Nvidia shocked the investment world when discussing its future revenue guidance thanks to the massive demand for generative artificial intelligence (AI). This will allow Nvidia to sell more graphics processing units (GPUs), the hardware used to train AI models.

Instead of buying Nvidia, a grossly overvalued stock, investors should look one step down the value chain at its suppliers. Because Nvidia is a fabless manufacturer (it doesn't make its own chips), it has to rely on companies like Taiwan Semiconductor (NYSE: TSM) to produce what it needs. Instead of Nvidia, TSMC looks like a great place to invest.

Don't think that you're outsmarting all of Wall Street by investing in Taiwan Semiconductor -- the stock popped 12% the day after Nvidia's announcement. However, unlike Nvidia, the stock is still valued at a reasonable level.

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Source Fool.com