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Artificial intelligence (AI) is revolutionizing various sectors, driving unprecedented innovation and invigorating conventional business models. Crucial to this transformation is the semiconductor industry, which supplies specialized chips to meet AI's soaring demand for computing power and data processing.
Over the past couple of years, AI chip stocks have attracted considerable investor attention. In a research note published last week, Bank of America Securities analyst Vivek Arya identified Nvidia Corp (NVDA) and Broadcom Inc. (AVGO) as two leading investment options in the AI chip sector, while also highlighting Marvell Technology, Inc. (MRVL), Micron Technology, Inc. (MU), and Advanced Micro Devices, Inc. (AMD) as promising “junior samurAI” picks.
Arya emphasized the potential for these companies to carve out “profitable niches” as industry leaders NVDA and AVGO expand the total addressable market (TAM). Additionally, he noted that the accelerator market - crucial for advanced AI applications - could double to $200 billion in three years, offering lucrative opportunities for MRVL, MU, and AMD, which he rated as "Buy," along with NVDA and AVGO.
The five AI chip stocks highlighted by the Bank of America analyst could be compelling portfolio additions this month for investors eager to capitalize on the AI boom. Let’s take a closer look.
AI Chip Stock #1: Nvidia
The first company on the list is Nvidia Corp (NVDA), a dominant gaming GPU and AI chip player founded in 1993. Its main products include graphics cards, enterprise workstations, software for cloud-based visual and virtual computing, cryptocurrency mining processors, gaming streaming services through GeForce NOW, and omniverse software. With an approximately 80% market share, the Santa Clara-based company dominates the AI chip market for cloud and data centers.
With a market cap of $2.2 trillion, NVDA stock rose 224% over the past 52 weeks and 76.9% on a YTD basis. The stock offers an annualized dividend of $0.16 per share, which translates to a dividend yield of 0.02%.
Out of the 39 analysts covering NVDA stock, 34 recommend “Strong Buy,” two recommend “Moderate Buy,” and three recommend “Hold.” The average target price for NVDA is $912.12, indicating an upside potential of 4.3% from current levels. The Street-high price target of $1,200 suggests an upside potential of 37.2%.
AI Chip Stock #2: Broadcom
Founded in 1961 and based in Palo Alto, Calif., Broadcom Inc. (AVGO) is a global leader in infrastructure technology, providing a wide range of semiconductor and infrastructure software solutions for data centers, cloud computing, networking, and wireless communications. Its market cap currently stands at $620.7 billion.
Shares of Broadcom are having a good run this year, with its stock price climbing 17.9% on a YTD basis. Over the past 52 weeks, its shares rose 111.7%. Moreover, the stock offers an annualized dividend of $19.70 per share, which translates to a dividend yield of 1.47%.
Overall, Broadcom stock has a consensus “Strong Buy” rating, with 27 analysts weighing in. Twenty-four of them have a “Strong Buy” rating, and three suggest a “Hold.” The average price target for AVGO is $1,485.05, which implies a potential upside of 12.5% from current levels.
AI Chip Stock #3: Marvell Technology
Incorporated in 1995, Marvell Technology, Inc. (MRVL) provides data infrastructure semiconductor solutions, spanning the data center core to the network edge. The Wilmington-headquartered company is attracting investors as demand for its AI products rises. Marvell's products have a significant impact on everything from high-performance networking solutions that power data centers to advanced storage technologies that enable cloud computing and 5G connectivity.
Valued at $62.9 billion by market cap, Marvell Technology’s stock has gained 83.5% over the past 52 weeks and 19.5% on a YTD basis. The stock offers an annualized dividend of $0.18 per share, which translates to a dividend yield of 0.25%.
BofA analysts foresee Marvell as the second player to Broadcom in AI networking, and a rising contender in custom chips within a rapidly expanding accelerator market. Arya expects the company will guide for about 10% long-term share of the $20 to $30 billion custom AI chip market, which would be well above consensus estimates of less than 5% share.
Marvell stock has a consensus “Strong Buy” rating. Out of the 28 analysts offering recommendations for the stock, 25 have rated it a “Strong Buy,” two have a “Moderate Buy” recommendation, and one suggests a “Hold.”
The average price target for MRVL is $88.37, which implies a potential upside of 22.7% from current levels.
AI Chip Stock #4: Micron Technology
Founded in 1978, Micron Technology, Inc. (MU) is a leading manufacturer of innovative memory and storage solutions, providing essential tech for industries like computing, networking, and mobile communications. The Boise-based company's top-notch offerings include DRAM (Dynamic Random-Access Memory), NAND Flash memory, solid-state drives (SSDs), and other memory and storage products. Its market cap currently stands at $136.8 billion.
Shares of MU rose 113.9% over the past 52 weeks and 46.9% on a YTD basis. The stock offers an annualized dividend of $0.58 per share, which translates to a dividend yield of 0.47%.
BofA suggests Micron Technology could seize opportunities to expand its high-bandwidth memory (HBM) market share behind its Korean peers.
Micron Technology stock has a consensus “Strong Buy” rating. Out of the 28 analysts offering recommendations for the stock, 24 analysts recommend it as a “Strong Buy,” two have a “Moderate Buy” rating, one suggests "Hold," and one gives a "Moderate Sell."
The average analyst price target for Micron Technology is $124.38, indicating a slight discount to current prices. The Street-high price target of $225 suggests an upside potential of 79.5%.
AI Chip Stock #5: Advanced Micro Devices
Incorporated in 1969, Santa Clara-based Advanced Micro Devices, Inc. (AMD) is a prominent semiconductor firm shaping the data center, embedded, gaming, and PC markets. AMD is renowned for pioneering advancements in modern computing. It boasts a market cap of $275.4 billion.
Over the last few years, AMD has emerged as a major player in the semiconductor industry, making significant progress in both the CPU and GPU markets, with its Ryzen processors and Radeon graphics cards gaining traction.
Advanced Micro Device's fundamentals improved last year, thanks to the integration of AI, causing its stock to rise 13.7% on a YTD basis. Plus, shares of AMD gained 81% over the past 52 weeks.
BofA analyst Arya sees potential for Advanced Micro Devices, which is ranked second in GPUs and third in AI accelerators. AMD's consistency in execution gives Arya confidence that it can maintain a 5% to 10% share in the AI accelerator market that Nvidia dominates.
Advanced Micro Devices stock has a consensus “Strong Buy” rating and a mean price target of $189.43, indicating a potential upside of 12.72%. Out of the 33 analysts offering recommendations for the stock, 27 recommend it as a “Strong Buy,” one has a “Moderate Buy” rating, and five suggest "Hold."
