Investors should keep their ears to the ground for alluring chip stocks.
Positive indicators point to growth in the semiconductor industry in 2024. Initial CHIPS Act funding released in late 2023 stands ready to stimulate the industry, and there’s always the growth potential AI brings to the table that’s worth considering. In particular, investors continue to hone in on the ability for companies to monetize their generative AI capabilities, something that could lead to surging chip demand for some time to come.
Of course, not all chip stocks are created equal. And there are plenty of seasonal hurdles and inventory issues for companies to work through.
However, these semiconductor stocks are among the best picks in this sector right now. Let’s delve into the three companies that top the list of highest-potential chip stocks to buy right now.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) remains the leading chip company globally in terms of market capitalization. Recently, it surpassed Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) to become the world’s fourth-most valuable company. That’s no small feat.
In fact, a number of key catalysts drove Nvidia’s rise. Obviously, AI-related chip demand is top of mind for most investors. And, the company is planning a new business segment focusing on customized AI chips for cloud computing and AI to remain unbeatable. With an 80% market share in high-end AI chips, NVDA continues to rocket higher. Further, it appears to have plenty of rocket fuel remaining.
The company’s H100 and A100 chips provide versatile and high-performance AI processing power for clients. Notably, Nvidia has provided custom chip development for companies seeking tailored solutions. If the company’s clientele continues to demand more personalization, it could drive greater growth than expected.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is another key winner in the AI-related surge in the chip sector. The company’s 2024 revenue estimate has already improved, surging to around $3.5 billion from only $2 billion previously.
While this is a small piece of the pie relative to Nvidia and other high-performance chip makers, it signals accelerated growth potential. Additionally, it exhibits strong early-stage market share in the AI realm.
Also, the company cited its enhanced AI positioning and anticipated share gains in the AI GPU market. Analyst Gus Richard predicts accelerated share gains in the AI GPU market, based on the company’s pricing and growth strategy long-term. This may be central to AMD’s recent rise.
Furthermore, the company’s numbers have impressed, with AMD reporting an 11% increase in sales, surpassing estimates by $60 million. It set an ambitious target of $3.5 billion in data center revenue, a 75% jump from its initial $2 billion forecast. Data center revenue towered by 37% year over year (YOY) in the latest quarter, a quarterly increase of 43%.
Strong CPU and data center GPU revenues contributed to this development. Also, AMD’s AI-focused MI300X GPU was introduced, which offers better speed, efficiency, and affordability.
Taiwan Semiconductor (TSM)
Leading semiconductor maker Taiwan Semiconductor (NYSE:TSM) has a market cap of $472 billion and an average stock price of $120, as stated by Yahoo Finance.
The company serves as the primary supplier of microchips to giants like Apple (NASDAQ:AAPL). And, the $570 billion semiconductor market is expected to grow 12.2% CAGR through 2029. All indications point to Taiwan Semiconductor playing a major role in this space.
TSM is a leading tech investment due to its steady annual earnings growth of more than 20%, which could go even higher given AI-driven demand. Despite a relatively low price-earnings ratio of around 23x, the company continued yo grow due to AI expansion.
As the world’s largest foundry, TSM serves major players like Nvidia and AMD, and its strategic location in a geopolitically significant country further bolsters its investment appeal.
On the date of publication, Chris MacDonald 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.
