Wall Street Recommends Investing in These 2 Top Semiconductor Stocks over Nvidia

Wall Street Recommends Investing in These 2 Top Semiconductor Stocks over Nvidia

Nvidia (NASDAQ:NVDA) is the blueprint for the artificial intelligence (AI) revolution. The company is worth $2.2 trillion as of this writing, including $1.5 trillion in value added in the last 12 months alone. Nvidia’s recent success comes down to its data center chips designed to handle AI workloads, which continue to see incredible demand.

But while it has captured the lion’s share of investor attention, Nvidia isn’t the only opportunity in the semiconductor space. According to The Wall Street Journalanalysts have an overweight (bullish) consensus rating on two other names: Advanced microsystems (NASDAQ:AMD) And Axcelis Technologies (NASDAQ:ACLS).

Here’s why owning shares of AMD and Axcelis could also be a fantastic idea.

1. AMD emerges as a competitor to Nvidia in data centers

AMD’s chips power some of the world’s most popular consumer electronics devices, including Sonythe PlayStation 5, Microsoftof the Xbox Series You’re hereelectric vehicles. However, investors’ attention is now focused on data centers.

The company has started shipping its latest MI300 line of data center chips designed for AI workloads – hardware that rivals Nvidia’s industry-leading H100 graphics processing unit (GPU). The MI300 comes in two configurations: the MI300A combines GPU and CPU hardware to create an accelerated processing unit (APU), while the MI300X is a pure GPU.

The MI300A was selected by the Lawrence Livermore National Laboratory to power its new El Capitan supercomputer, which is expected to be the world’s fastest when it goes live this year. However, AMD is also seeing strong commercial demand for the MI300 series from major data center operators such as OracleMicrosoft and Metaplatforms.

The MI300 will likely drive AMD’s data center revenues higher in the coming years. It won’t be easy to catch Nvidia in this segment. However, AMD has a 90% market share in AI-enabled personal computers. Its Ryzen 700 series (Ryzen AI) chips are designed to handle powerful on-device AI workloads, resulting in faster response times for the end user because requests do not flow to the center of data.

Millions of computers from major manufacturers like Dell, HPAnd Asus (among others) already come with Ryzen AI chips. During the recent fourth quarter of 2023, Ryzen AI chips drove AMD’s Client segment revenue 62% year-over-year. The company plans to launch a new processor, which is up to three times faster than previous iterations, so this activity is only heating up.

Combined with a projected $3.5 billion revenue contribution from the MI300 series in their first full year of sales, 2024 is expected to be AMD’s biggest year ever. It is not surprising that the majority of the 50 analysts followed by The Wall Street Journal have given AMD stock the highest possible Buy rating.

2. Axcelis Technologies plays a vital role in the chip manufacturing process

Axcelis Technologies is not a glamorous GPU producer like Nvidia or AMD. In fact, it is relatively neglected, with The Wall Street Journal following only eight analysts who cover its shares. Still, the majority gave it the highest possible Buy rating, and it currently trades at a very attractive valuation, which could entice investors to follow the Street’s lead.

Axcelis manufactures ion implantation equipment, essential to the chip manufacturing process. Producers of silicon carbide electrical devices, which regulate electrical energy during high-current workloads, are currently a significant source of demand for Axcelis, particularly through the electric vehicle industry. Silicon carbide chemistry is more efficient than traditional silicon chemistry, resulting in longer mileage per battery charge and faster charging times.

The company is also preparing to meet growing demand from AI-related semiconductor producers. Last year, the company noted that AI requires significantly more memory and storage capacity, which could make DRAM and NAND chips more complex to manufacture and more expensive.

Axcelis generated record revenue of $1.13 billion in 2023, representing a 22.9% year-over-year increase. But here’s the kicker: The company ended 2023 with an order backlog worth $1.2 billion, so 2024 is shaping up to be another record year.

The stock is up more than 400% over the past five years, but it has taken a break in recent months, suffering a 44% decline from its all-time high. This could represent an opportunity, because based on the company’s 2023 earnings per share of $7.43, the stock now trades at a price-to-earnings (P/E) ratio of just 14.6. This represents a 59% discount to the company’s P/E ratio of 35.6. iShares Semiconductor ETFso Axcelis stock is on average significantly cheaper than the rest of the chip industry.

Additionally, when you also consider Wall Street’s bullish stance on Axcelis stock, there is a very clear case for buying it right now.

Where to invest $1,000 now

When our team of analysts has a stock tip, it can pay to listen. After all, the newsletter they’ve been running for two decades, Motley Fool Stock Advisormore than tripled the market.*

They just revealed what they think is the 10 best stocks that investors can buy right now…and Advanced Micro Devices is on the list – but there are 9 other stocks you may be overlooking.

See the 10 values

*Stock Advisor returns March 11, 2024

Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony DiPizio has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, HP, Meta Platforms, Microsoft, Nvidia, Oracle and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Forget Nvidia: 2 Super Semiconductor Stocks to Buy, According to Wall Street was originally published by The Motley Fool

Source Reference

Latest stories