Artificial intelligence (AI) is transforming the world in various ways, from enhancing customer experience to enabling autonomous vehicles. AI requires high-performance computing power, which depends on advanced semiconductor chips. Therefore, investing in semiconductor companies that are leading the AI revolution can be a smart move for long-term investors. Right now, the Q2 earnings season is largely coming toward a close, but that does not mean there are no opportunities in the market. Many of the AI chip stocks to invest in now have plenty of runway to increase in share price as artificial intelligence will continue to be crucial in powering the next generation applications and products.
In this article, we will discuss three semiconductor stocks that have strong exposure to the AI market and offer attractive growth opportunities for investors.
AI Chip Stocks: Nvidia (NVDA)
For those betting on AI chip stocks, Nvidia (NASDAQ:NVDA) has proven it needs to be in your portfolio. The chip stock has defied all odds this year, despite an ongoing chip clump that has tempered the rise of some competitors’ shares. In late August, Nvidia released another earnings report revealing actual results came in well-above Wall Street’s estimates. The chipmaker generated $13.5 billion in quarterly sales and $2.70 for adjusted earnings per share. Moreover, net income jumped to $6.2 billion from $656 million for the same period last year.
Nvidia’s data center business contributed at $10.3 billion or 76.3% of total quarterly revenue to these record results, and Nvidia’s A100 and H100 chips were again in hot demand. These chips help to power the elaborate large language models (LLMs) used to train AI models that undergird advanced applications and programs. For those investors still waiting out to benefit from artificial intelligence craze, they should take a serious look at Nvidia shares. According to Koyfin, the stock is up 231.9% year-to-date and have plenty of room to continue their upward trend as the AI craze continues unabated.NVDA is leading the charge for AI chip stocks.
Advanced Micro Devices (AMD)
The company that knocked microprocessor giant Intel (NASDAQ:INTC) off its feet is having difficulty getting investors and market analysts to believe in its core AI products. According to Reuters, Wall Street analysts remain skeptical. “We don’t believe it until we see it,” is the sentiment amongst certain analysts. However, this would not represent the first time in which Advanced Micro Devices (NASDAQ:AMD) was underestimated and subsequently came out on top. Throughout the past decade, AMD’s CPUs have been able to steal significant market share from Intel (NASDAQ:INTC), and those trends do not appear to be reversing.
While AMD’s MI300x CPU meant to help power the AI revolution is not yet in full scale production, analysts and investors should not give up on the chipmaker that will probably be the only formidable competitor to Nvidia in the space of AI chips. For the quarter, AMD’s shares are down 3.9% whereas Nvidia’s shares have gain 14.7%, indicating AMD could be losing some of its luster. Despite that, I urge market spectators to continue observing how this competitive landscape will alter throughout the next year.
On Semiconductor (ON)
On Semiconductor (NASDAQ:ON) has carved out for itself lesser flashy part of the AI semiconductor market. This chipmaker offers power management devices, sensors, image processors, wireless connectivity solutions for various end-markets including automotive, industrial, consumer electronics, medical devices, aerospace and defense. On Semiconductor happens to be a specialist in silicon carbide (SiC) production. Electric vehicle producers, such as Tesla (NASDAQ:TSLA) are increasingly leveraging SiC technology for traction inverters, which convert direct current (DC) supply from the vehicle’s batteries into an alternating current (AC) output. Silicon carbide also help to optimize weight and space in electric vehicles.
Moreover, On Semiconductor’s automotive end-market is where it shines. The chipmaker’s semiconductor solutions power advanced driver assistance systems (ADAS), electric vehicles (EVs), infotainment systems, and lighting systems. More likely than not all of these systems will utilize artificial intelligence and machine learning to make driving safer. With shares up 59.4% year-to-date, investors looking for exposure to an end-market that will have plenty of applications for AI in the future, On Semiconductor could be a good consideration.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
