The demand for artificial intelligence (AI) is driving significant resources to manage chip stocks. These companies are playing important roles in the adoption of this technology, and there are still opportunities for investors to make money. Statista estimates that the AI chip market will grow by more than 30% in 2024, which is significantly increasing the growth rate of 16% for the larger semiconductor industry.
Here are two of the best stocks to profit from this opportunity.
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Nvidia (NASDAQ: NVDA) shares are up 186% year to date, at the time of writing, but despite this stellar run, investors shouldn’t feel like they missed the boat. The company’s latest earnings report shows a strong demand trend for this leader in graphics processing units (GPUs), and this is expected to continue until 2025.
“The age of AI is here, driving a global revolution for Nvidia computing,” CEO Jensen Huang said. For fiscal Q3, the company exceeded its guidance, with revenue up 94% year over year to $350,000.
While investors wait for Blackwell, which is the company’s new AI computing platform currently in production, it is encouraging that Nvidia’s Hopper chips are still in high demand. Nvidia reported that H200 chip sales grew significantly in the quarter, making it the fastest product ramp in the company’s history.
Blackwell will be a major growth factor next year. CFO Colette Kress said, “Demand for Blackwell is incredible, and we’re racing to ramp up to meet the demands of the customers we’re placing on us.” This is not a chip, but a scalable computing platform that includes different types of chips to deliver the computing power needed to create AI workloads – one of the biggest trends in high performance computing right now. Based on benchmark tests, Blackwell can deliver 2.2 times the performance over Hopper-based chips.
Some investors may look at the $3.5 billion market cap and think it’s expensive, but comparing the share price to Wall Street’s earnings estimates, the company’s valuation seems reasonable. Over the next several years, the analyst’s estimate of the deal has the company’s earnings growing at an annual rate of 37%. With the stock trading at around 34 times next year’s earnings estimates, the stock could continue to deliver market-beating returns for investors.
Shares of Taiwan Semiconductor Manufacturing (NYSE: TSM) are up 91% from last year. It makes chips for Nvidia and other chip companies, so it’s benefiting from some of the demand in high-performance computing.