Shares in global chipmakers have continued to move higher presenting some compelling chip stocks to buy. This is amid a more favorable macro backdrop and unprecedented demand for high-end chips that power artificial intelligence (AI) apps. The investment appeal of these stocks received a notable boost after Taiwan Semiconductor Manufacturing (NYSE:TSM), the world’s largest chip manufacturing company, reported April revenue up nearly 60% from the same period last year.
This marks the most substantial growth rate for the year 2024 thus far. TSMC is a crucial supplier for tech giants such as Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA). It has a strong performance signaling anticipated growth in customer operations.
Chip stocks maintain a favorable outlook on the risk-reward potential for global semiconductor stocks. Here, we look at three chip stocks to buy that are considered safe bets in the chipmaking sector.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a leading global technology company and one of the top chip stocks to buy. The company designs, develops and supplies various semiconductor and infrastructure software solutions. Known for its extensive product portfolio, Broadcom’s offerings encompass data center networking, broadband access, software, and wireless connectivity.
Most recently, Barclays initiated coverage on Broadcom with a positive outlook, assigning an Overweight rating and a price target of $1,405. The brokerage firm highlighted that Broadcom is leading in the data center silicon market and poised to benefit from the burgeoning advancements in artificial intelligence (AI).
Broadcom’s inclusion in Barclays’ list of preferred names for the year stems from its robust data center silicon portfolio. Despite the semiconductor industry’s susceptibility to cyclical downturns, the company’s growing software business is recognized as a pivotal element in bolstering profitability and free cash flow.
Barclays’ attention to AI’s potential is timely. The firm anticipates a mid to high-20% growth rate for Broadcom next year. This surge will continue over the long haul, fueled by the company’s expertise in custom silicon and switching solutions.
Micron (MU)
Micron Technology (NASDAQ:MU) is a leading global innovative memory and storage solutions provider. Micron’s product portfolio includes DRAM, NAND flash memory and NOR flash memory, integral to advanced computing, mobile applications and data centers.
The company’s stock has surged on robust demand for high bandwidth memory this year. Micron is the supplier of these chips, alongside Samsung Electronics (OTC:SSNLF) and SK Hynix’s (OTC:HXSCL). Along these lines, Baird analysts recently upgraded their rating on Micron stock.
The brokerage firm cited significant growth opportunities for the company in the face of increasing demand for AI applications. The firm changed its rating from Neutral to Outperform. It’s anticipating substantial upside potential for the United States’ largest memory chip manufacturer.
The upgrade comes after Baird analysts researched the semiconductor industry, identifying positive trends in the Dynamic Random-Access Memory (DRAM) market that could benefit Micron. According to Baird, recent checks within the channel have revealed an outlook for memory that could be favorable over the next 12 to 18 months.
Additionally, Morgan Stanley (NYSE:MS) has recognized the strong performance and market position of Micron. It has upgraded its rating from “Underweight” to “Equalweight” and substantially increased its price target from $98 to $130 — an increase of over 32%.
Baird’s report highlighted that DRAM prices surpass expectations, which could lead to constrained industry-wide supply growth. They expect the growth to slow to low single digits quarter-over-quarter in the latter half of 2024.
This slowdown is partly due to capacity shifts toward high-bandwidth memory (HBM). It is expected to enter a new supercycle that could significantly enhance Micron’s gross margins. The investment firm pointed out Micron’s production of HBM3E, the latest generation of high-bandwidth memory. It has the potential to achieve over 60% gross margin.
Super Micro Computer (SMCI)
Super Micro Computer Inc. (NASDAQ:SMCI), known as Supermicro, is a global leader in high-performance, high-efficiency server technology and innovation. The company provides advanced server solutions, storage systems, and cloud computing technologies.
Wall Street analysts recently highlighted SMCI as one of the top chip stocks to buy, describing the stock as the “Switzerland of AI” following the company’s announcement of another set of strong quarterly results. Rosenblatt analysts, known for their expertise on chip stocks, pointed out that the company’s AI dynamics are “a sweet spot for the company’s building block architecture, Green computing, rapid broad platform deployment, and must-have liquid cooling capabilities.“
Similarly, analysts at Loop Capital reiterated their Buy rating on shares of Super Micro Computer, maintaining a price target of $1,500. The firm anchors its positive stance on the stock in Super Micro’s well-positioned AI dynamics, driven by the company’s building block architecture.
On the date of publication, Shane Neagle 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.
