Semiconductor stocks in 2024 are like thoroughbreds at the racetrack, with the PHLX Semiconductor Sector index galloping ahead by 33% while the broader S&P 500 lags far behind at a mere 15%. Despite this bonanza, not all chipmakers have tasted the fruits of success. Advanced Micro Devices (NASDAQ: AMD) and Marvell Technology (NASDAQ: MRVL) trail the semiconductor market, clocking gains of only 9% and 19% respectively.
The Essence of AMD
AMD dances in the realms of personal computers and data centers, both savoring the AI feast. The data center landscape burgeons with AI, McKinsey prognosticating a 10% annual growth in construction, potentially ballooning to a 20% increment for hyperscale data centers.
AMD is poised on the cusp of a lucid future, anticipating a burgeoning $400 billion AI-focused data center chip market by 2027, a fourfold leap from last year’s $45 billion. In its tussle with the behemoth, Nvidia, AMD plans to narrow the gap by unfurling competitive chips annually, aligning itself for better prospects.
As AMD’s data center revenue soared by 80% in Q1 of 2024 to $2.3 billion, it’s evident that the burgeoning AI sector is a promising avenue for growth. Embracing AI-enabled PC processors, AMD finds itself basking in an 85% revenue surge for the Q1 horizon.
Analysts eye AMD’s earnings to soar by 32% to reach $3.51 per share in 2024. The flares of growth radiate further, with a projected 33% annual escalation in earnings for the next five years. Could this spell a renaissance for the once-dormant semiconductor stock?
The Marvell Chronicles
Joining the AI fiesta alongside AMD is Marvell Technology, carving its niche in the AI-fueled data center bonanza. Armed with custom chips tailored for specific duties, Marvell is parading its wares through a different avenue compared to AMD’s GPU-driven general-purpose computing.
Mounting a horse of optimism, Marvell predicts a scintillating 85% yearly growth for custom AI chips up to 2027, potentially amassing $30 billion in 2027 alone. The company’s data center arm reaped an 87% surge in revenue, hitting $816 million, fermented by a “ramp in our custom AI programs”.
Should Marvell’s data center segment dominate 70% of the top line, as seen in the past quarter, it hints at a rosier future. The CEO’s optimism during the last earnings call, promising a substantial uptick in the forthcoming fiscal period, is like a rider’s confidence before a steep hurdle.