Outperforming

Nvidia is arguably the king of Wall Street these days. As the maker of high-performing graphics processing units (GPUs) that power artificial intelligence (AI) programs and large language models, Nvidia’s stock price exploded in the last three years, up nearly 1,500%. The company now boasts a market capitalization of $4.6 trillion, making it the biggest company in the world by valuation, and it seems to be a lock to reach $5 trillion soon.

While Nvidia is having another solid year in 2025, boasting a 41% gain, there’s another AI stock that’s doing even better — one that’s essential to the success of Nvidia and nearly every other major chipmaker.

Better than Nvidia

Taiwan Semiconductor Manufacturing (TSM 3.46%), better known as TSMC, is the biggest semiconductor fabricator in the world. It doesn’t design chips, but it builds them in its fabrication plants for Nvidia and other customers, including Broadcom, Advanced Micro Devices, Apple, Tesla, and more.

TSMC stock is up 45% so far this year, beating Nvidia’s year-to-date gain, and just set a new all-time high. And it’s also a better valued stock, with price-to-earnings and price-to-sales ratios that are much more appealing than Nvidia.

TSM PE Ratio data by YCharts

Now for the icing on the cake. Nvidia’s CEO loves Taiwan Semiconductor and recently tipped his cap to TSMC. “They are a world-class foundry and support customers of diverse needs. You can’t overstate the magic that is TSMC,” Jensen Huang told reporters in September.

Image source: The Motley Fool.

What makes TSMC tick?

Taiwan Semiconductor’s biggest business is making 3-nanometer and 5nm chips. The company gets 60% of its revenue from making the chips.

TSMC is one of a select few fabricators that can make the highly sought-after 3nm chips at scale, and that’s a big deal. The smaller the transistors on chips, the more that companies such as Tesla and Nvidia can cram into them to make them more powerful. And TSMC already has plans to mass-produce its 2nm process this year.

TSMC also makes semiconductors used in smartphones, making 5G communication possible for a mass audience. 5G allows wireless users to access the internet at broadband speeds, which means you can do pretty much anything you need from your laptop, tablet, or phone, including streaming high-resolution videos or content, or work remotely.

The company gets a smaller portion of its revenue from Internet of Things devices such as smart home products and wearable technology. It also makes chips for electric vehicles, driver assistance programs, and vehicle information and entertainment systems.

Revenue in the second quarter was $30.07 billion, up 44.4% from a year ago, with an outstanding net profit margin of 42.7%. And the numbers are expected to be even better next quarter, when the company is projecting revenue between $31.8 billion and $33 billion.

TSMC is also expanding rapidly, investing $165 billion into creating fabrication plants and other facilities in Arizona. That’s important to help insulate Taiwan Semiconductor from the threat of tariffs or other economic headwinds as the U.S. government seeks to bring manufacturing to American soil.

Should you buy Nvidia or TSMC?

If you’re just picking one stock to buy now, my choice would be TSMC. The company has a 70% market share in the foundry market, according to market research firm TrendForce, giving it an enormous moat. And when you consider the semiconductor industry is a $600 billion business that’s projected to reach $1 trillion annually by 2030, the market opportunity for Taiwan Semiconductor is huge.

And it also has a dividend, which you don’t often see in an AI stock. Taiwan Semiconductor’s yield of 1.2% and payout of $3.34 per share won’t make you a millionaire, but it’s loads better than the skimpy $0.04 that Nvidia pays out annually.

All in, TSMC is a cheaper stock than Nvidia and is absolutely essential to the semiconductor and AI industries. But if you have room in your portfolio, you should invest in both. Together, TSMC and Nvidia are an unstoppable two-headed AI powerhouse that can anchor any portfolio.

Some investors look for stocks that have good growth potential, while others look for stocks that can provide consistent income. It’s not always an either-or thing as some stocks have proven to do both.

Case in point: energy company MPLX (MPLX 2.05%). Although MPLX may not be a household name like other top energy companies, the stock has been on an impressive run over the past five years. In that span, it’s up close to 186%, while the S&P 500 is up 95% (as of Sept. 9).

No one can predict if the stock will continue growing at its current pace, but one thing’s for sure: Its ultra-high dividend is a dream for investors interested in income stocks.

Image source: Getty Images.

How MPLX’s business works

You can think of the energy industry as three parts: upstream, midstream, and downstream. Upstream companies explore for and produce oil and natural gas; midstream companies focus on storing and processing; and downstream companies refine, market, and sell end products like the gasoline you buy at gas stations.

Some larger companies may operate in two or three of the phases, but MPLX solely operates in the midstream section. Formed by Marathon Petroleum, it owns pipelines, processing plants, storage facilities, and other infrastructure that moves and conditions oil, natural gas, and natural gas liquids (NGLs).

MPLX says it handles over 10% of all natural gas produced in the U.S.

MPLX has a shareholder-friendly business structure

MPLX isn’t structured like your typical corporation. It’s a master limited partnership (MLP), meaning its profits and losses are passed on to partners (investors) to avoid paying taxes on the corporate level, allowing it to pay out more money to its investors.

Its current 7.6% dividend yield is below its 9% average over the past five years, but it’s still more than six times the S&P 500’s average.

MPLX Dividend Yield data by YCharts

MPLX’s dividend payout won’t be consistent like typical corporations because it depends on its distributable cash flow (DCF). However, its DCF has had a compound annual growth rate (CAGR) of 6.9% since 2021.

MPLX has shown solid financials in recent years

MPLX makes money by charging fees for transporting, storing, and processing oil, natural gas, and NGLs. These are typically long-term contracts, which help provide the company with stable and predictable cash flow.

In the second quarter, MPLX generated $3 billion in revenue, which was down around 1.6% year over year. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) — which focuses strictly on its profits from core operations — was $1.7 billion, up 5% year over year.

MPLX isn’t a company that will typically produce double-digit percentage revenue growth consistently, but what matters most to investors is its DCF because that determines its dividend payout (the main reason many investors invest in the stock to begin with).

MPLX’s DCF in the second quarter only increased 1% year over year to $1.42 billion, but it was able to pay out $0.9565 per share compared to $0.8500 per share in the same quarter last year.

Should you own MPLX’s stock?

An ultra-high dividend yield is great for income investors, especially when it’s as high as MPLX’s. However, that alone shouldn’t be the sole reason you invest in a stock, because it could be a yield trap. Thankfully, when it comes to MPLX, that doesn’t seem to be the case.

MPLX likely won’t experience tech-like high growth over the long term, but it has solid growth opportunities. One of the key ways MPLX grows is via acquiring systems and assets that expand its footprint.

A recent example is its acquisition of Northwind Midstream, which it purchased for $2.375 billion. The company expects this to increase its treating capacity by roughly three times by the second half of 2026 and return mid-teen percentages, which is pretty impressive.

If you don’t mind dealing with the additional tax step needed when dealing with MLPs and their distributions (like filing a Schedule K-1 form), then MPLX can be a good income addition to your portfolio.