As organizations ramp up investment in artificial intelligence (AI) technology, there are more chip stocks starting to get in on the motion besides AI chip leader Nvidia.
Goldman Sachs lists Advanced Micro Devices (NASDAQ: AMD) and Marvell Technology (NASDAQ: MRVL) as two of its top AI chip stocks to buy without delay. These corporations are seeing accelerating demand for his or her AI chips that will fuel latest highs over the next few years. Listed below are more details on what’s fueling interest in these two AI stocks.
1. Advanced Micro Devices
Shares of AMD are up 117% over the past 12 months, despite the company experiencing a 4% decline in total revenue. AMD’s chips are present in several markets, including video game consoles, personal computers, and even the world’s strongest supercomputers. Nonetheless, investors are optimistic with reference to the corporate’s accelerating growth in data centers, where its latest MI300X graphics processing units (GPUs) designed for AI are gaining significant traction inside the marketplace.
Inside the fourth quarter, AMD said data center revenue, which comprises lower than a third of the business, grew 38% 12 months over 12 months and 43% over the previous quarter. GPU revenue for data centers exceeded management’s expectations following the launch of the MI300 series. AMD is seeing strong interest from several leading cloud providers, including Microsoft, which is using the MI300X to power latest capabilities inside the Azure enterprise cloud service.
It’s the accelerating demand in the data center business that has Wall Street analysts expecting AMD to return to growth this 12 months.
The stock has already risen 20% 12 months so far, as investors sense there may thoroughly be a wave of growth on the horizon. While AMD expects the near-term environment to be mixed for its consumer chips, it raised 2024 revenue guidance for data center GPUs significantly. AMD previously expected these products to usher in $2 billion in revenue this 12 months but now expects over $3.5 billion.
Most importantly, strong demand for high-end data center chips are pushing the company’s margins up. Analysts expect the company to grow earnings by 42% per 12 months over the next few years. With this much momentum, it’s clear why Goldman Sachs likes the stock, and why AMD shares could proceed to outperform the market.
2. Marvell Technology
Shares of Marvell Technology are up 60% over the past 12 months and already up 19% 12 months so far, despite posting falling revenue in recent quarters. The company makes several chip products utilized in gaming consoles, advanced driver-assistance systems in cars, wireless carrier infrastructure, and more. However the rationale for the stock’s relatively strong performance is growing demand for its processing solutions inside the AI and data center market.
Sales to data centers made up 39% of the business inside the October-ending quarter and are accelerating. Data center revenue surged 21% over the previous quarter, and management expects the segment to point sequential growth inside the mid-30% range in the next earnings report.
Marvell is partnering with Nvidia to deliver the required computing bandwidth for firms to utilize generative AI in the data center. In November, management noted strong demand for its electro-optic products, which might be growing consistent with the demand for high-powered AI chips.
As with AMD, demand for Marvell’s AI solutions is coming in stronger than management previously expected. The company expects AI-related revenue to significantly exceed its previous forecast for $200 million inside the fiscal fourth quarter.
Analysts expect the company to post earnings growth of 14% on an annualized basis over the next few years, but that estimate could drift higher if Marvell continues to report better-than-expected growth from AI-related products.
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John Ballard has positions in Advanced Micro Devices and Nvidia. The Motley Idiot has positions in and recommends Advanced Micro Devices, Goldman Sachs Group, Microsoft, and Nvidia. The Motley Idiot recommends Marvell Technology and recommends the subsequent options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
2 Top AI Stocks to Buy Now, In accordance with Wall Street was originally published by The Motley Idiot