3 Overlooked Growth Stocks Powering Every AI Chip Nvidia and AMD Build - The Motley Fool

Skyler Monroe (0:10)

Hey, everyone, welcome back to The AI Hardware Show. I'm your host Skyler Monroe. And if you're into chips, silicon and the hardware that's actually making AI happen, you're in exactly the right place. Big thanks to our sponsors keeping this show running.

Ada, helping businesses integrate AI into their workflows seamlessly. Ago Consulting, that's, ah, go, your go-to for silicon development from AI to Zoc and Zen Semiconductor. Building the processors and AI fabric behind modern data centers with incredible ventures like their Sierra RISC-V CPUs and Loom AI Fabric, plus Ada for deploying AI at scale in any business. Today, we've got a stacked episode. We're talking about the overlooked companies quietly powering every Nvidia and AMD chip. Why different chip makers react so differently to the same news cycle, a bold challenger claiming their AI chip is 10 times faster than a GPU, Nvidia using AI to dramatically speed up chip design, and a company called VsAura that's rethinking the memory compute balance for AI inference. Let's get into it. Alright, so let's kick things off with a story from The Motley Fool about three overlooked growth stocks that are powering every AI chip Nvidia and AMD build. And look, I love this topic because there's this tendency in the media to focus exclusively on the big names, Nvidia, AMD, Intel, and completely gloss over the ecosystem that makes those chips possible in the first place. Think about it like this. You've heard of Ferrari, right? Everyone knows Ferrari, but not everyone talks about the companies making the precision bearings, the carbon fiber, the specialized alloys that go into those cars. Without those suppliers, there is no Ferrari. And in the chip world, it's exactly the same story. So when we talk about AI chips, and specifically the GPS that Nvidia and AMD are cranking out at incredible scale right now, there's a whole supply chain underneath that most people never think about. We're talking about companies that make the substrate materials, the advanced packaging technologies, the specialized chemicals used in the fabrication process, and the electronic design automation software that engineers use to actually design these chips.

Now, The Motley Fool piece highlights three specific companies that fall into this overlooked category, and what makes them interesting from an investment standpoint. And honestly, from a technology standpoint, too, is that they're not trying to compete with Nvidia. They're riding the Nvidia wave. Every time Nvidia sells a GPU, these companies benefit. That's a really powerful position to be in. If you think about the AI chip market growing at the rate it's growing, we're talking about data centers spending hundreds of billions of dollars on AI infrastructure over the next few years. The companies supplying into that chain are going to see enormous demand.

One category that always comes up in these conversations is advanced packaging. This is something I find genuinely fascinating. Modern AI chips aren't just a single piece of silicon anymore. They're these incredibly complex assemblies, multiple chiplets, high bandwidth memory stacked right on top of the compute die, all connected through incredibly dense interconnects.

Nvidia's H100 and H200 GPUs use what's called COOs packaging from TSMC. That's chip on wafer on substrate, and it's a manufacturing process that requires specialized equipment and materials. The companies that supply into that process, they're benefiting enormously from AI demand without being in the direct line of fire of competing with Nvidia. Another category is EDA software, electronic design automation. These are the tools that chip designers use to lay out transistors, run simulations, verify that the chip will actually work before you spend hundreds of millions of dollars taping it out. Companies like Synopsys and Cadence dominate here. And as AI chips get more complex, the demand for their tools only increases. And then there's the materials side. The specialty chemicals, the gases used in etching and deposition processes, the polishing compounds, all of that is a real business with real growth tied directly to semiconductor manufacturing volume. The broader point I want to make here is that the AI hardware story is so much bigger than just the GPU companies. The whole ecosystem is expanding. And if you're a tech enthusiast or an engineer or an investor trying to understand where the value is being created, you have to look at the full stack, from the raw materials all the way up to the finished chip, sitting in a data center rack. And honestly, for those of you working in the industry, whether you're at a chip startup or a consulting firm, understanding this ecosystem is just as important because the constraints in AI hardware right now aren't always at the GPU level. Sometimes they're upstream in the packaging supply chain or in the availability of specialized materials. It's a really interconnected system. Okay, moving on to our second story. And this one is from Investing Live, asking a question I get all the time. Why do Nvidia, Broadcom and Intel react so differently to the same news? Like one day, there's a headline about AI chip demand being strong. An Nvidia stock goes up 5%, Broadcom goes up 2% and Intel barely moves or maybe even goes down. What's going on there? And the answer is actually really interesting when you dig into the hardware details. Because these three companies are fundamentally doing different things in the AI chip space, even though they all get lumped together under the AI chip label. Let's start with Nvidia because they're the easiest to understand from this perspective. Nvidia's AI story is almost entirely about data center. GPS, the height 100, H200, now the Blackwell architecture. They are the de facto standard for training large language models. When there's news about AI spending going up, Nvidia is directly in the path of that spending. The connection is tight and obvious. Broadcom is a more nuanced story. They're a massive company with fingers in a lot of pies, networking, broadband, storage, wireless. Their AI exposure is real and growing, but it's concentrated in two areas. First, they're a major player in custom AI accelerators, what the industry calls XPUs or a six, built specifically for companies like Google and Meta. Second, they make the high-speed networking silicon that connects all those GPS together in a data center. So their AI revenue is significant, but it's a portion of a much bigger, more diversified company.