For much of the industrial era, semiconductors (i.e. chips) were a cyclical sector. For investors, that meant 12 to 18 months of blistering growth followed by several years of flat performance. But for the last five years, chip stocks have been one of the best sectors for growth-oriented investors.
It's not to say that the sector has been without volatility. But long-term trends remain favorable for chip stocks. First, the emergence of artificial intelligence is fueling the growth of data centers, which will be a core audience for chipmakers. Second, the refresh cycle for consumers continues to get shorter.
And a big reason for that is because the amount of “connected" devices in our lives continues to expand. The average vehicle made today (ICE or EV) has between 1,000 and 3,000 semiconductor chips.
In this special presentation, we're analyzing seven chip stocks that investors should look to buy on the recent sell-off in the sector. These stocks will be part of the growth in this sector which continues to have years to run.
Quick Links
- NVIDIA
- Advanced Micro Devices
- Micron Technology
- Broadcom
- Analog Devices
- Lam Research
- iShares Semiconductor ETF
#1 - NVIDIA (NASDAQ:NVDA)
Is it too late to buy NVIDIA Corp. (NASDAQ: NVDA) stock? NVIDIA is one of the industry leaders, but if you believe industry analysts there is still more upside ahead. In October alone, the NVIDIA analyst ratings on MarketBeat show five analysts have reiterated their Buy rating on NVDA, and two analysts have raised their price targets, with the highest coming at $190.
The reason is the need to build an artificial intelligence (AI) infrastructure. That means corporations are looking for computing power and speed. Currently, NVIDIA is one of the only companies with the right tools for the job.
As one analyst has described it, corporations are facing a choice in which the cost of not spending on AI is far more than the cost of spending. With over 85% of the current market share in the critical high-performance chips needed to power these applications, NVIDiA is likely to maintain its lead for the foreseeable future.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $134.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.15 (21.9% Upside)
#2 - Advanced Micro Devices (NASDAQ:AMD)
If you consider NVIDIA to be the top chip stock, then Advanced Micro Devices Inc. (NASDAQ: AMD) may very well be 1A. The company recently launched its own high-performance GPUs which compete with NVIDIA’s H300 chips.
However, they will be superseded by NVIDIA’s Blackwell chips, which will launch in Q4 2024 and are already seeing a significant level of pre-ordering. That illustrates the speed at which things are changing in this sector. That said, AMD is pledging to increase the speed of its product release cycle to keep up with that of NVIDIA. The company’s next new product release, the MI350x, is expected to compete with the Blackwell chip and be available in the second half of 2025, which would shorten the lead time that NVIDIA currently enjoys.
Analysts remain bullish on AMD stock with several analysts reiterating their bullish rating and price target for AMD stock which has a consensus price of $195, a 24% increase.
About Advanced Micro Devices
Advanced Micro Devices, Inc operates as a semiconductor company worldwide. It operates through Data Center, Client, Gaming, and Embedded segments. The company offers x86 microprocessors and graphics processing units (GPUs) as an accelerated processing unit, chipsets, data center, and professional GPUs; and embedded processors, and semi-custom system-on-chip (SoC) products, microprocessor and SoC development services and technology, data processing unites, field programmable gate arrays (FPGA), and adaptive SoC products.
Read More - Current Price
- $119.21
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $191.96 (61.0% Upside)
#3 - Micron Technology (NASDAQ:MU)
The growth of high-performance chips requires high-bandwidth memory, which is a good reason to choose Micron Technology Inc. (NASDAQ: MU). The company is one of the leading suppliers of the dynamic random-access memory (DRAM) needed inside graphic processing units (GPUs), notably those from NVIDIA.
That’s one reason Micron’s capacity is sold out through 2025. Like NVIDIA and AMD, Micron continues to launch new products with expanded memory that will power even more powerful GPUs.
MU stock sold off sharply in June after its forecast disappointed investors. Memory products are seen as more of a commodity, so a lower forecast made the company’s high valuation untenable for many tech investors.
However, the stock has rallied approximately 20% since its September earnings report, in which it raised its forecast. In fact, analysts have a consensus price target of $142.85, which offers investors a 31% upside.
About Micron Technology
Micron Technology, Inc designs, develops, manufactures, and sells memory and storage products worldwide. The company operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Embedded Business Unit, and Storage Business Unit. It provides memory and storage technologies comprising dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval; non-volatile and re-writeable semiconductor storage devices; and non-volatile re-writable semiconductor memory devices that provide fast read speeds under the Micron and Crucial brands, as well as through private labels.
Read More - Current Price
- $90.12
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $135.24 (50.1% Upside)
#4 - Broadcom (NASDAQ:AVGO)
Broadcom Inc. (NASDAQ: AVGO) is a solid chip stock for investors looking to invest for both growth and income. With approximately 60% market share, Broadcom is the leader in custom (ASIC) chips that are tailored to specific workloads.
In October 2024, the company noted that it was seeing demand for artificial intelligence as well as in 5G and networking. Broadcom is the world’s second-largest AI semiconductor supplier, only trailing NVIDIA.
