Semiconductor stocks have made lucrative investments over the past 12 months. Secular tailwinds, including the artificial intelligence (AI) craze and the consumers returning to spend on consumer electronics, could extend that rally. The tech-heavy Nasdaq Composite has surged 23.1% on a year-to-date basis.

Moreover, recent macroeconomic data points to the possibility of more than one rate cut in 2024. The last few rounds of consumer price index (CPI) reports, for example, as well as jobs reports, have pointed to slower growth in consumer prices, on the one hand, and a cooling labor market, on the other.

Furthermore, if the Federal Reserve does pursue rate cuts, that will likely be a net positive for U.S. equities markets, including semiconductor stocks at the forefront of developing novel technology. Although certain semiconductor stocks have rallied quite extensively already, there is still plenty of room for these stocks to rise. With that said, below are three semiconductor stocks that could be multibaggers in the making.

Nvidia (NVDA)

Despite having experienced a significant rally over the past 12 months, Nvidia (NASDAQ:NVDA) stock still has plenty of juice to see its shares rise even more. The chipmaker has been essential in developing advanced graphics cards and accelerators for PCs and servers. Since last year, though, Nvidia has gained a new position in the chip market: the leading provider of AI chips.

Large language models (LLMs) have been in development for several years now but jumped into the mainstream after Microsoft (NASDAQ:MSFT)-backed startup OpenAI released its ChatGPT chatbot. Now enterprises across sectors are looking to make new products that leverage LLMs, creating pent-up demand for Nvidia’s advanced accelerators.

In March, Nvidia announced its new Blackwell series of chips, which when available later in the second half of 2024, will be the market’s most advanced AI chips. Nvidia’s share price has climbed 155.2% for the year. If the chipmaker continues to beat Wall Street estimates in its next earnings reports, then investors can expect NVDA shares to climb even more.

Advanced Micro Devices (AMD)

Another important chipmaker investors should consider is Advanced Micro Devices (NASDAQ:AMD). AMD has made quite a name for itself over the past decade. The chipmaker’s fabless manufacturing model has helped it to outcompete America’s legacy chip champion Intel (NASDAQ:INTC), which has continued to struggle to manufacture its own chips at increasingly smaller nodes. While AMD is still behind Nvidia in terms of developing AI accelerators, its entry into the market will be a pivotal moment.

At the Computex Conference in Taipei, Taiwan, AMD, as well as a host of other chipmaking companies, unveiled a pipeline of new chips to accelerate advancements in artificial intelligence. In particular, AMD announced the release of “[the] Instinct MI325X accelerators, with planned availability in Q4 2024.” The new chip will boast 288 gigabytes (GB) of ultra-fast HBM3E memory capacity. Though MI325X is behind Nvidia’s Blackwell series, it is apparently ahead of Nvidia’s H200 chip series.

AMD share price has rallied 20.4% on a year-to-date basis. A pickup in AI chip sales and a bullish market environment could send shares soaring.

Taiwan Semiconductor Manufacturing (TSM)

It’s hard to end a list of the world’s most important AI chipmakers without talking about their contract chip manufacturer Taiwan Semiconductor Manufacturing (NYSE:TSM). TSMC’s role in chipmaking has not been of greater importance and demand for advanced AI accelerators has boosted the need for TSMC’s manufacturing services even more. The fact the contract chip manufacturer possesses the advanced capabilities to manufacture at a 3-nanometer node size also gives it leverage in the market.

In the first quarter of 2024, TSMC reported a year-over-year increase in net revenue of 16.5% to $18.9 billion, while net income rose 8.8% to $7.2 billion. The strong earnings results came on the back of strong AI demand. Wall Street analysts expect TSMC’s second-quarter results to be just as good. Profits are expected to surge 30% on a year-over-year basis.

TSMC, being the world’s AI chip foundry, has a lot of pricing leverage for its manufacturing services. This could also see the chip manufacturer’s revenue and net income balloon over the coming quarters. TSM shares have risen 80% on a year-to-date basis.

On the date of publication, Tyrik Torres did not hold (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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.