Recent market fluctuations have sent tech stocks on a rollercoaster ride, with the once heralded artificial intelligence (AI) revolution seeming to lose its sparkle as shares of esteemed chipmakers took a post-earnings dip, leaving Wall Street adrift without a clear catalyst.
Chip stocks plummeted from mid-July highs, drawing similarities to the dot-com bubble of the late 1990s and early 2000s, as their lofty valuations sparked concerns about their ability to sustain genuine revenue growth.
Yet, the AI tidal wave remains steadfast and promises to propel chip stock prices skyward. Chip stocks like NVIDIA Corporation NVDA, Broadcom Inc. AVGO, and Taiwan Semiconductor Manufacturing Company Limited TSM are emerging as lucrative prospects, offering robust price upside to investors and enriching shareholder value.
The Solid Foundation of AI vs. the Dot-Com Era’s Bubble
Unlike the speculative business models of dot-com companies, AI’s stronghold lies in practical applications across diverse sectors such as technology, healthcare, transportation, agriculture, and finance, mitigating sector-specific bubble risks.
AI adoption in product innovation, efficiency, and cost savings underscores its tangible economic benefits compared to the abstract nature of the dot-com era. Moreover, established infrastructures like cloud computing platforms buttress the deployment of AI technologies, a luxury not afforded to dot-com ventures.
AI’s Meteoric Rise Fueling NVDA, AVGO, TSM Stock Prices
The global AI industry ballooned to over $184 billion in 2024, marking a nearly $50 billion leap from 2023. This exponential growth trajectory is expected to persist until 2030, with the AI market size surpassing $826 billion, as per Statista projections.
NVIDIA stands to benefit from this surge, given its critical hardware and technology contributions to AI applications. NVIDIA’s graphic processing units (GPUs) form an integral part of the computer server infrastructure essential for training extensive language models and powering AI interfaces.
Broadcom likewise plays a pivotal role in the AI landscape, with its data center products serving as linchpins for AI applications. CEO Hock Tan anticipates the company’s AI revenues to reach $12 billion by fiscal 2024, further escalating in fiscal 2025 due to heightened demand for custom accelerators in AI data centers. Broadcom witnessed a 10% sequential surge in AI revenues in the fiscal fourth quarter, reaching around $3.5 billion.
Taiwan Semiconductor, or TSMC, holds a prime position in manufacturing chips for AI hardware developers, positioning it ideally to capitalize on the flourishing AI market. TSMC’s chip manufacturing prowess is indispensable for the operation of GPUs crucial to data centers storing vast datasets fueling AI applications, thereby poised to fuel TSMC’s growth.
Stratospheric Potential: NVDA, AVGO, TSM Stock Price Upside
NVIDIA’s projected green light for chip exports to Saudi Arabia, the impending Blackwell chip launch, and its competitive advantage in the GPU market are set to propel its stock upwards, with brokers raising the average short-term target by 27.7% to $200, implying a 71.1% upside.
Broadcom’s adept handling of debts leveraging strong cash flow is expected to drive its stock prices higher. With a free cash flow of $4.791 billion in the fiscal third quarter and revenues hitting $13.07 billion, Broadcom’s FCF margin stands at 36.65%, slightly exceeding the previous quarter. Brokers revised the average short-term AVGO target up by 20.3% to $240, projecting a 51.6% ascent.
TSMC’s commanding pricing power in the high-end chip sector and exclusive role in manufacturing Apple Inc.’s AI chips position it for upward stock price movement. Brokers revised the average short-term TSM target up by 20.3% to $250, signaling a 46.9% climb.
Shares of NVIDIA, Broadcom, and TSMC have surged by 140.6%, 47.4%, and 64.8%, respectively, year to date.
All three stocks hold a Zacks Rank #3 (Hold).
Zacks Pinpoints Leading Semiconductor Stock
It’s a mere fraction the size of NVIDIA, which has soared over +800% since our endorsement. While NVIDIA remains vibrant, our top chip stock pick presents significant growth potential.
With robust earnings expansion and a widening customer base, it is well-positioned to cater to the soaring demand for Artificial Intelligence, Machine Learning, and the Internet of Things. Global semiconductor manufacturing is slated to soar from $452 billion in 2021 to $803 billion by 2028.
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