As the broader semiconductor industry accelerates in early 2024, the Philadelphia Semiconductor Index (SOX) closed at 4,206.52 on Jan 18, marking a 50% surge over the past year and a 2.6% increase year to date. This upward trajectory shows no signs of abating, fueled by a multitude of positive catalysts.
Strong Global Demand
The explosion of artificial intelligence (AI) has opened up substantial opportunities for semiconductor manufacturers, especially with the rise of data-centric computing architecture, cloud computing, the Internet of Things (IoT), and the metaverse. The pandemic-induced shift towards digitization as the new norm has further bolstered the growth trajectory of this sector.
The metaverse, a virtual interactive world powered by virtual and augmented reality, has propelled the demand for high-tech semiconductors, reshaping consumer habits and fostering a robust market for advanced technologies.
Explosion of Generative AI
The 2023 tech rally was driven by a surge in generative AI, with leading companies like NVIDIA at the forefront. The ongoing robust U.S. economy, alongside optimistic earnings results from NVIDIA and Taiwan Semiconductor Manufacturing Co. Ltd., further underscores the potential for substantial growth in the AI domain and its associated technologies.
Smart Devices Aiding Computing Demand
The increasing reliance on smart devices for functions such as face detection and video analytics has amplified the demand for high processing power, speed, low power consumption, and better graphic processors. This upsurge in demand bodes well for the semiconductor industry, with projections from the World Semiconductor Trade Statistics and IDC further reinforcing this positive trend.
Our Top Picks
In this dynamic landscape, we have identified five key semiconductor companies that offer substantial growth potential in 2024. These companies have witnessed positive earnings revisions in the last 60 days and carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
The price performance chart below showcases the recent trends of these selected stocks:
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA) stands to benefit from the growth in artificial intelligence, high-performance computing, and accelerated computing, driving its Compute & Networking revenues. It also enjoys positive prospects in the data center end-market business, fueled by burgeoning demand for generative AI and large language models. NVIDIA holds a Zacks Rank #1 and anticipates significant revenue and earnings growth in the current year.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) offers complementary metal oxide silicon wafer fabrication processes to manufacture a range of semiconductor devices. With a Zacks Rank #1, the company projects robust revenue and earnings growth for the current year.
Micron Technology Inc. (MU) is set to leverage the improving supply-demand landscape and the anticipated stabilization in mid-2024 to drive pricing and meet the rising demand in the AI segment. Micron, with a Zacks Rank #2, forecasts substantial revenue and earnings growth for the current year.
Advanced Micro Devices Inc. (AMD) is capitalizing on its portfolio strength and a growing partner base, with a strong focus on EPYC processors. The launch of the Ryzen 8040 series processor with Ryzen AI and Instinct MI300 Series data center AI accelerators is expected to fortify top-line growth.