As we enter the new year, the semiconductor sector is experiencing a revival, akin to a locomotive gathering steam. The seeds of this resurgence were sown in the wake of 2020, as the world witnessed the pervasive reliance on semiconductors across various industries. An initial boom ensued as companies scrambled to meet burgeoning demand, only to be followed by a slump as supply eventually caught up. However, the cyclical pattern characteristic of semiconductor stocks is undergoing a transformation ignited by two key catalysts: the rise of artificial intelligence (AI), particularly generative AI, and the CHIPS and Science Act of 2022.
The Renaissance of Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has emerged as a trailblazer in the semiconductor realm, a position it is poised to retain in 2024. The company’s stronghold in the data center market before the AI boom, coupled with the unveiling of the H200 chip, underscores its unrelenting innovation. Despite concerns about its ability to meet the voracious appetite for AI chips and questions regarding its valuation, analysts project a substantial earnings growth, fueling optimistic projections and a surge in stock ratings.
The Ascendance of Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is well-positioned to challenge Nvidia’s dominance, leveraging its new MI300 chips to rival Nvidia in the data center and AI sectors. The company’s partnerships with tech behemoths such as Meta Platforms, Amazon, OpenAI, Microsoft, and Oracle, signal an industry-wide vote of confidence in its capabilities. The meteoric 130% surge in AMD stock in 2023, buoyed by a resounding endorsement from Bank of America, is a testament to its bullish outlook for 2024.
The Promise of Intel (INTC)
Despite lagging behind the chip sector in 2023, Intel (NASDAQ:INTC) is poised for a renaissance with its strategic foray into AI with the impending launch of Gaudi 3. The impending launch of its Falcon Shores GPU in 2025 is expected to further bolster its competitive standing. While analysts anticipate fluctuating stock prices, bullish upgrades in December signal a potential confluence of growth and value for Intel.
The Unique Appeal of Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) offers a distinctive avenue to semiconductor investment in 2024. As a leading chip manufacturer for tech giants and a pivotal partner for chip designers like Nvidia, it commands a formidable 58% market share in third-party semiconductor manufacturing. However, geopolitical concerns stemming from a potential conflict between Taiwan and China present a formidable challenge, albeit one that underscores the intricate global dynamics at play.
Semiconductor Stocks to Watch in 2024
Amid the fervid nationwide push for semiconductor manufacturing, TSMC is making substantial investments in building a fab plant in Arizona. Their strategic maneuvering, corroborated by the CHIPS Act, indicates an impending resurgence. Although the tumult of 2023 damaged their earnings, analysts have sanguine projections of a soaring 20%+ earnings growth over the next five years.
The Micron Momentum
Investors are witnessing Micron Technology (NASDAQ:MU) ascend to its zenith, set to become a pivotal semiconductor stock in 2024. As the adept purveyor of dynamic random-access memory (DRAM) chips, Micron is poised to reign supreme in the AI-driven landscape, where prodigious memory applications will prove indispensable. The launch of HBM3E, a memory-chip module exhibiting prolific output and frugal power consumption, is a significant milestone anticipated to inscribe several hundred million dollars in the company’s 2024 revenue ledger.
While 2023 beset Micron with flat overall revenue, analysts are touting the company’s prospective resurgence in the data center market and core business sectors. Consequently, 25 of 39 analysts have bestowed MU stock with a resounding Strong Buy rating, signaling bullish consensus. Throughout the earnings report, a surfeit of analysts revamped their price targets, signifying unwavering faith in Micron’s trajectory.
Applied Materials: Forging the Tools of the Semiconductor Era
Applied Materials (NASDAQ:AMAT) warrants inclusion in the pantheon of semiconductor stocks by virtue of its pivotal role in chip manufacturing. Given the indispensable nature of semiconductor proliferation in driving economic growth, Applied Materials emerges as the linchpin of this acceleration. The modest 3% revenue growth in fiscal year 2023 might seem underwhelming, but the 8% earnings per share (EPS) growth offers a more reassuring vista. With a Moderate Buy rating from analysts, potential investors might find the projected pullback a propitious opportunity to partake in the ascendancy of this quintessential semiconductor entity.
Skyworks Solutions in the Ether
Skyworks Solutions (NASDAQ:SWKS) presents another avenue to dabble in the semiconductor domain, albeit with a distinct focus on wireless device chips as opposed to AI chips. Banking on an entrenched customer base led by none other than the perennial juggernaut, Apple Inc. (NASDAQ:AAPL), Skyworks Solutions finds solace in the enduring allure of the iPhone, which undergirds the resilience of SWKS stock. Despite peers notching up impressive gains, SWKS stock surged by 25% in 2023, underlining its resilience amidst waning quarterly revenue and earnings. However, a forthcoming pullback seems to be on the cards, presenting an opportune moment for discerning investors to seize the initiative.
Chris Markoch, on the date of this publication, did not have (either directly or indirectly) any positions in the securities mentioned in this article. The views expressed are strictly in compliance with the InvestorPlace.com Publishing Guidelines.
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