Semiconductors devices are crucial to the modern digital economy. These tiny electronics power everything from our smartphones and personal computers to cars, commercial airplanes and cloud servers. Therefore, if you are a public equities investor looking for high-growth opportunities, semiconductor stocks have to be in your portfolio. Still, choosing a semiconductor stock that would provide the best returns is not easy. The semiconductor sector remains crowded, and there are geopolitics and supply chain bottlenecks to consider. Ultimately, the companies that will come out on top will have to be at the forefront of innovation.
To help me create this list, I have decided to turn to one of the artificial intelligence (AI)-powered chatbots birthed during this year’s AI craze: Bing ChatGPT. Below is a list of semiconductor stocks that Bing ChatGPT thinks are worth targeting this month.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is the semiconductor company on everyone’s lips in 2023 due to its focus on not just gaming, but also artificial intelligence. After selling off 48% in 2022, shares of Nvidia have rallied nearly 195% YTD, making it the best-performing chip stock in the market in 2023. Nvidia is the leader in graphics processing units (GPUs), which are essential for rendering realistic images and videos in games, as well as accelerating AI applications in data centers, cloud computing, autonomous vehicles and more.
Most recently, Nvidia’s A100 and H100 chips have helped power the elaborate large language models (LLMs) used to train the conversational AI chat-bots released this year, including OpenAI’s ChatGPT. Both of these new GPU sets are based on the company’s Ampere and Hopper architectures, respectively. These novel architectures offer significant performance improvements over the previous generations.
Wall Street analysts expect Nvidia to grow its non-GAAP earnings by 134% in 2024, driven by strong demand for its AI-powering GPU products. This gives more than enough reason to keep the GPU maker in your portfolio for the long run.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is another chip stock that has benefited from the growth of gaming and data center markets. AMD competes with Intel (NASDAQ:INTC) in the central processing unit (CPU) market, where it has gained market share with its Ryzen and Epyc processors that offer better performance and value than Intel’s counterparts. AMD also competes with Nvidia in the GPU market, where it has launched its own products based on its RDNA 2 architecture, which power the latest gaming consoles from Sony (NASDAQ:SNE) and Microsoft (NASDAQ:MSFT) as well as high-end PCs. However, AMD’s latest and, perhaps, most crucial battleground with Nvidia is in the realm of AI. Last month, 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.
This year, AMD has seen its shares soar 77% YTD, eclipsing Intel’s 22% gain. Analysts have an average 12-month price target of $132.63, implying a nearly 17% gain. Market-watchers should pay special to attention to how AMD rolls out its new AI chips. Traction for these products could spell immense upward potential for the company’s shares.
NXP Semiconductors (NXPI)
NXP Semiconductors (NASDAQ:NXPI) is a chip stock that has exposure to the automotive and Internet of Things (IoT) markets, which are expected to see continued growth in the coming years. The Dutch semiconductor giant is one of the largest suppliers of chips for cars, especially electric vehicles (EVs), which require more semiconductors than traditional cars for functions such as battery management. In 2022, revenues came in at $13.21 billion with NXP’s automotive segment representing 52.1% or $6.88 billion. Revenue growth for the automotive segment was up more than 25% YoY and was aided by strong demand and price inflation. NXP also provides chips for IoT devices such as smart home appliances, wearables, industrial equipment and more. Revenues for this segment were up 13% YoY at $2.71 billion. Similarly, NXP’s Q1’2023 revenues came in better than expected due to tailwinds in the company’s automotive segment.
NXP has seen its shares rise more than 35% YTD, despite facing some headwinds from the global chip shortage that has affected the automotive industry. Wall Street analysts expect NXP to grow its earnings by 8.56% in 2024, driven by the recovery of car demand and the expansion of IoT applications.
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.
