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The semiconductor industry is gaining momentum as it plays a central role in the development of AI and other advanced technologies. Semiconductors are the foundation of modern computing devices and systems. Interestingly, advanced technologies have helped develop cutting-edge chips with high precision and versatility that support complex applications and meet higher processing requirements.

With this in mind, investors might consider buying fundamentally strong semiconductor stocks such as Advanced Micro Devices, Inc. (AMD), Micron Technology, Inc. (MU), and NVIDIA Corporation (NVDA), which are driving the technology revolution.

Semiconductors have become essential for advancing advanced technologies such as machine learning, edge computing, quantum computing, deep learning and neural networks.

The semiconductor industry is experiencing a surge in demand thanks to the rise of artificial intelligence (AI) and high-performance computing (HPC). Since these technologies require greater computing power to work efficiently, companies are developing AI chips that power AI algorithms and applications to work efficiently by processing large amounts of data quickly and accurately.

Advanced chips also enable applications such as augmented and virtual reality and artificial intelligence on devices. These advanced chips are great at tasks such as image recognition and natural language processing, and offer high accuracy for high-end applications. The global semiconductor market will reach $2.06 trillion by 2032, growing at a compound annual growth rate of 14.9%.

With these factors in mind, let’s now look at the basics of semiconductor and wireless chip stock picking, starting with the third pick.

Stock No. 3: Advanced Micro Devices, Inc. (AMD)

AMD is a global semiconductor company. It operates in the data center, client, gaming and embedded markets. It offers x86 microprocessors and graphics processing units (GPUs) as accelerated processing units, chipsets, data center and professional GPUs and more.

On June 2, 2024, AMD announced the launch of AMD Ryzen AI 300 Series processors with the world’s most powerful Neural Processing Unit for next-generation AI PCs. The company also introduced the next-generation AMD Ryzen 9000 Series processors for desktops, further cementing its position as a leader in performance and efficiency for gamers, content creators, and prosumers.

These new processors complement a broad product portfolio that supports AI in the cloud, at the edge, in the client and beyond.

On May 7, 2024, AMD announced that Optiver, a leading global market maker trading on over 100 exchanges, leveraged a broad range of AMD high-performance computing engines to advance its mission of improving financial markets by building a modern infrastructure that serves as the backbone of the organization.

AMD’s CAPEX/revenue for the last 12 months is 2.32%, 2% higher than the industry average of 2.28%. Similarly, its EBITDA margin and net profit margin for the last 12 months are 16.83% and 4.89%, respectively, 74.1% and 83.5% higher than the industry averages of 9.67% and 2.67%, respectively.

AMD’s net revenue for the first fiscal quarter ended March 30, 2024, increased 2.2% year-over-year to $5.47 billion. In addition, free cash flow increased 15.5% year-over-year to $379 million. Non-GAAP net income was $1.01 billion, up 4.4% from the year-ago quarter. Non-GAAP earnings per share also increased 3.3% year-over-year to $0.62.

Analysts expect AMD’s revenue and earnings per share for the quarter ending June 30, 2024, to rise 6.8% and 17% year-over-year, to $5.72 billion and $0.68, respectively. The company has beaten Wall Street’s revenue estimates in each of the last four quarters, which is impressive. Over the past nine months, the stock has gained 51.1%, closing the last trading session at $160.34.

AMD has an A grade for Growth, which is reflected in its POWR Ratings. POWR Ratings are calculated by taking into account 118 different factors, with each factor being given optimal weighting.

It ranks 72 out of 92 stocks in the Semiconductors and Wireless Chip industry. Click here to see AMD’s additional POWR Ratings (Value, Momentum, Stability, Sentiment and Quality).

Stock No. 2: Micron Technology, Inc. (MU)

MU designs, develops, manufactures and sells storage products worldwide. The company operates in four segments: the Compute and Networking Business Unit, the Mobile Business Unit, the Embedded Business Unit and the Storage Business Unit.

On May 7, 2024, MU announced the availability of Crucial LPCAMM2, the breakthrough next-generation laptop storage form factor featuring LPDDR5X mobile memory to boost laptop performance for professionals and creatives. LPCAMM2 delivers higher bandwidth and dual-channel support with a single module.

It is a high-performance storage solution for handling AI PCs and complex workloads and is compatible with Lenovo ThinkPad P1 Gen 7 mobile workstations.

