In 2016, Nvidia (NASDAQ: NVDA) CEO Jensen Huang personally delivered the first artificial intelligence (AI) supercomputer to OpenAI. In hindsight, this was a significant moment in history as the startup continued to develop one of the industry’s most advanced AI applications, ChatGPT.
ChatGPT and many of its competitors have been able to generate text, images, videos, and computer code on command. But Nvidia and its partners are designing more powerful and more energy-efficient hardware, paving the way for the development of better AI applications with expanded capabilities.
Here are five semiconductor stocks that investors can buy during the AI ​​revolution.
1. Nvidia
Nvidia is known for designing the most powerful data center graphics processing units (GPUs) for AI development. But the Nvidia AI Enterprise platform is an entirely cloud-based operating system for AI developers that goes beyond the chips themselves.
The platform offers developers a large library of language models (LLM) that they can use to build AI applications, which can save them a lot of time and money. It is also home to CUDA (GPU software layer), which allows developers to optimize the chip to create applications faster. CUDA doesn’t work with other chips, so data center operators must stick with Nvidia hardware or risk upsetting their software-savvy customers.
The Nvidia H100 GPU sets the benchmark in the AI ​​industry, but the company is getting ready to deliver a new generation of chips based on the Blackwell architecture. The future GB200 GPU, for example, can perform AI inference at five times the speed of the H100, which will reduce costs for developers, who often pay for computing capacity by the minute.
Nvidia stock has tripled over the past year, and it may not be done yet. Wall Street thinks that the company will generate more than $ 120 billion during the current fiscal year 2025 (ends on January 30, 2025), which is almost double the result of fiscal 2024. The majority of this revenue will come from the focus of AI. data center segment.
2. Advanced Micro Devices (AMD)
Nvidia is struggling to meet demand for GPUs, so some of its biggest customers are targeting them Advanced Micro Devices (NASDAQ: AMD) to change. AMD’s MI300 GPU wins over data center titans like Microsoft, Oracleand Meta platformwhich has been found to offer inference performance and cost advantages over the H100.
AMD’s data center revenue grew 80% to $2.3 billion during the first quarter of 2024 (ending March 31). The company expects to generate $4 billion in GPU sales this year, up from a January forecast of $3.5 billion.
But AMD has taken a leadership position in another important field of AI: personal computing. It says millions of PCs equipped with Ryzen AI chips have been shipped so far – from leading manufacturers like Dell, HPand Asus — giving AMD a 90% market share in this segment.
The company is working with Microsoft to develop a new Ryzen chip capable of processing the growing suite of AI features in the Windows operating system.
AMD stock is up 51% in the past year, but remains 18% below its high. Now could be a good time to buy as the company’s AI revenue is increasing in the data center and PC segments.
3. Axcelis Technologies
Unlike Nvidia and AMD, Axcelis Technologies (NASDAQ: ACLS) do not make any chips. It makes important ion implantation equipment for making processors (CPUs), memory chips, and storage chips. AI applications require a higher capacity of all three, which presents a huge opportunity for this company.
Most Nvidia data center GPUs have built-in memory, and high-end models like the Blackwell GB200 even come with a built-in CPU for higher efficiency.
In addition, AI-enabled PCs and smartphones require more processing power and up to twice the memory capacity of their predecessors. As a result, Axcelis CEO Russell Low said AI will require a significant expansion of manufacturing capacity throughout the semiconductor industry, which should result in more sales of the company’s equipment.
In addition, power devices (chips that regulate the flow of electrical power in current workloads) are very implant-intensive to manufacture. Rapid demand for AI data centers, leading to demand for energy generation, distribution, and cooling. And, thus, increasing the demand for Axcelis equipment.
Despite rising 835% over the past five years, the stock trades at a price-to-earnings (P/E) ratio of just 18.7, a 49% discount to the 36.9 P/E from iShares Semiconductor ETF. In other words, Axcelis stock would have to nearly double just to trade in line with its peers in the chip industry. This presents an opportunity for investors.
4. Broadcom
Broadcom (NASDAQ: AVGO) is a multifaceted AI play. It creates hardware and software networking solutions for data centers, including switches, which manage how fast data travels between servers and devices. It is a key component when thousands of GPUs are assembled to process massive amounts of data in AI development.
During the second quarter of fiscal 2024 (ending May 5), sales of Broadcom’s Tomahawk 5 and Jericho3 switches doubled compared to the year-ago period.
Many subsidiaries are also using AI. They acquired Symantec for $10.7 billion in 2019, which they used AlphabetVertex AI platform to bring AI to cybersecurity software. Broadcom is also acquiring cloud software provider VMware for $69 billion in 2023, which will allow developers to create virtual machines. This means that several users can connect to one server to use all the capacity, which is important when the AI ​​infrastructure is lacking.
Broadcom said company-wide AI revenue grew 280% year-over-year to $3.1 billion during the second quarter. The company expects to generate a record high of $51 billion in total revenue for all of fiscal 2024, with $11 billion coming from dedicated AI.
5. Micron Technology
As I mentioned earlier, AI-enabled PCs and smartphones require more memory capacity than non-AI devices. This is because AI applications require large amounts of data to function, and the memory chip is the brain that stores this information in a ready state. Micron Technology (NASDAQ: MU) it is the leading provider of memory and storage chips, and it is experiencing a wave of demand as a result of the AI ​​revolution.
Every tier 1 manufacturer of Android-based AI smartphones (eg Samsung) using Micron’s LPDDR5X memory chip. It offers between 12 gigabytes and 16 gigabytes of capacity, which is 50% to 100% more memory than the previous flagship smartphone required. Additionally, the minimum memory requirement for Microsoft’s new Copilot+ AI PC is 16 gigabytes, which is double the minimum amount required for the previous Surface lineup. This trend is generating more profits for Micron.
In the data center, Micron’s HBM3e (high bandwidth memory) solution is used in Nvidia’s new H200 GPU. It can perform AI inference at almost twice the speed of the H100 while using half the amount of energy, which translates into substantial cost savings for data center operators.
Micron said the HBM3e contributed $100 million to earnings during the fiscal third quarter of 2024 (ending May 30). By the end of fiscal year 2024, it is expected to be in the hundreds of millions of dollars in sales — but is forecast to grow to billions in US Dollars in fiscal year 2025.
Micron has completely sold off HBM3e memory over the next two years, which should give the company incredible pricing power and, therefore, generate significant profits.
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Randi Zuckerberg, former Facebook director of market development and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. Motley Fool positions and recommends Advanced Micro Devices, Alphabet, HP, Meta Platforms, Microsoft, Nvidia, Oracle, and iShares Trust – iShares Semiconductor ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
5 Super Semiconductor Stocks to Buy Hand in Hand for the Artificial Intelligence (AI) Revolution was originally published by The Motley Fool
