The newest Wall Street buzzword is the "Great Rotation," as the market has seen money move out of large-cap artificial intelligence (AI) stocks into value-oriented names and small caps.
The newest Wall Street buzzword is the "
Great Rotation," as the market has seen money move out of large-cap artificial intelligence (AI) stocks into value-oriented names and small caps. While it can be tempting to follow Wall Street's lead, investors are typically best served sticking with elite growth stocks during these rotations, not abandoning them. That's especially true when the underlying trends haven't changed.
AI infrastructure demand is still growing rapidly, and semiconductors remain the foundation of the data center buildout. Even great stocks can get pulled down when investors reshuffle their portfolios, but that creates opportunity. Two stocks worth pouncing on during this rotation are Broadcom (AVGO +0.29%) and Taiwan Semiconductor Manufacturing (TSM 0.83%).
Both sit at the heart of the AI buildout, and long-term trends are working in their favor.
Meanwhile, the pressure in their stocks has created a great buying opportunity. Broadcom: AI infrastructure is trending in its direction With the AI infrastructure buildout trending in Broadcom's direction, now is the time to lean into the stock, not rotate out of it. The company is just at the beginning of two powerful trends that are set to power its growth for years to come.
The first trend is the growing size of AI chip clusters. Cluster sizes are set to grow to over 1 million chips, which vastly increases the importance of data center networking. The reason for this is simple: If a company is spending tens of billions of dollars on chips, they need those chips to be constantly working together as a unit.
If this isn't happening, then their investment is being underutilized. That's why managing this data workflow through networking components, like Ethernet switches, is so important, so chips don't sit idly by. Broadcom is the market leader in data center networking and is thus riding this trend.
At the same time, Broadcom is also benefiting from the shift toward custom chips to help power AI workloads. The company is a leader in ASIC (application-specific integrated circuit) technology, helping its customers turn their chip designs into reality. It helped Alphabet develop its popular Tensor Processing Units (TPUs), and it forecast that its AI ASIC revenue will skyrocket to over $100 billion next fiscal year (that's 1.5x times its total company revenue from fiscal 2025!).
Custom AI chips are a powerful trend that should continue to take market share over time. TSMC: The winner no matter what technology wins out One of the biggest beneficiaries of current trends in AI and tech in general is Taiwan Semiconductor Manufacturing. The company has a near-monopoly in the manufacturing of advanced chips, so the more of these types of chips being produced, the better for TSMC.
Whether AI workloads are being powered by graphics processing units (GPUs) or AI ASI
Cs, TSMC benefits, as it's manufacturing both. The growing need for high-performance central processing units (CPUs) for agentic AI also helps TSMC. The robotaxi revolution and autonomous vehicles are going to need an assortment of advanced chips, manufactured by guess who.
This is just a company that is likely to be at the forefront of every major chip trend over the next decade. Why both stocks are buys Market rotations come and go, but durable growth stories persist. You don't want to try to time every market shift; instead, you want to buy high-quality growth stocks when their valuations are being reset.
That's what makes names like Broadcom and TSMC stand out right now. Both companies are integral parts of the AI infrastructure story, and the long-term trends are working in their favor. History suggests these are exactly the kinds of stocks worth leaning into during periods like this one.
While value and small-cap stocks are finally gaining some traction, revenue and earnings growth are still the two biggest drivers of stocks over the long haul. That's why you want to jump on these names now.
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