There’s a lot of hype, even euphoria, surrounding the top semiconductor stocks these days, specifically those with exposure to the generative artificial intelligence (AI) boom. Undoubtedly, Nvidia (NASDAQ:NVDA) pulled off yet another impressive quarter, helping lift the broader basket of AI chip stocks and most of the technology sector.
While I remain upbeat over Nvidia and CEO Jensen Huang’s ability to feed the incredible (and growing) demand for AI chips and software over the next few years, it’s not hard to imagine many investors feeling a tad uncomfortable with buying after sudden spikes in share price.
You’re not alone in shying away from the market’s high flyers, even if recent rallies were backed by robust growth and vast improvement in the underlying fundamentals. The good news is other breakout stocks are only starting to lift off the tarmac, with not nearly as much heat as the likes of Nvidia stock or some of the other semiconductor plays. Let’s look at three breakout stocks that value-conscious investors may be more comfortable pursuing in today’s red-hot market.
Costco (COST)
Costco (NASDAQ:COST) is a wholesale retailer that’s also seen its shares get hot since they broke through to new all-time highs towards the end of 2023. The new year has continued to be incredibly kind to Costco stock, with almost 13% in gains posted year-to-date. Undoubtedly, inflation-rattled, cost-conscious consumers cannot get enough of Costco’s top-notch value proposition, even if it means paying $60.00 for an annual membership (or $120.00 for that executive membership) and buying goods by the tens of pounds to get the best deals.
As inflation dies down (hopefully soon), loyal members may just be able to have some more disposable income to take the splurge factor up a notch at their local Costco. Given management’s knack for knowing just what its consumers want (they sure knew their customers had an appetite for gold last year!) and the promise of incredible deals, my guess is that a healthier consumer won’t think twice when they reach for more non-essential, non-grocery items scattered through Costco’s warehouse floors.
If you’re getting that promise of a great deal and need to spend money to justify your membership, why not go for the laptop alongside your bulk-buying spree of Kirkland Signature-branded pantry items? All considered, Costco stock looks like a breakout stock poised to keep winning well into the post-high inflation age.
Intuitive Surgical (ISRG)
Intuitive Surgical (NASDAQ:ISRG) is another hot cutting-edge (forgive the pun) medical device tech stock that’s finally breaking out, with shares smashing through all-time highs on the back of an impressive 17% year-to-date gain. As others look to play chip stocks as a way to ride the AI wave, the field of robot-assisted surgery may be a somewhat less scorching way to ride an even larger wave, seeing as ISRG stock’s breakout just began a few weeks ago.
Just because shares have just broken past their prior 2021 highs doesn’t mean shares are cheap, though. At 77.5 times trailing price-to-earnings (P/E), or 62.5 times forward P/E, you’re paying a rather lofty growth multiple to get into the name here as it looks to make higher highs. The da Vinci surgical robot in itself is a profound innovation with so much promise in the AI age.
With recent commentary about a new surgical robot, which may be looming, Intuitive Surgical may have a huge catalyst to move toward some of the Street-high price targets on Wall Street.
Lam Research (LRCX)
Lam Research (NASDAQ:LRCX) stock’s recent breakout has been quite swift, with shares surging 21% year-to-date and 90% over the past year. As a company that provides essential wafer-fabrication equipment to the semiconductor industry, Lam stands to gain from the surging demand for a wide range of chip products.
If we are in the early stages of an AI boom, it’s the big-ticket machinery companies standing behind the chipmakers and designers that may have what it takes to lead the industry’s next upward charge.
Lam Research recently reported terrific fiscal second-quarter numbers alongside good guidance. Many analysts were delighted with Lam’s showing, with a handful of price target hikes being rewarded by some big names on Wall Street. Aside from cashing in on the AI boom, the stock also looks too cheap at 31.45 times forward P/E.
On the date of publication, Joey Frenette 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.
