The oversupply of inventory (“chip glut”) in the semiconductor market plagued manufacturers in 2022 and 2023, but this phenomenon is coming to an end. Moreover, strong tailwinds in the industry make investing in semiconductors essential to any portfolio.
Below are three of semiconductor stocks poised to deliver for market-beating returns.
Nvidia (NVDA)
Nvidia continues to dominate the stock market in terms of performance. While shares in the chipmaker did dip more than 5% in one trading session a few weeks ago, NVDA has significantly rebounded. The stock price has nearly doubled in value.
The reason is not complicated. Nvidia has a stranglehold on about 81% of the market for AI chips used in personal computers and data centers. The chipmaker has effectively tackled and consolidated this new market in an unprecedented manner. The only chipmaker likely to begin to rival it in the near future will be Advanced Micro Devices (NASDAQ:AMD), which plans to sell billions worth of AI chips in 2024. While AMD’s entrance to the market is welcomed, the chipmaker will have to be ready to face steep competition.
Earlier last week, NVDA stock released a new flagship processor, Blackwell, with 208 billion transistors. The new line of AI chips will be available later this year and will be used by some of the world’s largest data center operators.
Despite there being AI hype all around, Nvidia continues to live up to it.
Advanced Micro Devices (AMD)
2024 will be a make-or-break year for Advanced Micro Devices. The chipmaker announced the MI300x GPU chipset almost a year ago in its second quarter 2023 earnings report. To follow that up, in their January earnings call, AMD announced it expects to sell $3.5 billion in AI chips this year.
Moreover, the company announced a swath of new GPU tailored for AI computing last December. Nvidia’s recent announcement of its new Blackwell AI chips and product roadmap may have put AMD investors on edge. So has China’s ban on Intel (NASDAQ:INTC) and AMD chips from government computers.
Still, while AMD will certainly face competition in the AI market, its entrance into the novel market could very well be a game changer.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) is a semiconductor equipment manufacturer. In particular, ACMR supplies semiconductor manufacturers with wet processing equipment and technologies, and the manufacturer has a particular focus on China’s domestic semiconductor market.
ACM Research’s earnings results throughout 2023 were admittedly impressive and beat Wall Street’s estimates. Their recent Q4’2023 earnings report was no different. Full-year revenue climbed 43% year-over-year to $558 million. ACM Research expects solid double-digit revenue growth in 2024 as well. During this period, the company expects its Shanghai-based unit to grow substantially.
Furthermore, while ACMR has appreciated more than 50% year-to-date, the company’s share price is trading at relatively cheap valuation multiples. ACMR’s forward EV/EBITDA is around 13.6x, and its forward price-to-earnings ratio is 20.3x. ACM Research’s cheap multiples, coupled with its growth prospects, could help further its rally.
On the date of publication, Tyrik Torres 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.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.