distribution software tools, to the government, aerospace, defense, financial services industries. and technology. From 1994 to 2019, its revenue only grew at a CAGR of 6%, as it struggled to grow in the shadow of larger companies like IBM And Microsoft.

But in recent years, many of these technology leaders have struggled to efficiently prepare large amounts of high-quality data for their new AI applications. Many large companies would have spent 80% of their time preparing their data for an AI project and the remaining 20% ​​training the AI ​​algorithms. To address these inefficiencies, Innodata deployed a suite of task-specific microservices in 2018 to prepare custom data for AI applications.

From 2019 to 2023, Innodata’s revenue grew at a CAGR of 12% amid growing market demand for its AI training services. From 2023 to 2026, analysts expect its revenue to grow at a CAGR of 42% as it generates more revenue from its Magnificent Seven customers and expands its customer base. It is also expected to become profitable in 2024 and grow its EPS at a CAGR of 21% over the next two years.

With an enterprise value of $1 billion, Innodata still appears reasonably valued at 45 times forward earnings and five times next year’s sales – so it could have plenty of room to run.

The megacap backbone of the AI ​​market: TSMC

Nvidia couldn’t produce its leading chips without TSMC, the world’s largest and most technologically advanced contract chipmaker. TSMC’s foundries are used to produce the smallest, densest and most energy-efficient chips for “fabless” chipmakers like Nvidia, AMD, QualcommAnd Appleso it’s basically the backbone of the semiconductor sector.

Strong sales of Nvidia’s AI chips generate tailwinds for TSMC’s high-performance computing (HPC) market, which accounted for 51% of its revenue in the third quarter of 2024. For the full year , TSMC expects revenue growth of nearly 30% – – an acceleration from its 9% decline in 2022 – as the PC and desktop markets smartphones stabilize and the AI ​​market develops. IntelIt is recent foundry problems is also expected to attract more fabless chipmakers to strengthen their relationships with TSMC.

In 2025, TSMC plans to expand its lead over Intel and Samsung by accelerating its production of its smallest and densest 2-nanometer chips. From 2023 to 2026, analysts expect its revenue and EPS to grow at a CAGR of 25% and 29%, respectively, as this growth cycle progresses.

Based on these expectations, TSMC appears to be a bargain, with earnings 18 times higher than next year. This valuation perhaps reflects some uncertainty over export restrictions against China and geopolitical tensions over Taiwan, but it remains one of the easiest ways to profit from the growth of the AI ​​and semi-automatic markets. -drivers.

Should you buy these two stocks instead of Nvidia?

Compared to Nvidia, Innodata could attract more speculative growth investors, while TSMC could be a more conservative play in the booming AI market. I don’t think either stock can be considered a complete replacement for Nvidia in an AI-oriented portfolio – since the chipmaker is still selling the best picks and shovels for the AI ​​rush. gold of AI – but they could complement its growth and represent an alternative. ways to diversify your AI-focused holdings away from Nvidia.

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Leo Sun has positions at Apple. The Motley Fool holds positions and recommends Advanced Micro Devices, Apple, Intel, Microsoft, Nvidia, Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.