Top Tech Stocks to Consider Amid AI Chip Demand
Investing in innovative technology can yield substantial long-term wealth. The Nasdaq Composite has doubled in the last five years, with opportunities to purchase quality tech stocks at appealing valuations.
Two companies addressing the rising demand for artificial intelligence (AI) chips may potentially see their share prices double by 2030.
1. Nvidia
Nvidia (NASDAQ: NVDA) is the top provider of graphics processing units (GPUs) necessary for AI workloads in data centers. Despite earlier concerns about slowing data center spending, Nvidia reported strong growth, with shares approaching new highs.
The company posted a revenue of $44 billion, marking a 69% increase year over year and a 12% rise over the previous quarter. Nvidia lost $2.5 billion in potential revenue for its H20 chip due to new export rules to China but still surpassed Wall Street’s revenue estimates.
CEO Jensen Huang emphasized the vital role of AI infrastructure in modern economies, likening it to electricity and the internet. AI spending is forecasted to drive a $20 trillion boost to the global economy by 2030, presenting promising growth for Nvidia.
Demand continues from major cloud service providers, which constituted nearly half of Nvidia’s data center sales last quarter, growing 73% year over year to $39 billion. The company is also supplying AI systems for growing markets like autonomous driving and robotics.
While Nvidia faces rising competition, its GPUs still offer unmatched general-purpose computing power. Analysts predict earnings growth of 29% annually, which could double its share price within five years if the stock maintains a forward price-to-earnings multiple of 33.
2. Lam Research
Lam Research (NASDAQ: LRCX) is integral to fulfilling the growing demand for chips. The company specializes in etch and deposition equipment, crucial in chip manufacturing, and has seen its stock rise over 200% in the last five years.
Currently trading about 25% below its previous highs, Lam reported a 24% increase in revenue year-over-year. Despite near-term uncertainties due to tariffs, management remains optimistic about long-term growth prospects.
CEO Tim Archer highlighted the compelling nature of Lam’s portfolio, aiming to expand its addressable market as semiconductor production evolves. Historical data show wafer equipment spending has grown at an annualized rate of 11% from 2013 to 2024, with Lam’s revenue outperforming at a rate of 14%.
As semiconductor designs become more complex, analysts anticipate Lam Research’s earnings to grow at an annualized rate of 15%. The stock currently trades at a reasonable forward price-to-earnings multiple of 21, setting up potential for gains equivalent to earnings doubling in five years.
Should you invest $1,000 in Nvidia right now?
Before investing in Nvidia, consider the recommendations from various analysts who have identified what they believe to be the best stocks.
Notably, past recommendations have yielded substantial returns. For example, an investment in Netflix in December 2004 would have turned into $651,049 today. Similarly, an investment in Nvidia from April 2005 would have grown to $828,224.
The average return for the recommending platform stands at 979%, significantly outpacing the S&P 500’s 171% during the same period.
The views and opinions expressed herein are those of the author and do not reflect those of Nasdaq, Inc.
