In this article, we will be taking a look at the 10 best semiconductor stocks to buy for the AI boom. To skip our detailed analysis of the semiconductor industry and the impact of AI on the sector, you can go directly to see the 5 Best Semiconductor Stocks To Buy For The AI Boom.
The Impact Of Artificial Intelligence
The artificial intelligence (AI) boom has revolutionized almost every industry and sector in the market today, and the technology sector is perhaps the most heavily impacted by this frenzy. Semiconductor companies, in particular, are well-positioned to benefit from the AI boom, with many companies reporting higher sales and revenue forecasts directly correlated with the developments being seen in this space today. One example is NVIDIA Corporation (NASDAQ:NVDA), which forecasted its second-quarter revenue to come in at $11 billion, going above analyst estimates. Jensen Huang, the founder, and CEO of the company, noted that they will be increasing the supply of their family of products to meet the rising demand for them.
On May 24, Needham & Co.'s Global Semiconductor Analyst, Rajvindra Gill, was invited on CNBC to share his insights on NVIDIA Corporation's (NASDAQ:NVDA) first-quarter earnings report. Here's what he had to say:
"If you look at their guide for July, it's $11 billion. That's $4 billion over the Street. I thought it was a typo when I first looked at it - it's a massive guide up. Some of that might be higher pricing for their H-100."
According to Gill, the "massive guide up" may have to do a lot with the increasing demand for NVIDIA Corporation's (NASDAQ:NVDA) H-100, a demand he considers to be genuine and highly beneficial for the company. All in all, the company seems to have paved for itself a path for success in the rapidly transforming AI space at present and in the future. In an interview on CNBC Overtime this May, CEO Huang had the following to say on the future of AI:
"We have reinvented computing for the first time since the IBM system 360 60 years ago. There's a trillion dollars worth of data center infrastructure based on the old method of doing computation. Now we have accelerated computing and we have the killer app for computing called generative AI."
According to Huang, NVIDIA Corporation's (NASDAQ:NVDA) recent partnership with ServiceNow, Inc. (NYSE:NOW) is also "a fantastic growth opportunity" for both these companies in relation to their AI endeavors. The latter company is now offering the former access to immense amounts of data and "the engine for transforming all of that data and domain expertise into generative AI models."
Considering the immense benefits to be gained from active involvement in the AI space, many semiconductor companies are throwing in their cap with NVIDIA Corporation (NASDAQ:NVDA). For example, Lisa Su, the CEO of Advanced Micro Devices, Inc. (NASDAQ:AMD), mentioned in her June interview with CNBC that her company will be working on producing its own next-generation AI chip by the end of 2023. The next-generation GPU is aimed to pave the way for Advanced Micro Devices, Inc. (NASDAQ:AMD) to rival other semiconductor companies working on AI products today. Here are some comments from Su's interview:
"Everybody's talking about AI. We've been working on this roadmap for many, many years. M1-300 is our newest generation chip and frankly, it's incredible. I mean, the amount of technology we have on this, a hundred and fifty-three billion transistors. Everybody's talking about ChatGPT and Large Language Models, and M1-300 is actually designed exactly for this use case."
Rising Demand For AI Chips
According to the interview, Advanced Micro Devices, Inc. (NASDAQ:AMD) expects to sample its new chip by the third quarter and be in production by the end of 2023. Su's comments also signal that the company is focusing on making AI, particularly generative AI, its priority as it produces its new chips to meet the demand for AI chips. Here's what Su noted on this matter:
"What we see is that there's a tremendous demand for GPUs in AI space, for both training and inference. We work with all of the largest cloud manufacturers as well as many of the largest enterprise guys. And so, you know, the key is 'let's get these products to market as fast as possible.'"
According to Su, the Total Addressable Market (TAM) for chips like these is $30 billion in 2023, which her company plans to grow to over $150 billion. This highlights how not just the two companies mentioned here but others like QUALCOMM, Incorporated (NASDAQ:QCOM) and more will also have their eyes set on the prize in this space. Consequently, several semiconductor companies today are aiming to produce semiconductors and chips for AI to leave their mark and satisfy their customers. As this continues, these companies may soon become some of the best AI stocks or AI chip makers in the market. We have thus compiled a list of the companies we think are the best ones to play the AI boom.
