A seismic shift is underway in the semiconductor industry, where innovation meets the promise of astronomical growth. Imagine a landscape of three juggernauts poised at the precipice of an explosive market surge. Their strategies and innovations hint at the creation of trillion-dollar titans.
The first one has an unwavering revenue trajectory and a diverse product portfolio. Meanwhile, the second one dominates generative AI and networking. Finally, the third one has a strategic pivot towards AI infrastructure, beckoning an era of unprecedented possibilities. These giants, wielding technological prowess and market foresight, symbolize the beating heart of Silicon Valley’s future.
Let’s explore the crux of the trio’s technology-based trillion-dollar race.
ASML (ASML)
ASML’s (NASDAQ:ASML) performance demonstrates a robust trend in net sales.
Consistent revenue generation reflects the company’s ability to forecast and execute effectively. Also, a steady trajectory in sales signifies market demand for their products and services, indicating sustained growth.
Also, the composition of net system sales, primarily driven by logic at 76% and memory at 24%, highlights ASML’s diverse product portfolio. Such a balanced distribution mitigates the risks associated with dependence on a single product line or market segment. This allows the company to leverage opportunities across different sectors within the semiconductor industry. ASML is capturing market share in various technological applications, ensuring resilience against macro-adversities.
A strong order book is a vital element of ASML’s growth. The Q3 net system bookings totaling EUR2.6 billion contributed to a substantial backlog of over EUR35 billion. This robust order book provides visibility into future revenue streams, indicating sustained demand for ASML’s products and services. ASML observed a surge in demand from China, with substantial orders booked in previous years and a current uptick in shipments to Chinese customers.
Therefore, this anticipation of future market trends and technology adoption reflects the company’s strategic planning and readiness to capitalize on emerging opportunities.
Broadcom (AVGO)
Generative AI is an emerging moat for Broadcom (NASDAQ:AVGO). The generative AI revenue in Q4 2023 amounted to nearly $1.5 billion, representing 20% of the semiconductor revenue. Ethernet solutions and custom AI accelerators primarily drive this segment’s growth.
Fundamentally, the company’s focus on generative AI speaks volumes about its focus on meeting the demands of advanced technologies. Investing in custom AI accelerators aligns with the growing necessity for tailored AI solutions across industries, especially in hyperscalers and large enterprises.
Moreover, growth is embedded in other segments of the company. For instance, networking revenue in Q4 2023 soared by 23% year over year (YOY), amounting to $3.1 billion and constituting 42% of Broadcom’s semiconductor revenue. This growth was fueled by heightened demand from hyperscalers for AI accelerators, networking switches, routers, and NICs. The consistent growth of networking revenue reached $10.8 billion in fiscal 2023 and is projected to grow further in 2024.
Broadcom’s guidance for fiscal 2024, projecting consolidated revenue of $50 billion, a 40% YOY increase. This suggests the company’s optimistic outlook and confidence in sustaining substantial growth. The quarterly common stock cash dividend increased by 14% to $5.25 per share. And, the company aims for an annual dividend of $21 per share in fiscal 2024, signifying its focus on returning value to shareholders.
AMD (AMD)
As a tech supplier, AMD (NASDAQ:AMD) is crucial within the AI market. The data center AI accelerator market has a massive anticipated growth rate, from $30 billion in 2023 to over $150 billion in 2027. Projected initially at a 50% annual growth rate, the industry adoption has accelerated. Then, this led to the expectation of over 70% annual growth in the next four years, reaching over $400 billion in 2027.
To capitalize on this trend, AMD’s strategy has three core priorities – product portfolio enhancement, developer-friendly software platforms, and extensive partnership collaborations. AMD stands ready and adaptable to address AI infrastructure demands. It emphasizes the need for high-performing, energy-efficient GPUs, CPUs, and adaptive computing solutions. For instance, the launch of MI300X signifies AMD’s focus on technical innovation, specifically in generative AI.
Additionally, the performance metrics comparing the MI300X with competitor models demonstrate the MI300X’s superiority. AMD has 2.4x more memory capacity, 1.6x more memory bandwidth than competitors, and up to 1.6x faster inference performance on widely used models like Llama2-70b.
Lastly, the expansion of AMD’s ecosystem is also supported by the Instinct GPUs and software advancements like ROCm 6. There are significant performance improvements in ROCm 6 for inference tasks and competitive performance metrics with smaller models compared to competitors.
As of this writing, Yiannis Zourmpanos held a long position in ASML. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
