DBSDY - 3 Hot Semiconductor Stocks That Will Ride the AI Revolution to New Heights

2024-07-09 06:07:00 ET

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In the rapidly advancing tech world, semiconductor AI stocks are emerging as pivotal players in market value growth through the development of AI chips and related applications. These companies are riding the AI wave. With that, they are actively shaping its trajectory through innovative technologies and strategic financial management. Here are three leading semiconductor companies listed, as well as their financial performance and strategic initiatives. This is crucial for tech enthusiasts aiming to capitalize on the AI revolution. The first one has demonstrated exceptional margin performance and significant advancements in silicon carbide technology. It is crucial for AI applications in the automotive and industrial sectors.

Similarly, another company on the list is a global leader in semiconductor manufacturing. This one makes substantial capital investments to expand its advanced technology capabilities and mitigate geopolitical risks. The last one on the list continues to drive rapid revenue growth with its high-performance processors, including upcoming AI-integrated models. Over the long term, these companies are beyond participants in the AI revolution. They are its architects, developing and deploying technologies that construct the future of AI.

ON Semiconductor (ON)

ON Semiconductor (NASDAQ: ON ) excels in power and sensor technologies. The technology is crucial for AI applications in the automotive and industrial sectors. ON Semiconductor attained a gross margin of 45.9% in Q1 2024. Given the industry’s competitive pressures, this margin performance is a vital signal. This bottom-line level indicates efficient cost management and pricing power in ON Semiconductor’s markets. Moving downward, the EPS was $1.08 in Q1 2024. That was near the high end of ON Semiconductor’s guidance, and the EPS growth indicates ON Semiconductor’s fundamental ability to convert revenue into profitable earnings.

Moreover, ON Semiconductor highlighted significant achievements beyond margins in their silicon carbide business. This includes achieving over 50% of substrates from internal production. Simply put, this vertical integration strategy boosts margins. Similarly, the integration also positions ON Semiconductor on the edge to capitalize on the growing demand for silicon carbide solutions. The company had a 30% sequential growth in new design wins. That indicates strong customer adoption of its intelligent power and sensing technologies.

In short, ON Semiconductor’s strategic focus on silicon carbide solutions and strong financial metrics make it a solid choice among top semiconductor AI stocks.

Taiwan Semiconductor Manufacturing (TSM)

Taiwan Semiconductor Manufacturing (NYSE: TSM ), or TSMC, dominates advanced semiconductor manufacturing. It is supplying critical components for AI-driven technologies. Despite seasonal impacts, TSMC’s gross margin increased slightly to 53.1% in Q1. Favorable product mix changes amidst smartphone seasonality drive this. The operating margin also improved sequentially by 0.4 percentage points to 42%. This signifies an operational edge, mainly through tighter expense controls, keeping operating expenses lower than initially guided. TSMC delivered EPS of TWD 8.7 with a return on equity of 25.4% for Q1. Hence, this reflects a solid bottom line and sharp utilization of equity.

Moreover, TSMC plans a massive CapEx of $28 to $32 billion in 2024. CapEx (70% to 80%) is focused on advanced process technologies. Indeed, this strategic investment solidifies growth potential by expanding manufacturing capacity and technology capabilities. All this ensures alignment with long-term AI market demand profiles. Further, TSMC’s global expansion efforts include the construction of fabs in Arizona and specialty technology fabs in Japan and Europe. These efforts enhance its geographic flexibility and demand responsiveness.

To summarize, TSMC’s solid performance and massive capital investments support its high mark on the top semiconductor AI stocks list.

Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ: AMD ), or AMD, focuses on high-performance CPUs and GPUs. Its products are essential for AI and machine learning workloads. AMD has deployments with large enterprises such as American Airlines (NASDAQ: AAL ), DBS (OTCMKTS: DBSDY ) and Shell (NYSE: SHEL ). The company can penetrate and grow within the expanding enterprise market by securing contracts with these prominent enterprises. Adopting EPYC CPUs for mission-critical applications like enterprise resource planning and database solutions boosts client reliability on AMD’s products.

Further, the Turin family of EPYC processors promises the potential to capture additional market share in both enterprise and cloud computing segments. Certainly, AMD’s proactive roadmap strategy aligns with the ongoing market demand for advanced computing solutions. AMD’s client segment revenue reached $1.4 billion. As a result, this is marking an 85% year-over-year increase driven by Ryzen 8000 Series processors. Moreover, the strong growth in Ryzen processor sales points to AMD’s sharp strategy in the consumer PC market. Looking forward, AMD anticipates expanding its AI PC portfolio with the launch of Ryzen mobile processors code-named Strix.

Overall, AMD’s rapid top-line growth and AI-integrated processors solidify its presence on the top semiconductor AI stocks list.

As of this writing, Yiannis Zourmpanos held long positions in TSM and AMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing 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.

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