MU’s CAPEX/sales for the last 12 months is 33.87%, significantly above the industry average of 2.28%. Likewise, the EBITDA margin for the last 12 months is 20%, 106.9% above the industry average of 9.67%.

For the second fiscal quarter ended February 29, 2024, MU’s revenue was $5.82 billion, up 57.7% year over year. Non-GAAP operating income was $204 million, compared to a non-GAAP operating loss of $2.08 billion in the year-ago quarter.

For the same quarter, non-GAAP net income and earnings per share were $476 million and $0.42, respectively, compared to non-GAAP net loss and loss per share of $2.08 billion and $1.91, respectively, in the year-ago quarter.

Street expects MU’s earnings per share to grow 917.3% year-over-year to $8.18 in fiscal 2025. Revenue for the quarter ending May 31, 2024 is expected to grow 76.9% to $6.64 billion. The company has beaten consensus estimates for earnings per share and revenue in each of the last four quarters. MU has gained 106.1% over the past year, closing the last trading session at $134.82.

MU has an A grade for sentiment and a B grade for growth. It is ranked 66th in the same industry. Here you can find MU’s ratings in the areas of value, momentum, stability and quality.

Stock No. 1: NVIDIA Corporation (NVDA)

NVDA provides graphics, computing and networking solutions in the United States, Taiwan, China, Hong Kong and internationally. The company has two segments: Computing & Networking and Graphics.

On June 2, 2024, NVDA announced the general software availability of NVIDIA AI Enterprise-IGX with NVIDIA Holoscan on the NVIDIA IGX platform. This addresses the increasing need for real-time AI computing at the industrial edge by enabling solution providers to develop and deploy edge AI solutions faster with enterprise-grade software and support.

On June 2, 2024, NVDA announced NVIDIA RTX technology to power AI assistants and digital humans with GeForce RTX AI laptops. The company unveiled Project G-Assist, an RTX-based demo of AI assistant technology that provides contextual help for PC games and apps.

NVDA also introduced the first PC-based NVIDIA NIM inference microservices for the NVIDIA ACE digital human platform. These technologies are enabled by the NVIDIA RTX AI Toolkit, which helps developers optimize and deploy large-scale generative AI models on Windows PCs.

NVDA’s trailing-12-month asset turnover ratio of 1.31x is 113% higher than the industry average of 0.62x. The trailing-12-month return on assets and total assets ratio of 61.54% and 55.27%, respectively, are significantly higher than the industry averages of 2.58% and 1.66%, respectively.

NVDA’s revenue for the first fiscal quarter ended April 28, 2024, was $26.04 billion, up 262.1% year over year. Non-GAAP gross profit increased 328.2% from the year-ago quarter to $20.56 billion. In addition, non-GAAP net income was $15.24 billion and $6.12 per share, up 461.7% and 461.5%, respectively, from the year-ago quarter.

For fiscal year 2025, NVDA’s revenue and earnings per share are expected to grow 97% and 109.1% year-over-year, to $119.98 billion and $2.71, respectively. Over the last four quarters, the company has beaten consensus estimates for revenue and earnings per share. The stock has gained 214.1% over the past year, closing the last trading session at $121.79.

NVDA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary scoring system.

It has an A grade for Quality and a B grade for Growth and Value. It ranks first in the Semiconductor and Wireless Chip industry. Click here to see NVDA’s rating for Momentum, Stability and Sentiment.

What do you do next?

Steve Reitmeister, a 43-year investment veteran, has just released his 2024 market outlook along with his trading plan and 11 top tips for the coming year.

Stock market outlook 2024 >

NVDA shares were trading at $120.26 per share on Tuesday morning, down $1.52 (-1.25%). Year-to-date, NVDA has gained 142.86%, while the benchmark S&P 500 index has risen 12.79% over the same period.

About the author: Neha Panjwani

Since her school days, Neha has had a deep fascination with finance, a passion that led her to a career as an investment analyst after completing her bachelor’s degree in commerce. Neha is currently enrolled in the CFA program and is dedicated to further deepening her understanding of investment fundamentals. Neha’s primary goal is to help retail investors identify optimal investment opportunities by carefully evaluating key aspects of financial instruments, with a focus on stocks and ETFs. Her commitment is to empower individuals to make informed and strategic investment decisions in the dynamic world of finance. More…

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