Semiconductor Stocks Poised for Growth as Supply Concerns Ease
Chicago, IL – December 3, 2024 – Today’s Zacks Investment Ideas feature includes notable mentions such as Nvidia NVDA, Microsoft MSFT, Meta Platforms META, Taiwan Semiconductor TSM, Super Micro Computer SMCI, Vaneck Semiconductor ETF SMH, Arm Holdings ARM, and Advanced Micro Devices AMD.
Investing in Semiconductors as 2024 Closes: Supply Worries Are Overstated
Since hitting a low point in the bear market in late 2022, U.S. stocks have surged, aided by the Federal Reserve’s interest rate cuts. Among the various sectors, technology, particularly the artificial intelligence (AI) arena, has taken the lead in recovery.
Nvidia, rated Zacks Rank #2 (Buy), stands out in this vital market. With a market capitalization of nearly $3.5 trillion, NVDA not only is a significant player but also serves as a benchmark for investors assessing growth. Its industry-leading GPUs are essential for the data centers constructed by major companies like Microsoft.
AI Revolution Kickstarted by ChatGPT’s Launch
The introduction of Microsoft’s ChatGPT in November 2022 marked a transformative moment for AI. Though AI technology was in development for many years, ChatGPT’s widespread popularity ignited an AI arms race among well-funded tech giants, including Meta Platforms. As a result, semiconductor firms like NVDA have experienced significant gains, though some investors question if growth can sustain the rapid increase in valuations among these tech stocks.
Nvidia’s Earnings Outlook Points to Further Expansion
During the November earnings call, Nvidia’s CEO Jensen Huang addressed investor concerns by labeling the demand for Nvidia’s latest chips as “insane.” According to Zacks Consensus Earnings Estimates, analysts anticipate a remarkable 125.38% year-over-year increase in earnings per share for Nvidia in 2025.
Supply Challenges Take Center Stage Over Demand
While AI demand remains robust, the primary worry for investors revolves around Nvidia’s supply capabilities. Two key supply concerns were highlighted:
1. Blackwell Delays: Nvidia’s upcoming AI chips faced setbacks due to design issues and overheating risks identified by Taiwan Semiconductor, a crucial partner. However, these challenges have reportedly been resolved, and production is set to ramp up this month.
2. SMCI Accounting Issues: Super Micro Computer, another vital Nvidia supplier, saw its shares drop after a short-seller raised accounting concerns, resulting in a postponed earnings call. Yet, a special committee confirmed that there was no evidence of accounting fraud. The announcement of a new CFO led to a surge of more than 20% in SMCI shares during early trading on Monday.
Currently, worries about Nvidia’s supply chain seem to be fading.
Investors Flocking to SMH at Key Technical Support
In light of positive supply developments, investors have more reasons to support semiconductor stocks as year-end approaches. The Vaneck Semiconductor ETF, which tracks the semiconductor sector, is approaching its 200-day moving average—a level that has previously indicated significant market reversals.
Semiconductor Valuations Remain Favorable
While some value investors might believe semiconductor valuations are overinflated, it’s imperative to acknowledge that increased forward growth expectations often justify higher valuations. Stocks like Arm Holdings and Advanced Micro Devices have recently seen their valuations become more appealing as their share prices stabilize.
Conclusion
As supply issues concerning Nvidia are resolved and the market environment turns more bullish, semiconductor stocks appear ready for growth as 2024 draws to a close.
Explore Zacks’ Top Stock Recommendations
Since 2000, Zacks’ leading stock-picking strategies have consistently outperformed the S&P 500’s average annual gain of +7.0%. Remarkably, they achieved average annual gains of +44.9%, +48.4%, and +55.2%.
You can now access their latest picks without any cost or obligation.
Discover Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material provides informational purposes only and does not constitute investment, legal, or tax advice, nor a recommendation to trade any security. It should not be assumed that investments described here will be profitable. All information is current as of the date herein and may change without notice. The views expressed may not reflect those of Zacks as a whole. Zacks Investment Research does not engage in investment banking or asset management activities related to any securities. Historical returns are based on hypothetical portfolios with Zacks Rank = 1, rebalanced monthly, with no transaction costs. These are not actual returns. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more performance information.
Just $1 for Access to Zacks’ Buy and Sell Recommendations
We are serious.
Years ago, we offered our members 30 days of access to all our stock picks for just $1, with no further obligations.
Many took advantage of this opportunity, while others were skeptical. Our motivation is straightforward: we want you to explore our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, which closed 228 positions in 2023 alone, yielding remarkable double- and triple-digit profits.
See Stocks Now >>
Interested in the latest insights from Zacks Investment Research? Download our report on 5 Stocks Set to Double today. Click to access this free report.
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
ARM Holdings PLC Sponsored ADR (ARM): Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report
Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
Meta Platforms, Inc. (META): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
