Nvidia (NASDAQ:NVDA) has proven that it is the king of chip stocks over the last 12 months. During that period, prices of the stock have roughly tripled. They’ve more than quadrupled since the beginning of 2023. Investors are naturally interested to understand which other chip stocks harbor similar potential.
Luckily investors don’t have to look particularly hard to identify clear challengers with such potential. While Nvidia’s chips continue to be the gold standard and remain in high demand, other chip manufacturers are legitimate competitors. Let’s take a look at those chip stocks in particular consideration of what makes them potent challengers to Nvidia.
AMD (AMD)
Discuss legitimate challengers to Nvidia, and AMD (NASDAQ:AMD) is likely to be the first stock mentioned. Like Nvidia, AMD has done phenomenally well over the past 12 months more than doubling to $164.
The high analyst price assigned to AMD currently is $270. Should that be achieved, it would result in returns above 50%. While that would be an excellent return, it is probably not enough to catapult AMD into the ranks of Nvidia level returns.
However, there is a caveat.
One prominent analyst believes that AMD shares could quadruple from their current price level. Pierre Ferragu of NewStreet Research believes that AMD prices could increase fourfold by 2027 based on projections from CEO Lisa Su. She believes the market for data center AI chips could balloon to $400 billion by 2027. In such a scenario it is plausible that AMD shares rise in price by a factor of four.
Meanwhile, it is also clear that important buyers remain highly interested in AMD offerings. Both Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) are eager to find lower cost solutions to Nvidia’s chips. Both firms also noted that they would switch to AMD chips recently.
Intel (INTC)
Recently, Intel (NASDAQ:INTC) stock disappointed with a March quarter forecast that was less rosy than anticipated. In fact, the revenue forecast was at least $1 billion lower than Wall Street had previously been anticipating.
Investors no longer care that the company had a reasonably strong 4th quarter with plenty to like. Instead, they are going to be looking for signs that Intel will be able to live up to its billing as America’s future foundry.
Thus far, progress has been fraught with issues. Government funding has been slow to materialize as part of the Chips Act. However, there’s still reason to believe that Intel could ultimately invest up to $100 billion in domestic chip production within the U.S.
Additionally, the geopolitical climate is fraught in relation to semiconductor production. Thus, the U.S. is scrambling to shore up supply chains leading to foundry investment domestically. That is precisely the reason investors should consider Intel as a legitimate challenger to Nvidia in regards to returns. Should positive signs regarding foundry progress emerge, INTC shares will rise dramatically.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) is another major player in relation to foundry development. The Taiwanese firm continues to progress plans to build two foundries in the U.S.
Progress on those projects has also been fraught with issues. Among those issues, negotiations over U.S. subsidies that would fund the project. Yet the $53 billion in Chips Act funding is too strong an enticement for serious progress not to continue. Taiwan Semiconductor Manufacturing is likely posturing in an effort to secure maximum funding.
The potential of TSM stock is much greater than the U.S. foundry project. Again, the company is already the most important foundry globally. It also sent strong signals throughout the chip sector earlier this year when it projected 20% sales growth in 2024 at a minimum.
The artificial intelligence age is upon us. Taiwan semiconductor Manufacturing is responsible for much of the production of the chips that lead that revolution. Nvidia relies upon TSMC for chips and packaging that are vital to its continued success.
On the date of publication, Alex Sirois 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.
