The artificial intelligence story has been explosive, creating substantial opportunities for some of the best semiconductor stocks.
According to Grand View Research, the global AI boom could grow from about $137 billion in 2022 to more than $1.81 trillion by 2030.
Even better, artificial intelligence-related spending will make up about 8% to 10% of IT budgets in 2024, according to Wedbush. “This demonstrates a remarkable acceleration in AI spending after it comprised less than 1% of IT budgets in 2023,” added Seeking Alpha.
Plus, according to JPMorgan, of the 166 Chief Investment Officers surveyed, 75% are set to allocate more than 5% of their IT budgets to AI computer hardware. Cloud spending could rise to about 35% of IT budgets from 20%. All of which will benefit semiconductor firms. And according to a recent CNBC survey, 60% of respondents said AI investments are “accelerating.”
Until the AI boom shows signs of cooling – which won’t happen any time soon – investors should jump into some of the best semiconductor stocks such as:
Best Semiconductor Stocks: Nvidia (NVDA)
When it comes to AI and chip demand, it’s impossible to overlook Nvidia (NASDAQ:NVDA) – especially with its post-split price of about $124.
Helping, Susquehanna analysts say NVDA could test $160 a share. Rosenblatt analysts say NVDA could rally to $200 with a buy rating. Truist also just raised its price target to $140. Even Citi analysts just bumped their price target on NVDA to $150, “citing its plans for 2025 to build its GB200 GPUs in both the NVL36 and 76 configurations,” says Seeking Alpha.
Earnings have been and should continue to be strong. In its most recent quarter, NVDA’s first quarter revenue jumped 262% year-over-year to $26.04 billion.
That was well ahead of estimates for $24.65 billion. Adjusted earnings per share jumped 461% to $6.12, soaring above estimates for $5.50.
Even adjusted gross margins of 78.9% were above expectations of 77.2%. Even guidance was expectedly strong. For the second quarter, NVDA’s projected revenue of $28 billion is above expectations of $26.6 billion. Adjusted gross margins could come in around 75.5%, which is also above estimates for 75.2.%.
Advanced Micro Devices (AMD)
Consolidating at around $162, Advanced Micro Devices (AMD) is a bargain.
Helping, Piper Sandler just reiterated its overweight rating on AMD, and said the stock was its large-cap stock pick for the second half of the year. The firm also has a price target of $175. Even Bank of America says AMD is a “best of breed” stock. Citi analysts say AMD could take about 10% of the data center graphics processing units (GPU) market.
And analysts at Edward Jones also initiated coverage of AMD with a buy rating, citing growing demand for data center infrastructure. All of which should boost AMD’s GPUs and central processing units (CPUs).
Plus, as pointed out by Investorplace contributor Chris MacDonald, “AMD’s new MI325X accelerator boasts 288 GB of HBM3e memory and 6 TBps bandwidth, surpassing the MI300X’s specs. Notably, this accelerator fits into the MI325X Platform, offering advantages over Nvidia’s H200, with double the memory and faster bandwidth for enhanced AI performance.”
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) is one of the top beneficiaries of Apple’s recent AI news. It’s also one of the best semiconductor stocks to buy today.
For one, according to analysts at Bank of America, TSM is an “indispensable and reliable partner” to Apple, says CNBC.
“We believe the semi-demand upside from Apple can get bigger with its widening AI service, from a relatively low base,” added the firm. “TSMC is Apple’s supplier for the A- and M-series semiconductors and is well poised to benefit from multi-year growth.”
Analysts at Bernstein also raised their price target on TSM to $200 from $150. As noted by Seeking Alpha, “The analysts expect third-quarter revenue guidance to beat estimates and 2024 full-year US$ revenue to rise by 25% and EPS by 28%.”
Two, earnings will only get stronger for TSM. In its most recent quarter, the company’s revenue soared 34.3% year over year to $6.1 billion – the fastest pace of growth since November 2022, says CNBC. “In January, the company said that its AI revenue is growing 50% on an annual basis. Analysts expect TSMC to post a 23.7% rise in total revenue this year, according to LSEG consensus estimates, after a decline in 2023.”
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
