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4 AI or chip stocks to buy aside from Nvidia

Stocks, Tech Stocks, US

Written by:

Joo Parn (JP)

I am still reeling from the sudden revival of the semiconductor industry.

1 jaw-dropping revenue guidance from NVIDIA Corporation (NASDAQ: NVDA) has reversed all the negativities reported by Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) and other semiconductor companies.

To the long-term investors, congratulations for staying patient in an age of instant gratification. It seems like yesterday when NVIDIA was trading at below USD 150 per share.

Since I did mention that NVIDIA is trading on rich valuations, here are 4 companies to consider aside from NVIDIA.

1. Advanced Micro Devices, Inc. (NASDAQ: AMD)

NVIDIA and AMD will always go hand in hand whenever it comes to all prospects regarding Graphic Processing Units (GPUs).

Prior to AI, AMD has always held a strong foothold in the PC space, powering most of the laptops alongside Intel Corporation (NASDAQ: INTC).

But the recent surplus and piling inventories as reported by most semiconductor companies, coupled with dwindling PC sales, have all but spelled a prelude to another downturn in the semiconductor sector.

Now that AI is all the rage, AMD has an opportunity to tap into this prospect. There are reported rumors of AMD helping to develop Microsoft’s in-house “Athena” AI chip by Bloomberg.

AI is still in its nascent phase. So playing catchup should not be a steep challenge for AMD.

For more apple-to-apple comparison, I compared their Price to Sales.

Even though AMD has always been trading at a discount, it has always enjoyed lower volatility.

Source: TIKR.com

2. Marvell Technology Inc (NASDAQ: MRVL)

Marvell Technology is a cutting-edge semiconductor company that has established itself as a global leader in the development and deployment of innovative solutions across a wide range of industries.

The company’s relentless commitment to research and development has resulted in a diverse portfolio of products that cater to the evolving needs of customers in sectors such as data centers, cloud computing, automotive, networking, and storage.

As AI slowly proliferates into our lives, we are most likely going to embrace it under the “as-a-service” model, which indirectly translates to a subscription basis.

Marvell has a strong foothold in data infrastructure, which includes data centers and carrier infrastructures. As more of the data and computing power sits in data centers instead of our homes, Marvell Technology is primed and ready for the AI ride.

Source: Marvell Technology Inc Q1’24 financial results

3. Broadcom Inc (NASDAQ: AVGO)

Broadcom is one of the biggest companies when it comes to wireless and wired communications.

Its business model revolves around a two-pronged approach. Its key strength in the semiconductor scene lies in its expertise to develop applications for wireless networking, broadband communication, data centers, and smart devices.

There might be concerns about headwinds as most semiconductor companies were either cautiously optimistic or bearish for 2023. But in its latest Q2’23 results, Broadcom not only beat Wall Street’s targets but also raised its estimates for Q3’23.

Source: Counterpoint RF Front-end Tracker, Q2 2022

In April 2023, Broadcom unveils and delivered Jericho3-AI, a networking chip that is designed to connect supercomputers and features high-performance fabric for artificial intelligence (AI) environments.

This could make the company a sudden beneficiary of the AI boom.

4. Palantir Technologies Inc (NYSE: PLTR)

Most of the semiconductor companies which are the AI infrastructure providers, have rallied. Price and valuation might be steep.

But when it comes to SaaS companies with an AI edge, not many have rallied across the board…yet.

Palantir Technologies’ business is already in AI prior to AI creating hype. Palantir specializes in big data analytics and intelligence, which helps corporates make sense of their raw data while taking action based on insights obtained.

Palantir’s 3 core projects, Palantir Gotham, Palantir Apollo, and Palantir Foundry need no further introduction. Palantir Gotham is used by counter-terrorism analysts from the government services, while Foundry serves corporate clients.

As AI, in particular Large Language Models (LLM) slowly entrench our lives, concerns of data leakages could occur. Thus as a business prospect, Palantir launched its Artificial Intelligence Platform (AIP) which integrates LLM into privately operated networks.

At roughly USD 14 per share, Palantir is trading close to its IPO price. It has turned profitable in its Q1’23 results and expects to be profitable through the end of the year.

Not that Palantir is exactly cheap right now, but there is more conviction now versus the Palantir back then when it first got listed.

AI is not just the flavor of the month, it is the theme for the next few years

I still remember the days when earnings and profitability meant nothing as the world swam with cheap money and liquidity.

Growth was championed and spotlighted. Even a mediocre company with widening losses, but with good growth, can see its share prices flip.

A lot has happened since then. Everything from SaaS, crypto, and the metaverse, we have experienced much hype and downturns.

You can still believe that this time, “things could be different”.

Personally, I feel that the AI breakthrough, and applications, hold more ground and prospects compared to the metaverse.

From a long-term investing point of view, AI is the next frontier.

But for those who are in for the short-term spike, even the wise cannot tell when a correction is due.

1 thought on “4 AI or chip stocks to buy aside from Nvidia”

  1. Broadcom is also acquiring VMware, which is huge and will give it the software that runs most of the world’s internet hosting infrastructure.

    Reply

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