Nvidia (NASDAQ: NVDA) has been the standout performer in the artificial intelligence (AI) surge over the past two and a half years. Its GPUs form the foundation of major data center projects, fueled by hyperscale cloud customers investing tens of billions of dollars in AI. This has driven significant revenue and even stronger earnings growth for Nvidia during the last two years. Investors have reaped substantial rewards, with Nvidia’s stock soaring 239% in 2023 and another 171% in 2024, briefly making it the most valuable company. However, after a recent market sell-off, Nvidia shares have dropped about 25% from their January peak. While some investors might consider buying Nvidia shares at these lower prices, two other AI-related companies could outperform Nvidia over the long term due to their competitive advantages and enduring market positions. 1. Meta Platforms (NASDAQ: META) Meta Platforms is potentially the largest long-term beneficiary of generative AI advances globally, investing heavily to realize this potential. The company plans capital expenditures up to $65 billion this year for data center expansion aimed at generative AI, though it differs from big cloud providers by using its servers solely for internal applications. Meta’s investment reflects the vast opportunities it sees in AI. Already, it has enhanced app engagement by applying large language model learnings to recommendations across content formats. Its ad creative AI, Advantage+ Creative, is used by 4 million advertisers, streamlining ad creation and enabling small businesses with little experience to buy ads easily. CEO Mark Zuckerberg envisions a future where advertisers simply provide objectives and budgets, with AI managing the entire campaign, increasing advertiser numbers and ad revenue. Additionally, Meta is developing AI chatbots for WhatsApp and Messenger to scale customer service and sales, which one analyst values at $100 billion in business potential. Meta’s software-centric model benefits from high operating leverage—its AI innovations can impact billions, leading to substantial profit growth as AI-generated revenue rises. Despite this, Meta’s stock currently trades at approximately 21. 2 times forward earnings, suggesting its AI-driven growth is not fully priced in.

With increasing engagement and a growing array of ad products, Meta is set for notable earnings expansion. 2. Taiwan Semiconductor Manufacturing (NYSE: TSM) Taiwan Semiconductor Manufacturing Company (TSMC) is essential to Nvidia’s success and dominates semiconductor fabrication, commanding over two-thirds of industry spending with a growing market share. TSMC uniquely manufactures the world’s most advanced chips at scale, meeting the high demand for such technology today. Its technological edge and scale allow it to produce chips at a lower cost, creating a virtuous cycle of winning contracts, reinvesting in technology, and expanding manufacturing. This widening gap strengthens its market leadership. Though tariffs pose short-term risks by potentially raising chip prices, long-term demand remains robust, especially as cloud providers require advanced chips for efficient data centers. While Nvidia might face competition as customers develop custom chips and seek alternatives, TSMC retains exclusivity in fabrication and packaging, making it indispensable. TSMC is expected to maintain its gross margin target of 53% or higher, with shares currently trading at about 17. 4 times forward earnings—the lowest valuation seen since the AI boom began. Investment Considerations Before investing $1, 000 in Meta Platforms, note that The Motley Fool’s Stock Advisor team recently unveiled their top 10 stock picks, and Meta was not included. These selected stocks have historically delivered exceptional returns; for example, Netflix and Nvidia investments recommended years ago yielded over 52, 000% and 62, 000% gains respectively. Stock Advisor’s average return is 792%, far surpassing the S&P 500’s 153%. Disclosure: Randi Zuckerberg, former Facebook director and Meta CEO Mark Zuckerberg’s sister, serves on The Motley Fool's board. Adam Levy holds positions in Meta and TSMC. The Motley Fool owns and recommends Meta Platforms, Nvidia, and TSMC and follows a disclosure policy. In summary, while Nvidia has driven the AI boom, Meta Platforms and Taiwan Semiconductor Manufacturing possess distinctive strengths and competitive edges that position them to outperform Nvidia in the coming years.