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The artificial intelligence (AI) megatrend has surged across markets over the last two years, generating substantial wealth for investors. With momentum showing no signs of slowing amid ongoing investments from hyper-scalers, the AI market is expected to maintain its strong growth trajectory - and semiconductors have been a major beneficiary.
Semiconductor chips are often considered the “picks and shovels” of AI technology. Specialized chips are essential for all AI platforms, serving as the “engine block” that delivers the necessary processing power and efficiency. With a projected compound annual growth rate (CAGR) of 14.9% from 2024 to 2032, the global semiconductor market is set to reach an impressive size of $2.06 trillion, underscoring the vast potential ahead for this sector.
But after a few tough earnings reports from semiconductor companies this Q3 season, some top players have pulled back sharply. Ahead of an expected revival in demand for the industrial and automotive end markets next year, though, Citi analyst Christopher Danely thinks that now is a good time for investors to “get aggressive” on chip stocks.
"We estimate global semi sales to be up another 9% YoY in 2025, following 17% YoY growth in 2024," wrote the analyst, who has “Buy” ratings on all five of the semiconductor stocks highlighted below.
1. Broadcom
Founded in 1991 and based in San Jose, Broadcom (AVGO) is one of the leading semiconductor companies in the world. With a massive market cap of $823 billion, Broadcom designs, develops, and supplies a wide range of analog and digital integrated circuits (ICs) and related products, as well as software for data center networking.
AVGO stock is up 56.7% on a YTD basis, and offers a dividend yield of 1.20%, backed by 14 years of consistent growth.
Overall, analysts have deemed AVGO stock a “Strong Buy,” with the mean target price of $195.19 indicating an upside potential of about 11.5% from current levels. Out of 33 analysts covering Broadcom stock, 30 have a “Strong Buy” rating and 3 have a “Hold” rating.
2. Microchip Technology
Founded in 1989, Microchip Technology (MCHP) is a leading supplier of microcontrollers. The company designs, manufactures, and sells embedded control solutions for various applications, including automotive, industrial, consumer, aerospace and defense, and communications. MCHP currently commands a market cap of $36.14 billion.
MCHP stock is down 25.8% on a YTD basis, and offers a dividend yield of 2.70%. Notably, MCHP has been raising dividends consistently over the past 21 years.
Overall, analysts have a rating of “Strong Buy” for MCHP stock, with a mean target price of $85.50. That's about 28.2% higher than current prices. Out of 22 analysts covering the stock, 15 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 6 have a “Hold” rating.
3. Advanced Micro Devices
Founded in 1969, Advanced Micro Devices (AMD) has been a key player in the chip industry for decades. Based out of Santa Clara, AMD initially focused on manufacturing memory chips. Now, it primarily designs, manufactures, and sells semiconductors, particularly microprocessors and graphics processing units (GPUs).
Valued at a market cap of $233 billion, AMD stock is down 4.8% on a YTD basis.
Powered by its rapidly expanding AI credentials and a diversified revenue stream, analysts have deemed AMD stock a “Strong Buy,” with a mean target price of $190.81. This indicates an upside potential of about 36% from current levels. Out of 38 analysts covering AMD, 31 have a “Strong Buy” rating, 1 has a “Moderate Buy,” and 6 have a “Hold” rating.
4. Micron Technology
Founded in 1978 and based out of Boise, Micron Technology (MU) is a legendary name in the semiconductor industry. It is one of the world's leading manufacturers of memory and storage technologies, including Dynamic Random-Access Memory (DRAM), NAND flash memory, NOR Flash memory and 3D XPoint memory (a high-performance storage solution). The company's products are used as essential components in various devices like leading-edge computing systems, consumer electronics, networking equipment and mobile devices. Micron currently commands a market cap of $115.4 billion.
MU stock is up 18.4% on a YTD basis, and it also offers a modest dividend yield of 0.44%.
Overall, analysts have a consensus rating of “Strong Buy” for Micron stock, with the mean target price of $146.22 implying expected upside potential of nearly 46% from current levels. Out of 27 analysts covering MU, 23 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 1 has a “Hold” rating, and 1 has a “Strong Sell” rating.
5. Nvidia
We conclude our list with the defining stock of the AI megatrend, Nvidia (NVDA). Nvidia is a leader in specialized AI semiconductors, and the company also supplies software to support the hardware it provides. Nvidia also designs and sells GPUs for the gaming and professional markets, and system-on-a-chip (SoC) units for the mobile computing market.
While the stock is up an impressive 196.6% on a YTD basis, NVDA is up a staggering 2,712% over the past five years. Nvidia's market cap now stands at a towering $3.63 trillion.
Analysts remain largely bullish about Nvidia stock. The consensus rating is a "Strong Buy,” although the mean target price of $152.87 indicates minimal upside potential from current prices. Out of 43 analysts covering NVDA, 37 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 4 have a “Hold” rating.
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