We all know that Nvidia (NASDAQ:NVDA) is the top choice among for investors looking at chip stocks in this market. However, this company is far from the only company that stands to benefit from AI-related tailwinds and surging long-term demand expectations.
Plenty of other chip stocks have emerged as beneficiaries of the recent hype. And as AI technology improves daily, more infrastructure is needed to support the developers and corporations building the applications.
For those looking at mega-cap chip stocks, and other related companies that could benefit from these trends, examine three stocks worth keeping an eye on now.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI), a leader in IT solutions for AI, Cloud, Storage and 5G/Edge, is expanding in Silicon Valley to meet rising demand for liquid-cooled data centers. The goal of the company’s new campuses is to streamline global delivery of plug-and-play liquid-cooled solutions. This will enhance AI workload capabilities while cutting energy use and operational costs significantly.
The management team continues to emphasize SMCI’s cutting-edge generative deep learning and AI inference platforms, enhanced by liquid-cooled technology. With rising interest in energy-efficient Direct Liquid-Cooled solutions, Super Micro Computer to innovates with its modular systems for AI and HPC industries. The company foresees liquid-cooled data centers increasing from historically minimal levels to 15%–30% of all installations within two years. This will position SMCI as a leader with superior efficiency and lower operational expenses versus conventional air-cooled setups.
The company saw its stock price soar nearly fourfold in the past year on strong growth in data center products. In Q3 of 2024, revenue reached $3.9 billion and net income $402 million. For Q4 of 2024, the market expects a $5.1 billion revenue, with a full year revenue projection of $14.7 billion.
Advanced Micro Devices (AMD)
Challenging Nvidia, Advanced Micro Devices (NASDAQ:AMD) comes in second in the AI chip market. AMD is also turning into a giant AI semiconductor company. It is gaining trust from other big tech companies like Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT). This led to an 80% increase in data center revenue last March. The growth stems from an emerging AI product lineup.
Recently, AMD launched its MI325X AI accelerator chip, offering 30% more bandwidth and double the memory of comparable Nvidia products. AMD plans to match Nvidia’s pace in releasing next-gen AI tech.
If tempted to buy shares of this underappreciated growth company, down over 30% from its March high, analysts support your choice. With a consensus price target of $190.02—20% above the current price—35 of 49 analysts rate it a strong buy. Expect volatility and potentially more downside, but the company’s long-term potential remains promising. I think at current levels, AMD stock presents a significant opportunity.
Taiwan Semiconductor (TSM)
Another crucial AI player is Taiwan Semiconductor (NYSE:TSM). The company has enabled Nvidia to produce powerful chips. In fact, Nvidia’s Hopper uses TSM’s 4N process and its Blackwell AI processors will use the 4NP process. Aside from that, Intel Corporation (NASDAQ:INTC) plans to use TSM’s 3mm line for their notebook processes.
Unlike Nvidia, INTC manufactures its own chips. But, it has fallen behind in developing advanced ones, thus relying on TSMC. Advancing toward 2nm process nodes, Taiwan Semiconductor continues to see high demand from Intel, Nvidia, Qualcomm and other mega-cap tech companies. This demand continues to spur high factory utilization rates. Further, it’s likely continue to do so over the long-term.
The market expects more growth from TSM stock, projecting a 21% increase by 2029. The company’s earning per share growth estimates are very optimistic, with analysts expecting a 23% and 25% increase for 2024 and 2025, respectively. Given the big potential in AI, Taiwan Semiconductor is a company long-term investors may want to consider right now.
On the date of publication, Chris MacDonald 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.
