Artificial intelligence (AI) and semiconductor chips have captured the collective imagination of investors, and for good reason. Together they are driving the technology of the future. Semiconductor chips are ubiquitous in the digital age, and in recent months AI has begun to transform the way we communicate with machines. The fusion of these two fields means endless possibilities.
For investors, this is of particular interest. The Philadelphia Semiconductor Index (PHLX), which tracks the chip sector through the performance of the 30 largest semiconductor makers, is up about 39% so far this year. ”
PHLX works for good reason. Semiconductors have been around for decades and are embedded in nearly everything in today’s digital world, but when combined with AI, they will power tomorrow’s technology. Investors know this and are turning chip makers into AI stocks.
The question here is how much room there is for AI chip stocks to grow. We can consult street analysts. A few top equity pros are weighing in on AI and semiconductors, and their comments could shed more light on the sector. Let’s take a look at their opinions and which AI-related chip giants they endorse.
NVIDIA Corporation (NVDA)
First, semiconductor giant Nvidia is the eighth largest chip maker by revenue. Nvidia is a leader in graphics processing unit (GPU) manufacturing and has built a reputation with these high-end his chips. This chip can meet the computing power needs of several high-end, processing-intensive applications such as professional graphic design, high-end gaming, and AI. Demand for Nvidia’s GPUs, especially in the latter application, has helped the stock to make a big jump this year. Year-to-date, NVDA’s stock is up about 190%.
Recent data shows that Nvidia’s performance is excellent for AI products. His OpenAI, which launched ChatGPT, has been using his GPUs from Nvidia to train his AI units in-house since 2020, with numbers reaching his 20,000 chips. Looking ahead, OpenAI suggests that ChatGPT may need another 10,000 chips to remain efficient.
This has been a solid foundation for Nvidia’s success, and the company’s strong position can be inferred from the solid results it posted in its recent first quarter results. The report showed total sales to be his $7.19 billion. That was down 13% year-over-year, but he beat expectations by $670 million. The final figure, non-GAAP EPS of $1.09, beats expectations for him by 17 cents per share.
Even better from an investor’s perspective was Nvidia’s guidance. The company forecasts second-quarter revenue of $11 billion, up from its previous forecast of $7.2 billion. Achieving this would translate into a 41% year-over-year increase in quarterly revenue.
The company’s strengths in AI are the basis for an upbeat comment from Morgan Stanley Five-Star Analyst Joseph Moore, who wrote: These peers have actually narrowed significantly…Nevertheless, the NVDA data center business continues to grow multi-yearly and on a combined basis, given that there is no computing business that has been offset or cannibalized. It should clearly outperform all other computing players. Even outside the AI business.
“As a result, we believe NVDA has the cleanest story in AI hardware, and we would not recommend investing in AI exposure even if the current valuation structure and year-to-date price/earnings ratio already reflects our expectations. From home we still think it deserves consideration,” the analyst added. That’s higher than secondary and third players. ”
To this end, Moore has overweight (or buy) the NVDA, listing it as a top priority. Moore expects NVDA to hit $500 by this time next year, which would represent an 18.5% gain from current levels. (To see Moore’s achievements, click here)
Overall, NVIDIA earned a “strong buy” rating based on a breakdown of 30 buys against just 3 holds, based on 33 recent reviews, which is the consensus of Wall Street analysts. I’m here. The stock is trading at $422.09, with an average price target of $464.85 suggesting a modest 10% gain over the next 12 months. (look NVDA Stock Prediction)
Advanced Micro Devices (AMD)
AMD is one of the top 10 largest chipmakers by revenue consistently, with total revenue of $23.06 billion over the past four quarters (Q2 2022 to Q1 2023). The company boasts a market cap of $188 billion and has a broad portfolio in the AI ecosystem, including high-performance chips and architectures.
AMD’s AI exposure includes Instinct GPU accelerators, Alveo Adaptive accelerators, EPYC server processors, as well as several chip lines including Ryzen AI mobile processors and Versal AI core adaptive SoCs. AMD’s AI chips and accelerators are used in a wide range of applications, from games to data centers to supercomputers, providing the processing speed and capacity needed for generative AI.
Looking at the numbers, the company’s recent performance has been better than expected. AMD’s total revenue in the first quarter of this year was $5.35 billion. It was down about 9% year-over-year, but beat estimates by $40 million. The company’s non-GAAP EPS bottom-line earnings of 60 cents per share also beat estimates by 4 cents. On the downside, the company’s second-quarter revenue guidance of $5.3 billion is considered weak, falling short of the $5.52 billion forecast.
The company’s AI portfolio provides important support for the company. AMD is shifting its strategic focus to emerging AI markets, investing heavily in both networking and data center AI operations. Specifically, AMD’s new Ryzen 7000 series will feature his AI processing capabilities, with the MI300 chip being designed for both high-performance computing and AI applications. The latter track will get support from the rapidly growing generative AI field.
These are the key points behind Baird analyst Tristan Gerra’s comments about AMD. Gerra, who has a five-star rating on TipRanks, said of the company: “The Mi300x claims to deliver best-in-class TCO performance for inference applications, and management expects significant AI revenues from Q4 2023 based on work with multiple hyperscalers. AMD expects data center AI acceleration to grow at a CAGR of over 50% and a TAM of over $150 billion by 2027. In our view, AMD’s ecosystem While not as mature as Nvidia, it is well positioned to be a major beneficiary of AI’s long-term growth trends in the medium term.”
Based on the above, Gerra has set an outperform (or buy) rating for AMD’s stock, with a target price of $170 for the stock, suggesting a 54.5% upside potential over a 12-month period. increase. (To see Gerra’s achievements, click here)
Overall, The Street gives AMD a medium consensus rating based on 29 recent analyst reviews with 21 buys and 8 holds. The company currently trades at $110.01, with an average target price of $134.31 suggesting a 22% gain over the next year. (look AMD stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. Content is used for informational purposes only. It is very important to do your own analysis before making any investment.