Like NVIDIA, Broadcom delivered a 10-for-1 stock split for investors in 2024. But that hasn’t slowed AVGO stock down. It's still up over 60% in 2024. But where Broadcom may offer investors a less volatile option to NVIDIA is its dividend. Broadcom’s dividend has a 1.18% yield, which is on par with the average of S&P 500 companies. That dividend has been increasing for over 15 years, making the stock appealing to investors looking for growth and income.
About Broadcom
Broadcom Inc designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
Read More - Current Price
- $220.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $221.88 (0.5% Upside)
#5 - Analog Devices (NASDAQ:ADI)
If you’re looking for chip stocks whose best days are still ahead, Analog Devices Inc. (NASDAQ: ADI) is worth a look. Analog Devices’ core business is in the industrial sector, specifically the automotive market.
ADI stock is up only about 12% in 2024, lagging behind other stocks in the chip sector. However, it’s interesting to note that the stock is still positive despite revenue and earnings being sharply lower year-over-year for the last four quarters. That reflects slowing demand in the automotive sector. However, as we acknowledged in the introduction, today’s vehicles require 1,000 to 3,000 chips.
Furthermore, some industry analysts are projecting that this market has hit a bottom in terms of demand. That’s reflected in the Analog Devices analyst forecasts on MarketBeat, which forecast an additional 11.7% increase in the ADI stock price. Plus, investors get a dividend that the company has increased for 22 consecutive years and currently offers a 1.65% yield.
About Analog Devices
Analog Devices, Inc designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products in the United States, rest of North and South America, Europe, Japan, China, and rest of Asia. The company provides data converter products, which translate real-world analog signals into digital data, as well as translates digital data into analog signals; power management and reference products for power conversion, driver monitoring, sequencing, and energy management applications in the automotive, communications, industrial, and consumer markets; and power ICs that include performance, integration, and software design simulation tools for accurate power supply designs.
Read More - Current Price
- $211.78
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $249.33 (17.7% Upside)
#6 - Lam Research (NASDAQ:LRCX)
Semiconductors are referred to as the picks and shovels of the AI revolution. With that in mind, Lam Research Corp. (NASDAQ: LRCX) is the pick and shovel for the chipmakers. The company isn’t a foundry or a design shop; rather, it makes wafer-fabrication equipment and related services that the chipmakers need.
Specifically, the company makes etch and deposition machines that allow chips to be stacked vertically. As the world needs more chips, chipmakers will need the services that Lam Research offers.
After several quarters of lower revenue and earnings year over year, the trend reversed in the fourth quarter. This correlates with many chipmakers upgrading their forecasts over the next several quarters.
Analysts have a consensus Moderate Buy rating on LRCX stock with a price target of $141.28. That’s an impressive 94% upside from its current price. This comes after the company completed a 10-for-1 stock split in early October 2024.
About Lam Research
Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers ALTUS systems to deposit conformal films for tungsten metallization applications; SABRE electrochemical deposition products for copper interconnect transition that offers copper damascene manufacturing; SOLA ultraviolet thermal processing products for film treatments; and VECTOR plasma-enhanced CVD ALD products.
Read More - Current Price
- $71.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $97.24 (35.4% Upside)
#7 - iShares Semiconductor ETF (NASDAQ:SOXX)
As you can see, the chip sector is comprised of many companies that handle different functions in this broad sector. That's where ETFs such as the iShares PHLX Semiconductor ETF (NASDAQ: SOXX) come into play. This fund gives you exposure to the chips sector without having to choose individual stocks.
The SOXX fund does that for you by investing in approximately 30 companies in the chip sector. The fund is market-cap weighted, which means companies like NVIDIA with large market caps make up a higher percentage of the fund.
The fund does include some small-cap stocks that may not fit your personal investment style. And although the fund is up more than 19% in 2024 as of October 21, that’s below the 24% increase in the NASDAQ Composite index.
Nevertheless, the fund's low expense ratio of 0.35% makes it an attractive investment for investors looking for broad exposure to one of our economy's hottest sectors.
About iShares Semiconductor ETF
iShares PHLX Semiconductor ETF, formerly iShares PHLX SOX Semiconductor Sector Index Fund (the Fund), is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the United States-listed semiconductor stocks as represented by the PHLX Semiconductor Sector Index (the Index).
Read More - Current Price
- $214.82
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $214.82 (0.0% Downside)
One thing should be clear as you look at the stocks in this presentation. That is, when in doubt, zoom out. All of these stocks have had periods of volatility that may be uncomfortable for risk-averse investors. But over time, particularly in the last five years, the trend is for a move higher.
For all the reasons we've given in this presentation, the sector is likely closer to the beginning than the end of this current super cycle. And as you can see, your choices don't begin and end with NVIDIA.
However, as you can see, this is a broad sector that includes more names than the seven stocks in this presentation. One way that MarketBeat can help you find the stocks that fit your investment style and goals is with our Compare Stocks tool. This allows you to enter up to ten ticker symbols and see how they compare on their fundamentals, price, performance, and technical indicators.
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