The generative artificial intelligence (AI) frenzy has created a massive demand for advanced chips, which are required to support large language models and build AI applications. While Nvidia (NASDAQ:NVDA) is considered the frontrunner in the generative AI space, analysts are also optimistic about the ability of several other chip companies to grab the opportunities created by generative AI.
Some of the chip companies are currently facing pressures in certain end markets, including electric vehicles, due to macroeconomic pressures. They are also facing headwinds due to the trade war between the U.S. and China.
Nevertheless, analysts are looking at the long-term growth potential of chipmakers based on their ability to innovate processors and products that can help in building and training generative AI applications.
Given this backdrop, I used TipRanks’ Stock Comparison Tool to compare the following chip stocks and pick the one with the highest upside potential, as per Wall Street analysts.
Marvell Technology (MRVL)
Marvell Technology (NASDAQ:MRVL) shares took a hit earlier this month when the company’s guidance for the first quarter of fiscal 2025 spooked investors. The company blamed its weak outlook on soft demand in the consumer, carrier infrastructure, and enterprise networking end markets.
That said, management anticipates that the conditions in these markets will improve, with a recovery expected in the second half of fiscal 2025.
Despite the lackluster guidance, several analysts remain upbeat about Marvell, mainly due to the strength of its Data Center segment. This segment is benefiting from AI-induced demand and generated 54% year-over-year growth and a 38% sequential rise in its revenue in the fourth quarter of fiscal 2024.
Following the recent results, Piper Sandler analyst Harsh Kumar reiterated a “buy” rating on MRVL stock and increased the price target to $100 from $70. The analyst expects the company to hit bottom in Q1 FY25, with modest acceleration projected in the fiscal second quarter and significant acceleration expected after that.
Kumar continues to view Marvell as a “compelling” pick due to the momentum in its Data Center business.
Overall, Marvell scores a “strong buy” consensus rating based on 28 buys versus only one hold rating. The average MRVL stock price target of $90 implies 35.3% upside potential.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is mainly known as a smartphone chip maker. The company’s results for the first quarter of fiscal 2024 exceeded expectations as the handset market showed signs of recovery after a dismal year. Moreover, the company witnessed solid momentum in its automotive business.
Qualcomm is leveraging its technology to capture growth in generative AI. The company recently unveiled the Snapdragon 8 Gen 3 Mobile Platform, which will support on-device generative AI features and handle the computational requirements of large language models.
Earlier this month, Rosenblatt analyst Kevin E. Cassidy reaffirmed a “buy” rating on QCOM stock and boosted the price target to $200 from $170. The analyst is optimistic about the company’s Snapdragon system on a chip emerging as a market leader in the next class of AI computing platforms.
Cassidy highlighted that recent data indicates that shipments of Samsung Galaxy S24 smartphones, based on Snapdragon 8 Gen 3 processor, increased 13% above last year’s S23 model shipments and 47% above S22 model shipments.
“QCOM remains our top large cap long idea for 2024,” said Cassidy.
With 15 buys, nine holds, and one sell, Qualcomm scores Wall Street’s “moderate buy” consensus rating on TipRanks. At $164.55, the average QCOM stock price target suggests a possible downside of 3.3% from current levels.
Advanced Micro Devices (AMD)
Over the past few years, Advanced Micro Devices (NASDAQ:AMD) has rapidly grown its presence in the CPU (central processing unit) market, challenging rival Intel’s (NASDAQ:INTC) dominance. However, the weakness in PC sales following the pandemic-induced buying spree impacted AMD’s business.
Nonetheless, an expected recovery in the PC market and AMD’s efforts to catch up with rival Nvidia in the generative AI market have been driving the stock higher. Mainly, there is optimism about the company’s Data Center segment, backed by the strong demand for AMD Instinct GPUs and EPYC CPU sales.
Given AMD’s technological prowess and innovation, most Wall Street analysts are positive about the road ahead. Recently, Melius Research analyst Ben Reitzes maintained a “buy” recommendation on AMD stock and increased the price target to $265 from $192. The analyst expects improved prospects for the company’s Data Center division in the near and long term.
Moreover, the analyst anticipates that AMD’s MI300X offering will gain significantly from AI’s “inferencing phase,” which is just starting and needs a lot of high-bandwidth memory. Additionally, checks by Reitzes’ firm suggest that the traditional server CPU sales are improving, thanks to better fundamentals and strong execution.
Wall Street has a “strong buy” consensus rating on AMD stock based on 28 buys and six holds. The average AMD stock price target of $201.26 implies 12% upside potential.
Conclusion
Analysts are highly bullish on Marvell and AMD but cautiously optimistic about Qualcomm. Wall Street sees higher upside potential in Marvell stock than in the stocks of the other two chip players. Analysts expect generative AI-related tailwinds to drive the demand for Marvell’s products.
On the date of publication, Sirisha Bhogaraju 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.
