Chicago, IL – January 8, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Taiwan Semiconductor Manufacturing Co. Ltd. TSM, Qualcomm Inc. QCOM, International Business Machines Corp. IBM, Broadcom Inc. AVGO and Marvell Technology Inc. MRVL.
Here are highlights from Tuesday’s Analyst Blog:
Buy 5 Giant AI Hardware Manufacturers to Maximize Your Gains
Wall Street witnessed an astonishing bull run in the past 24 months. The major drivers of this rally were the globally booming artificial intelligence (AI) technologies, especially generative AI. Companies that have extensively applied AI in their final products have become multi-baggers. Some stock prices have skyrocketed 300-400% during this period.
The AI frenzy is likely to continue in 2025. Bloomberg Intelligence estimates that generative AI spending will increase from $67 billion in 2023 to $1.3 trillion by 2032. Price Waterhouse Coopers estimated that the economic impact of generative AI is likely to reach around $15.7 trillion by 2030.
UBS estimated that four U.S. technology giants that are members of the so-called "Magnificent 7," will allocate around $267 billion as capital expenditure on AI applications in 2025, suggesting a jump of 33.5% year over year.
At this stage, it will be prudent to invest in AI hardware manufacturing bigwigs with a favorable Zacks Rank. These are: Taiwan Semiconductor Manufacturing Co. Ltd., Qualcomm Inc., International Business Machines Corp., Broadcom Inc. and Marvell Technology Inc..
Buy 5 Big AI Hardware Developers for 2025
These five AI chipset manufacturers have strong potential for 2025. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Taiwan Semiconductor Manufacturing Co. Ltd.
Taiwan Semiconductor is the largest manufacturer of AI-based chipsets for the world's best AI chipset developers. TSM is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. The growing adoption of its multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum.
TSM's growing efforts to ramp up the production of 3nm and development of 2nm is a plus. Also, strength across its 7nm, 16nm and 28nm technologies are contributing well to its top-line growth. Management expects revenue from AI processors to triple in 2025 and account for 15% of revenues.
TSM is currently trading at a reasonable valuation compared to its peers. The company has a forward P/E of 22.79X, Price/Sales (P/S) of 13.06X and Price/Book (P/B) of 8.39X. All three parameters are in line with the current industry average.
Taiwan Semiconductor has an expected revenue and earnings growth rate of 24.8% and 27.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% in the last 60 days.
Qualcomm Inc.
Qualcomm is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor firm for the intelligent edge. With the accelerated rollout of 5G technology, QCOM is benefiting from investments toward building a licensing program in mobile.
QCOM formed a strategic collaboration with Google to develop Generative AI digital cockpit solutions. QCOM also recently introduced powerful automotive platforms to bolster the in-vehicle digital experience and facilitate automated driving. These initiatives are driving growth in the automotive business. Strength in the Android smartphone market is a tailwind.
Qualcomm's Cloud AI 100 chip can carry out 227 server queries and manage a net of 3.8 queries per watt. In 2024, QCOM unveiled the Snapdragon 8s Gen 3 mobile chip supporting 30 generative models including image generation and voice assistants. QCOM also launched AI-capable Snapdragon X Plus laptop processor, which has faster CPU speed using less power.
QCOM has a forward P/E ratio of 16.90X, in line with the industry average and below the S&P 500's forward P/E of 17.98X. It has a PEG of 1.61X, well below the industry PEG of 3.38X and the S&P 500's PEG of 2.13X.
Qualcomm has an expected revenue and earnings growth rate of 8.3% and 9%, respectively, for the current year (ending September 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.5% in the last 60 days.
International Business Machines Corp.
International Business Machines (IBM) is poised to benefit from strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments. Settlement of ongoing lawsuits with GlobalFoundries will pave the way for future collaboration and exploration of new revenue-generating opportunities.
IBM is collaborating with SAP to tap generative AI technology within the retail industry. The collaboration is likely to facilitate higher productivity for IBM and help accelerate business transformation in consumer-packaged goods and retail firms.
IBM is betting big on the Watsonx platform, which is likely to be the core technology platform for its AI capabilities. Watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive. IBM has integrated the open-source Mixtral-8x7B large language model into its watsonx AI and data platform.
International Business Machines has an expected revenue and earnings growth rate of 4.9% and 4.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% in the last 60 days.
Broadcom Inc.
Broadcom benefited from strong demand for Broadcom's custom AI accelerators (XPUs) and networking. Broadcom experienced four times growth in AI connectivity revenues, driven by global shipments of its Tomahawk and Jericho solutions. AVGO supplies a wide variety of chips and accessories that are critical components in data center infrastructure.
The acquisition of VMware has benefited the infrastructure software solutions of Broadcom. VMware's expanding clientele, which includes the likes of Alphabet and Meta Platforms, is noteworthy. AVGO's strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, has been a key catalyst.
Broadcom has an expected revenue and earnings growth rate of 18.3% and 29.4%, respectively, for the current year (ending October 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.3% in the last seven days.
Marvell Technology Inc.
Marvell Technology is benefiting from the strong demand environment across the data center end market. In the last reported quarter, MRVL's data center end market revenues increased 98% year over year and 25% sequentially, propelled by strong revenue growth across AI-driven demand for PAM products and ZR electro-optics.
MRVL is a promising player in the solid-state drive controllers' market. The storage market is seeing a steady increase in demand, given the fast-growing data volume, especially the exponential growth in unstructured data. Completion of inventory digestions is likely to aid growth for MRVL across the enterprise networking and carrier infrastructure end markets.
Marvell Technology has an expected revenue and earnings growth rate of 40.3% and 72.8%, respectively, for next year (ending January 2026). The Zacks Consensus Estimate for next-year earnings has improved 0.4% in the last 30 days.
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