The Conquest of Advanced Micro Devices

Advanced Micro Devices (or AMD) has carved a niche as the world’s second-largest purveyor of x86 CPUs and discrete GPUs. Locked in a fierce rivalry with Intel in the CPU domain and Nvidia in GPUs, AMD has managed to hold parity with these giants by offering comparable chips at more competitive price points.

AMD also outpaced Intel in the race to produce smaller and denser CPUs by delegating a bulk of its manufacturing to Taiwan Semiconductor Manufacturing.

In 2023, AMD witnessed a decline of 4% in revenue and 24% in adjusted earnings per share (EPS) as PC shipments took a tumble. However, as the PC segment cooled off, AMD swiftly shifted focus to ramping up production of new data center GPUs tailored for AI processing. These cost-effective chips have already found favor with tech behemoths such as Microsoft, Meta Platforms, and Oracle.

Market analysts anticipate a surge in AMD’s revenue by 14% and 37% in adjusted EPS for 2024, propelled by the expansion of its data center segment and the resurgence of the PC market.

Although AMD’s stock may appear steeply priced at 47 times next year’s earnings, its trajectory seems poised to ascend in the ensuing years as it capitalizes on the burgeoning AI market. Its foray into the data center realm, bundling Epyc server CPUs, Instinct GPUs, and programmable chips following the Xilinx acquisition in 2022, could further propel its growth.

The Dominance of ASML

ASML emerges as the reigning monarch of lithography systems, essential for optically etching circuit patterns on silicon wafers. It proudly stands as the exclusive high-end purveyor of extreme ultraviolet (EUV) lithography systems, the go-to technology for chip foundries such as TSMC, Intel, and Samsung in the production of cutting-edge chips.

While 2023 saw a stellar 30% revenue ascent and a 41% EPS surge, ASML basked in the limelight of intensified competition between TSMC, Intel, and Samsung, leading to a scramble for more EUV systems to manufacture smaller and denser chips.

However, projections for 2024 paint a modest outlook of a 2% revenue upsurge and a 3% earnings dip. This deceleration is primarily attributed to recent export restrictions on EUV system deliveries to Chinese chipmakers. As the company overcomes these hurdles and accelerates the rollout of its new high-NA EUV systems, it aims at ushering in an era of even smaller chips beyond the 2-nanometer threshold come 2025.

In the long run, ASML sets its sights on achieving a revenue bracket of 44 billion euros ($48 billion) to 60 billion euros ($65 billion) by 2030, representing a compound annual growth rate (CAGR) of 7% to 12% since 2023.

Although the stock might sport a slightly premium tag at 31 times next year’s earnings, its monopoly over a pivotal chipmaking technology substantiates the higher valuation. ASML promises to be an enduring tech investment for the coming decade.

The Rise of Pinterest

Pinterest looms large as a social media titan, offering users a platform to showcase their interests, hobbies, and ideas via virtual boards. Its inherent appeal to companies seeking to market and vend products through shoppable “pins” positions it favorably amidst the burgeoning “social shopping” trend.

Amid a modest 9% revenue increase in 2023, Pinterest struggled to break into the black based on generally accepted accounting principles (GAAP) for the second consecutive year. This slowdown was attributed to macroeconomic headwinds in the advertising sector, a lull post its pandemic-induced growth spurt, and stiff rivalry from Meta’s Instagram, ByteDance’s TikTok, and other hybrid social-shopping platforms.

In the latter half of 2023, Pinterest staged a GAAP-profitability comeback while wrapping up the year with 498 million monthly active users (MAUs), marking an 11% annual surge and a notable acceleration from its 4% MAU growth in 2022. This growth trajectory counters the narrative tagging it as a mere pandemic-era fad.

Analysts foresee a 17% revenue boost and a 24% rise in adjusted EPS for Pinterest in 2024. The anticipated influx of Gen Z users, its global expansion efforts, fresh video content offerings, and AI-powered recommendations spell a promising long-term growth story.

Priced reasonably at 28 times forward earnings, Pinterest holds the promise of defending its niche and navigating the e-commerce landscape with its shoppable pins. It presents a compelling growth opportunity for the forthcoming decade.

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