Last week, Nvidia (NASDAQ:NVDA) took the tech world by storm when it reported impressive first-quarter earnings. Since then, NVDA has secured its place as the breakout stock of 2023, rising from less than $300 per share a month ago to nearly $400 per share today. This growth spurt has helped Nvidia touch a trillion-dollar valuation, in keeping with recent predictions.
Almost a week after the earnings report, Nvidia’s success is still powering tech stocks. This is unsurprising when we consider the dominating market trends over the past year. Between the artificial intelligence (AI) boom and the rush to the metaverse, everything seems to be shifting in favor of this Silicon Valley darling. In turn, all of this leads to a question: Which company will be the next Nvidia?
The answer may be complicated. Of course, many chip stocks have surged on news of Nvidia’s earnings. But rivals like Advanced Micro Devices (NYSE:AMD) and Intel (NASDAQ:INTC) may actually suffer as Nvidia continues to grow. Per Investopedia:
“Nvidia’s current wave will not lift all boats as technology in the industry moves from CPU to GPU processing. Intel (INTC) was the dominant player in CPUs with AMD (AMD) as its main rival. Nvidia is the market leader in GPU technology and its recent growth is driven by the rush to embrace AI technologies.”
Investopedia also notes that AI demand is growing very steadily, which could ultimately allow any companies in the space to secure market share. However, it’s important to acknowledge that some chipmakers will have better opportunities than others. To find the next Nvidia, let’s look at companies still trading at low enough levels to offer investors an attractive point of entry.
The Next Nvidia: SkyWater Technology (SKYT)
This little-known company doesn’t see as much coverage as its larger-cap peers, but that’s part of what makes SkyWater Technology (NASDAQ:SKYT) worth watching. Operating as an engineering and fabrication foundry for semiconductors, the firm describes itself as “the only US-owned pure-play silicon foundry.”
If that’s true, the company certainly has a lucrative niche offering plenty of room to run in the coming months. Even before Nvidia earnings boosted chip stocks, SkyWater had a competitive edge stemming from President Joe Biden’s focus on spurring domestic chip manufacturing. That may be why shares have risen 35% year-to-date (YTD). While only five analysts tracked by CNN Business have issued takes on SKYT stock, it has been collectively rated as a “buy” since August 2022.
Now that investor enthusiasm for chip stocks is soaring, SkyWater has even more opportunity to ride the wave to the top. After an impressive year, SKYT still trades at around $10 per share, giving investors an excellent chance to buy in.
According to InvestorPlace contributor Josh Enomoto, SKYT stock has high return potential despite its “less-than-satisfactory financials.” Even if SkyWater doesn’t reach Nvidia levels, the firm is still in an excellent position to ride the current chip boom. The stock’s average analyst price target on TipRanks is currently $21.50, implying significant upside.
Taiwan Semiconductor (TSM)
It’s impossible to have a conversation about chip stocks without bringing up this sector staple. Taiwan Semiconductor (NYSE:TSM) has been enjoying the momentum generated by Nvidia’s Q1 earnings. Shares have rocketed to their best trading week in more than a year.
This bodes very well for its growth prospects. As InvestorPlace contributor Joel Baglole notes, both microchips and semiconductors are increasing in importance and Taiwan Semiconductor produces roughly 60% of the global supply. For that reason, Baglole says TSM stock has millionaire-maker potential. He wrote earlier this month:
“The good news for investors is that TSM stock is only starting to recover from a 52-week low in November of last year. Over the past 12 months, Taiwan Semiconductor’s stock has been down 4%. It’s currently trading 16% below its 52-week high. This presents a great opportunity for investors looking for a long-term growth stock to add to their portfolio.”
On top of that, Taiwan Semiconductor works closely with Nvidia, putting it in a prime position to ride the sector leader’s wave to the top of the AI boom. TSM also boasts market share that’s hard to compete with. Even though geopolitical tensions have caused some investors to regard Taiwan-related stocks with skepticism, it’s impossible to ignore the tempting exposure that TSM stock can offer investors.
The Next Nvidia: MaxLinear (MXL)
Like SkyWater, this company often flies under Wall Street’s radar when the focus is on chip stocks. However, it may be among the most undervalued plays on the sector.
MaxLinear (NASDAQ:MXL) services the communications sector, providing “highly integrated radio-frequency analog and mixed-signal semiconductor products.” InvestorPlace contributor Alex Sirois notes that this type of technology is helping provide the world with faster data delivery, something just about everyone is hungry for. This means there will be plenty of continued demand for MaxLinear’s services.
Of course, it hasn’t been an easy year for MXL stock, which is down more than 10% YTD. However, as Sirois also notes, the company boasts mostly strong fundamentals and offers investors ample opportunity for growth. Eight out of 10 Wall Street analysts rate MXL stock as a “buy” on TipRanks with an average price target of $36.30. Considering that MXL currently trades at less than $30, that’s pretty good upside potential.
Part of Nvidia’s stellar earnings were driven by the company’s thriving data center business. MaxLinear will have the chance to cash in on the data rush as the chip boom takes it higher as well.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
