The chip glut that was plaguing manufacturers in 2022 and 2023 is coming to an end, and strong tailwinds in the industry make investing in semiconductors important to any portfolio. Below are three of Wall Street’s favorite semiconductor stocks poised for strong growth and share price appreciation.
Nvidia (NVDA)
There was a lot of worry when investors saw Nvidia’s shares ended March 8th’s trading session down nearly 6%. Fortunately for Nvidia shareholders, when the chipmaker shed $128 billion of market value, it was just a short-term shudder. The stock is back on the rebound.
Last year, the company’s share returned a staggering gain of 240%, and Nvidia’s Q4 earnings report beat Wall Street’s expectations. Currently, shares of NVDA have risen 89.58% on a year-to-date basis.
The chipmaker dominates in both gaming GPUs and AI chips. In fact, the chipmaker dominates about 81% of the market for AI chips used in personal computers and data centers. Earlier this week, Nvidia 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.
Nvidia remains both a Wall Street and retail investor favorite, and as long as the company maintains its dominant position in the space, this is unlikely to change.
Advanced Micro Devices (AMD)
2024 will be a make or break it year for Advanced Micro Devices (NASDAQ:AMD). The chipmaker announced the MI300x GPU chipset almost a year ago in its second quarter 2023 earnings report. To follow that up, in its third-quarter earnings report, AMD announced it expects to sell $2 billion in AI chips next year. Because these AI chips are still in high demand in North America, Europe and Asia, AMD will likely reap a significant profit upon entering the space.
Anticipating AMD’s long-awaited entrance into the AI chip market, a number of Wall Street firms have also boosted their target prices for the chipmaker. Investment bank Jefferies raised its target price for AMD to $200 from $130. JPMorgan, Goldman Sachs, Baird and a host of other investment banks also made significant increases to their target prices in late January 2024. Moreover, Japanese bank Mizuho Securities has recently raised its target price for $200 to $235.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) is a global leader in high-performance server solutions for enterprise, cloud, data center and edge computing. The company offers a wide range of products, such as servers, storage systems, networking devices and customizable software solutions to meet the specific needs of its customers. In recent years, Super Micro Computer has benefited from the increasing demand for cloud infrastructure and data processing capabilities, generating strong, double-digit revenue growth in fiscal years 2022 and 2023.
The company has managed to be one of the most successful AI plays in the stock market, alongside Nvidia. The company has risen 854% over the past 12 months and 220% since the start of 2024. Super Micro Computers’ servers and liquid cooling systems are must-haves for those training AI models. This has driven not only the company’s revenue growth but also earnings potential.
In its Q2 fiscal year 2024 earnings print, Super Micro Chip reported $3.66 billion in net sales for the fourth quarter, up more than 100% year over year. The semiconductor firm also generated net income of nearly $300 million.
Despite its meteoric rise, the company’s valuation doesn’t look too expensive, only at 33.1x forward earnings. Down about 24% since the start of mid-March, now would be a good buying opportunity.
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.