Semiconductors power many devices that you use every day. You can find this technology in your computer, car, refrigerator, and other everyday items. Chipmakers have reported rising revenue and earnings for years, but artificial intelligence has taken these companies to new heights.
Artificial intelligence is a booming industry that’s projected to maintain a 36.6% compound annual growth rate from now until 2030. Corporations rely on AI chips to keep AI applications functional, and those apps require more computing power than what most chips can provide. The high demand for AI computing and the industry’s growth have created a tremendous opportunity for semiconductor stocks.
Some companies are better positioned than others to capitalize on the multi-year tailwinds of artificial intelligence. Most of the AI winners have been gaining market share long before AI became mainstream. These three standout semiconductor stocks have rising revenue and profits. They also have enough catalysts to help them reach new highs.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been front-and-center of the AI boom for a few years. The stock has more than doubled year-to-date while delivering a 5-year gain that few companies will ever match. The semiconductor giant was briefly the world’s most valuable company and currently has a market cap of roughly $3 trillion.
It is the clear leader in the AI chip industry, and recent financial results demonstrate how much the leadership position has benefited the company. Revenue soared by 262% YOY in the first quarter of fiscal 2025 while net income jumped by 628% YOY. A 10-for-1 stock split brought more attention to the stock, but earnings reports like this one should generate more gains for the company’s shareholders.
Wall Street analysts have been bullish on this stock for a while, especially as the AI tailwinds have taken shape. The average price target implies a 16% upside from current levels. Nvidia is rated as a Strong Buy, and the highest price target of $200 per share suggests that a 64% gain is possible.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is another top-performing semiconductor stock that has a history of beating the stock market. Shares are up by 51% year-to-date and have more than quintupled over the past five years. The semiconductor firm also has a 1.28% yield and has regularly maintained a double-digit growth rate for its dividend.
Last year’s VMware acquisition has been doing wonders for Broadcom. The company reported $12.5 billion in Q2 FY24 revenue which is up by 43% YOY. Excluding VMware, revenue increased by 12% YOY. Artificial intelligence products reached a record $3.1 billion in the quarter. Talks with OpenAI can spark more demand for Broadcom’s AI business and increase the gains for shareholders.
Broadcom decided to raise fiscal 2024 guidance. The new benchmark suggests that Broadcom will generate $51 billion throughout the fiscal year. Broadcom is currently rated as a Strong Buy among 24 analysts and has a projected 20% upside based on the average price target.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) had a bumpy 2023 but is now up by 38% year-to-date. The chipmaker has also gained more than 150% over the past five years as its profit margins expand. Qualcomm reported 1% YOY revenue growth and 37% YOY net income growth in the second quarter of fiscal 2024. Those results prompted the company to hike its quarterly cash dividend to $0.85 per share. It comes to an annualized dividend of $3.40 per share.
Unlike most semiconductor stocks, Qualcomm still trades at a relatively low P/E ratio. The company’s P/E ratio currently stands at 26, while it is common to find semiconductor stocks with P/E ratios above 50. Furthermore, Qualcomm offers a 1.76% yield for current investors. The Snapdragon Digital Chassis solution is poised to expand rapidly and should generate $4 billion in annual revenue by fiscal 2026. The company had its third consecutive quarter of record auto revenue.
On this date of publication, Marc Guberti held long positions in NVDA and AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.