With the rising adoption of generative artificial intelligence technology, there’s now an AI gold rush, and semiconductor companies are selling the “picks and shovels.” Hence, all eyes are on the top chip stocks to watch, but are these names also in the “Green Zone?”
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (or VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to positions. View any move into the Red Zone as a warning sign to exit your position for now.
These three chip stocks to watch are currently in the “Green Zone.”
Advanced Micro Devices (AMD)
Shares in chip maker Advanced Micro Devices (NASDAQ:AMD) have been in the “Green Zone” for more than four months. Some may believe that the stock rallied prematurely due to the AI megatrend, given that the company was not exactly a first mover in the area of AI chips.
However, while it has taken some time for a strong AI growth catalyst to develop for AMD stock, one may be just around the corner. Advanced Micro Devices plans to launch its MI300 AI accelerator chip by year’s end. As Wells Fargo analyst Aaron Rakers recently argued, this chip launch means “increasing confidence” when it comes to the company’s operating performance during 2024.
With this in mind, instead of waning, AI mania surrounding Advanced Micro Devices could perhaps get even stronger over the next 12 months. TradeSmith’s volatility quotient for AMD is 40.32%, which makes it a high-risk stock.
Intel (INTC)
Intel (NASDAQ:INTC) has only recently become a “Green Zone” stock, entering just over two weeks ago. Admittedly, this major chip maker has received far less of a boost from rising excitement about generative AI. This makes sense. Other factors, like the uncertainty surrounding Intel’s turnaround efforts, are outweighing this industry tailwind.
Even so, you may not want to underestimate Intel’s potential to capitalize on the surging demand for AI chips. According to Melius Research’s Ben Reitzes, with INTC stock, possible upside from the company’s Gaudi AI chip hasn’t been priced in. That said, it may take some time for investors to finally appreciate this aspect of the overall story with Intel.
However, once near-term worries still weighing on shares clear up, Intel’s AI catalyst could finally take center stage. TradeSmith’s volatility quotient for INTC is 28.03%, making it a medium-risk stock.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is in the “Green Zone,” having entered it over six months ago. Shares in this leading AI chip company have nearly tripled in price, largely because it’s one of the few companies so far to successfully monetize this technology.
Yet with the stock pulling back in recent weeks, you may be concerned that fading AI mania means more declines ahead for NVDA stock. Then again, maybe not. Although shares may be vulnerable to some more moderate weakness in the near term, this growth catalyst could once again propel NVDA to higher prices.
How? While having an impact now, AI is poised to have an even greater boost for the bottom line over the next few years, according to sell-side forecasts. This growth acceleration means Nvidia will likely stay one of the chip stocks to watch. TradeSmith’s volatility quotient for NVDA is 45.51%, making it a high-risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