10 Best Semiconductor Stocks To Buy For The AI Boom
We used a stock screener to get our list of the top semiconductors stocks in the market today and then ranked them using Insider Monkey's hedge fund data for the first quarter when 943 hedge funds were tracked. These stocks are well-positioned to benefit from the AI boom considering their operations in the AI industry, mentioned for each company in their paragraphs below. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.
Texas Instruments Incorporated (NASDAQ:TXN) is a semiconductor company well-positioned to benefit from the AI boom since it is introducing new Arm-based vision processors for use in processing visual images for AI. The company is based in Dallas, Texas.
We saw 52 hedge funds long Texas Instruments Incorporated (NASDAQ:TXN) in the first quarter, with a total stake value of $2.9 billion.
Susquehanna analyst Christopher Rolland reiterated a Positive rating on Texas Instruments Incorporated (NASDAQ:TXN) shares on June 13, alongside a $205 price target.
Holding 4.3 million shares in the company, Generation Investment Management was the largest shareholder in Texas Instruments Incorporated (NASDAQ:TXN) at the end of the first quarter.
John Vinh, an analyst at Keybanc, maintains an Overweight rating on Marvell Technology Inc. (NASDAQ: MRVL) shares, alongside an $80 price target, as of July 11.
Marvell Technology Inc. (NASDAQ: MRVL) offers data infrastructure semiconductor solutions and is based in Wilmington, Delaware. The company's CEO, Matt Murphy, sees its fiscal 2024 AI revenue at least doubling compared to the previous year.
Marvell Technology Inc. (NASDAQ: MRVL) was spotted in the 13F holdings of 62 hedge funds during the first quarter. Their total stake value was $1.1 billion.
Like QUALCOMM, Incorporated (NASDAQ:QCOM), Advanced Micro Devices, Inc. (NASDAQ:AMD), and NVIDIA Corporation (NASDAQ:NVDA), Marvell Technology Inc. (NASDAQ: MRVL) is a highly popular semiconductor stock involved in the AI space today.
There were 68 hedge funds long Intel Corporation (NASDAQ:INTC) in the first quarter, with a total stake value of $3.7 billion.
As of June 22, Cody Acree, an analyst at Benchmark, holds a Buy rating on Intel Corporation (NASDAQ:INTC) shares, alongside a price target of $39.
Intel Corporation (NASDAQ:INTC) is another semiconductor company working its way into the AI space, forecasting that it will be introducing its own AI computing chips in 2025. The company is based in Santa Clara, California.
Citadel Investment Group was the most prominent shareholder in Intel Corporation (NASDAQ:INTC) at the end of the first quarter, holding 17.2 million shares in the company.
QUALCOMM, Incorporated (NASDAQ:QCOM) is a leading semiconductor company offering chips that provide stellar AI processing and performance. It is based in San Diego, California.
Vijay Rakesh at Mizuho holds a Buy rating on QUALCOMM, Incorporated (NASDAQ:QCOM) shares as of June 22. The analyst also maintains a $140 price target on the stock.
QUALCOMM, Incorporated (NASDAQ:QCOM) had 69 hedge funds long its stock at the end of the first quarter, with a total stake value of $1.7 billion.
Like Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA), QUALCOMM, Incorporated (NASDAQ:QCOM) is a stock that is joining the AI frenzy today.
Beech Hill Partners was the largest shareholder in Broadcom Inc. (NASDAQ:AVGO) at the end of the first quarter, holding 6,950 shares.
Broadcom Inc. (NASDAQ:AVGO) is considered to be an undervalued giant in the AI space today since the company's chips are essential for generative AI networking infrastructure. It is based in San Jose, California.
In total, 72 hedge funds held stakes in Broadcom Inc. (NASDAQ:AVGO) in the first quarter. Their total stake value was $3.5 billion.
A Buy rating was reiterated on Broadcom Inc. (NASDAQ:AVGO) shares on July 14 by William Stein, an analyst at Truist Securities. The analyst also raised his price target on the stock from $890 to $942.
