Investors in the stock market are currently navigating a challenging landscape, particularly following an announcement from major tech firms like Microsoft, Meta Platforms, Amazon, Alphabet, Tesla, and Apple, which revealed plans to invest nearly $700 billion in capital expenditures this year. This substantial expenditure has led to significant selling pressure on artificial intelligence (AI) stocks, especially in the software sector.
Smart investors are honing in on macroeconomic trends as the sell-off predominantly affects software stocks. With increased investment in AI infrastructure, opportunities exist for companies poised to capitalize on hyperscale budget expenditures.
For those considering where to invest $1,000 in this environment, insights from a recent analyst report suggest examining two prominent AI chip stocks that are positioned as strong long-term buys amid the ongoing AI infrastructure revolution.
At first glance, the $700 billion allocation toward AI capital expenditures primarily points to established players like Nvidia and Advanced Micro Devices (AMD) as the go-to semiconductor stocks. Nvidia, in particular, has enjoyed immense success with its Blackwell and forthcoming Rubin GPUs, which have generated a backlog valued in the hundreds of billions of dollars.
However, some developers are taking alternative paths by designing their own custom AI accelerators, such as Meta’s MTIA and Alphabet’s TPU chips, with Broadcom aiding these companies in their custom silicon solutions. Additionally, Broadcom benefits from the surge in data center development through its networking division. As hyperscalers procure vast quantities of GPUs, linking these large clusters requires sophisticated routing and switching technologies, for which Broadcom’s Tomahawk and Jericho chips serve as leading solutions.
This trend indicates that Broadcom is strategically positioned to gain from the uptick in AI-related capital expenditures, particularly in essential networking equipment that complements the demand for GPUs.
Since the inception of generative AI, large language models have significantly impacted the tech landscape; however, the current focus of hyperscalers is broader, encompassing advanced applications such as autonomous vehicles and humanoid robots. These endeavors necessitate higher levels of development, prompting massive scaling of AI workloads as leading tech companies constantly refine their next-generation models. Consequently, traditional GPU capabilities are no longer the sole consideration; effective AI workloads also require robust memory and storage solutions, highlighting the role of Micron Technology, which specializes in high-bandwidth memory (HBM) chips.
The importance of HBM is underscored by anticipated price increases for dynamic random access memory (DRAM) and NAND chips, projected to soar by up to 60% and 38%, respectively, in the upcoming quarter. With Micron already having sold out its HBM inventory for 2026, the company is well-positioned to assert significant pricing power amid rising demands for memory solutions.
In the AI data center framework, Nvidia and AMD’s GPU architectures function as the “brain” of the server rack, while specialty chips from Broadcom and Micron form the “nervous system” and memory, respectively, to ensure optimal functionality. As tech giants pivot from merely acquiring GPUs for developmental purposes to focusing on efficiency and scalability in AI infrastructure, both Broadcom and Micron appear poised to capture a larger share of capital expenditures.
In this context, Broadcom and Micron emerge as compelling investment opportunities within the AI infrastructure sector. Investors might find value in these stocks during the ongoing tech sell-off, as their current valuations seem favorable.
While considering investments in Micron Technology, it’s essential to note that the Motley Fool’s Stock Advisor team has curated a list of ten recommended stocks believed to hold higher potential for significant returns, with Micron absent from this exclusive lineup. This highlights the dynamic alternatives available for investors seeking substantial growth opportunities in today’s market climate.
