Semiconductor stocks have captured Wall Street’s attention since the start of 2023. Advances in the chip market have allowed dozens of other industries to take their technologies to the next level. Sectors like artificial intelligence, cloud computing, virtual/augmented reality, consumer technology, self-driving cars, and more have all benefited from new chip designs from companies like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD)As a result, semiconductor companies have become among the best choices for technology investment.
Nvidia and AMD stocks have risen 782% and 132% since the start of 2023, when the AI boom began. Nvidia was able to get a head start in the industry and was able to immediately start supplying its chips to AI developers around the world. AMD, meanwhile, needed more time to produce competitive hardware.
However, AMD has made promising strides in AI in 2024 and could be on track for big gains in the coming years. It’s one of the semiconductor stocks I expect to catch Nvidia’s $3 trillion market cap in 10 years.
AMD Expands to Better Meet Demand for AI
AMD shares have risen 12% since reporting second-quarter 2024 earnings on July 30, galvanizing investors. Winning in artificial intelligence Which proves that the market has become the biggest driver of growth.
Total revenue increased 7% year over year to just under $6 billion, driven primarily by a 115% increase in the AI data center segment and a 49% increase in the client segment. The quarter benefited from an increase in AI Graphics Processing Unit (GPU) And CPU sales.
Over the past year, AMD has been aggressively pushing into AI, expanding into multiple areas of the industry that are likely to pay off over the next decade. The company unveiled its most powerful GPU yet and announced plans to buy server builder ZT Systems for $5 billion. Both moves make the company more competitive against Nvidia, with the acquisition allowing AMD to roll out AI-specific GPUs faster at the scale needed by cloud providers.
AMD chips have already attracted some of the biggest players in AI, with the company signing MicrosoftI visit, Meta platformsand Oracle As customers. These cloud computing giants compete fiercely with each other, and require powerful hardware to stay competitive. As a result, demand for AI chips is likely to continue to rise for the foreseeable future, with AMD well positioned to enjoy significant gains.
AI Opportunities Beyond GPUs
In addition to GPUs, AMD is planting seeds in the AI market to diversify its position and capitalize on growth drivers in the distant future.
The company has a huge opportunity in AI CPUs. AMD has been a niche player in CPUs for years, with its CPU market share rising from 18% in 2017 to 34% this year, steadily gaining market share from IntelMeanwhile, data from Verified Market Reports shows that the AI CPU segment was valued at $15 billion last year and is expected to reach $410 billion by the end of the decade, expanding at a compound annual growth rate (CAGR) of 29%.
AMD’s expertise in CPUs also gives it a potentially lucrative role in the rapidly expanding AI-powered PC market. As demand for AI services rises, so does the need for more powerful hardware. As a result, AI-powered PCs are expected to account for about 40% of total global PC shipments in 2025, with the market growing at a CAGR of 44% through 2028.
Nvidia’s market cap was $359 billion at the start of 2023. However, it reached $3 trillion in June 2024, just 18 months later, after its stock surged 738%. The company’s success has been driven primarily by a massive surge in sales of AI graphics processing units. Nvidia has shown what’s possible with success in one aspect of AI. At the same time, AMD has laid the groundwork in multiple areas of the industry that could deliver significant stock gains.
AMD’s market cap is currently around $251 billion. The company’s stock would need to rise 1,200% to reach $3 trillion over the next 10 years. It’s a lofty goal, but it’s not out of reach. Given that AMD’s stock has risen more than 3,000% since 2014, that goal may not be so far-fetched.
The chart above projects AMD’s earnings to reach just over $7 per share by fiscal year 2026. Multiplying that number by the company’s forward price-to-earnings ratio of 46 gives a stock price of $336, indicating potential growth of about 115% by 2026.
However, NVIDIA’s impressive rise in AI and AMD’s performance over the past decade suggest that growth may be conservative. As a result, AMD may be on a growth trajectory to achieve its coveted $3 trillion market cap over the next decade. The company is expanding rapidly, and you won’t want to miss out on this opportunity.
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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. Danny Cook The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Intel and recommends the following options: Buy $395 January 2026 calls on Microsoft, Sell $405 January 2026 calls on Microsoft, and Sell $24 November 2024 calls on Intel. The Motley Fool has Disclosure Policy.
Prediction: One Semiconductor Stock Will Catch Nvidia in 10 Years Originally posted by The Motley Fool
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