Semiconductors are the lifeblood of the modern digital economy. These tiny devices power everything from our smartphones and personal computers to cars and commercial airplanes. If you are a public equities investor betting on the digital age, semiconductor stocks would have to be in your portfolio. Still, choosing a semiconductor stock that would provide the best returns is not easy. The semiconductor sector is crowded and nowadays there is geopolitics and supply chain bottlenecks to think about. Ultimately, the companies that will come out on top will have to be at the forefront of innovation. Below is a list of semiconductor stocks to target for triple digit returns this year.
NVIDIA (NVDA)
Only a couple years ago were Nvidia (NASDAQ:NVDA) graphics processors in the headlines for being able to efficiently mine cryptocurrency. Now NVDA’s chips are in the spotlight for a different reason, language models used to train artificial intelligence (AI) chatbots. Nvidia’s A100 and H100 chips help power the elaborate large language models used to train AI chatbots like ChatGPT. Although in its recent earnings report, the chipmaker reported a 38% year-over-year decrease in revenues for its gaming division, Nvidia’s overall financial results were driven well-above expectations due to a demand for its AI chips used in data centers.
To gain on the upside of the artificial intelligence craze, Nvidia looks increasingly like a good long-term bet. Despite macroeconomic factors dampening graphics cards sales, Nvidia’s shares are up almost 195% for the year, and the company’s leading position in AI language model chips implies shares could continue going that way.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) has built a burgeoning reputation over the recent years, both among investors and consumers alike. Based on its product mix, which includes both central processing units (CPUs) and graphics processing units (GPUs), AMD has two main competitors in Intel (NASDAQ:INTC) and Nvidia. To the surprise of many, AMD’s CPUs have slowly been able to steal significant market share from Intel, and those trends do not appear to be reversing. What gives the company a slight edge over Nvidia is its larger breadth of products, designing the parts powering many modern PCs, servers and graphics cards.
AMD and Nvidia will be competing head-on to capture market share for graphics cards powering the AI revolution. However, there is still a lot of room for AMD to grow and improve in this aspect. In mid-June, AMD announced the MI300x GPU which will compete directly with Nvidia’s A100 and H100 chips. If AMD can price competitively there could be a clear opportunity for the company to capture market share. AMD has an arduous uphill battle to dethrone Nvidia. However, AMD’s share price is currently up 72% year-to-date (YTD) and the evolving AI chip race can bring the shares to new heights.
Monolithic Power Systems (MPWR)
Monolithic Power Systems (NASDAQ:MPWR) designs semiconductor-based power electronics for the computing, automotive, industrial, communications and consumer markets. The integrated circuits MPWR provides are used in large but easy-to-use power management solutions. Those power management solutions go into a variety of electronic devices, wireless LAN access points, personal computers, monitors, infotainment applications and medical equipment.
Although MPWR does not create the fancy chips powering AI models, its power systems are critical to the semiconductor industry. They make electronic devices power efficient and less energy intensive. Monolithic Power Systems shares have risen by around 55% YTD and its shares could be well-posed for triple digits returns this year.
On the date of publication, Tyrik Torres did not have (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.
