Three super semiconductor stocks (including Nvidia) that are being bought hand over fist for the artificial intelligence (AI) revolution

By | April 1, 2024

ChatGPT, Claude and Gemini are just a few of the powerful artificial intelligence (AI) chatbot applications available today. They can interpret and generate text, images, videos and computer code, which could drive productivity growth in the global economy.

But these AI applications wouldn’t be possible without data centers filled with advanced semiconductors, which developers use to build, train and deploy their models. Nvidia (NASDAQ: NVDA) CEO Jensen Huang estimates that the current $1 trillion in installed data center infrastructure around the world will double over the next five years due to AI.

This creates substantial opportunities for leading chip companies Nvidia, Advanced micro devices (NASDAQ: AMD)And Micron technology (NASDAQ:MU). This is why investors may want to own a stake in each of them to ride the AI ​​boom.

1. Nvidia

The gaming industry used to be Nvidia’s biggest source of revenue, but data center graphics processing units (GPUs) are now driving Nvidia’s business. In fiscal 2024 (ending January 28), Nvidia’s H100 GPU boosted the company’s data center revenue by 217% to $47.5 billion, and the current fiscal year 2025 is expected to bring more growth.

Nvidia’s H100 is the most sought-after data center chip for AI workloads. Many tech giants are lining up to buy it in bulk Amazon Unpleasant Oracle Unpleasant Metaplatforms. But Nvidia will ramp up shipments of its new H200 GPU this year, which could fuel the company’s next wave of growth.

The H200 can make inferences (meaning feeding live data to an AI model so it can make predictions) at twice the speed of its predecessor, and also consumes 50% less energy, meaning big cost savings for data center operators.

Longer term, all eyes are on Nvidia’s new Blackwell architecture, which will power the next generation of chips. The company is expected to release its Blackwell B200 GPUs next year, which will deliver 15 times the inference speed of the H100.

Wall Street expects Nvidia’s total revenue to rise 81% this fiscal year to a record $110 billion. Despite the stock’s 240% gain in the past twelve months, there is still plenty of room for upside.

2. Advanced Micro Devices (AMD)

AMD makes some of the world’s most popular consumer electronics chips. They can be found in the Microsoft Xbox Series X and the Sony PlayStation 5, not to mention a long list of personal computers. But AMD recently launched its MI300 series data center chips in a bid to take on Nvidia.

The MI300 is available as a standard GPU, called the MI300X, but it is also available in a combined GPU and CPU configuration, the MI300A. AMD is already shipping the MI300A to Lawrence Livermore National Laboratory for its El Capitan supercomputer, which will be one of the most powerful in the world when it comes online this year. But a number of leading data center operators, including Microsoft, Oracle and Meta Platforms, are also lining up to buy the MI300 series.

As AMD chases Nvidia in the data center, the company has a dominant 90% market share in the emerging AI-based personal computing industry. Millions of computers from manufacturers such as Dell And PK already come with AMD’s Ryzen AI chips, which will allow users to process AI on the device. This leads to a faster, more responsive experience because AI workloads don’t have to travel to and from the data center.

In the recent Q4 2023, the Ryzen AI series drove the company’s customer segment revenue up 62% year over year. Combined with growing shipments of the MI300 chips – which could generate $3.5 billion in sales by 2024 – this could be AMD’s biggest year.

3. Micron

Micron doesn’t get as much attention as Nvidia and AMD because it produces memory (DRAM) and storage (NAND) chips, which aren’t as glamorous as GPUs. However, every GPU requires memory, and it is crucial to get the maximum performance.

Micron’s latest HBM3E (high-bandwidth memory) data center solution was selected by Nvidia to power the new H200. It’s an obvious choice because it uses 30% less power than competing HBM hardware, making it much more cost-efficient. Micron is currently testing a new HBM3E product, which packs 50% more memory into each GPU, allowing Nvidia customers to bring their AI models to market much faster.

Micron’s entire 2024 HBM inventory is already sold out, and much of the 2025 inventory has also already been spoken for.

Like AMD, Micron’s AI capabilities extend beyond the data center. The AI-enabled chipsets in new personal computers could require 80% more DRAM content than traditional models, which is great for Micron’s business. Many modern smartphones are also equipped with AI chips, which require twice the DRAM of traditional devices. Samsung’s new Galaxy S24 comes with a slew of AI features and runs on Micron hardware.

Micron’s revenue rose 57% year over year during the second quarter of fiscal 2024 (ended February 29). The company also posted a net profit of $793 million, marking a welcome return to profitability after more than a year of struggling with falling prices due to an oversupply of chips.

Micron’s forecast for the upcoming third quarter of 2024 (ending June 1) points to accelerated revenue growth of 76%. Micron stock is trading at an all-time high, but is still cheaper than both Nvidia and AMD, so this could be a great buying opportunity for investors.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, HP, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Three super semiconductor stocks (including Nvidia) being bought hand over fist for the artificial intelligence (AI) revolution was originally published by The Motley Fool

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