Artificial Intelligence, Nvidia Just the Tip of the Iceberg. Chip Stocks Shine: Here’s Which Ones to Bet on
L’artificial intelligence it has not only revolutionized our way of existing, but has also given a different imprint to the markets and the economy, looking kindly at companies and large producers of small mechanical and computer components, such as chips. An example? Nvidia, whose rise is the daughter of the artificial intelligence boom, also exploited by Microsoft and, lastly, by Apple. Nvidia, specifically, produces the gpu necessary to train AI models, processors composed of a myriad of operational cores of the chip and even smaller and more specialized than those of the traditional computer brain, the cpu. Without these tools the AI miracle would not have been possible.
Nvidia’s record as the most capitalized company in the world has taken on a more symbolic value than that of its traveling companions. LThe AI chip giant’s takeover has been more disruptive than that of Microsoft and Apple, and the stock drove the S&P 500 and Nasdaq to previously unexplored heights. But Nvidia is also and only the tip of an iceberg where upstream, analyze Milan Finance, there are companies like the Dutch Asml, which produces the photolithography machines that engrave the shape of the microchips on the silicon. Or Arm, a British company controlled by the Japanese holding SoftBank, which deals with the design of chips. “The company has several strengths that strengthen its position in the semiconductor market. Its flexible business model, based on the design and licensing of processor architectures, allows it to reduce the risks associated with direct chip production,” he notes on Milan Finance Giacomo Calefcountry head of Ns Partners.
Once the chip has been designed, we move on to its creation. This phase is dominated by Taiwan Semiconductor Manufacturing Company (Tsmc), which in the fourth quarter of 2023 had a market share of over 60%, according to data from Statista. The company is a key supplier for Nvidia and in recent days has benefited from the rally of the company led by Jen-Hsun Huang, approaching a trillion market cap. “TSMC expects revenue growth of 27.6% in the second quarter but faces significant geopolitical challenges “due to tensions between China and Taiwan,” Calef said. “The company maintains a strong position in the advanced semiconductor market, but rising energy costs and manufacturing challenges could impact margins.”
Among the chip giants there are some players who manage to move along all stages of the supply chain. The main names are those of the Korean Samsung and the American Intel, even if the latter is going through a difficult time. Its foundry activity has recorded a operational loss of 7 billion in 2023 and the stock has lost almost 40% this year. Furthermore, according to Citi analysts, the company has lost market share to AMD and Arm. The reason is to be found in Intel’s products, which are not designed for AI, even if the company is ready to take cover.
Nvidia, besides, now he has to beware of the competition of AMD, another big American company that does the same job but capitalizes “only” 260 billion. The former has the advantage both in terms of market share and brand perception, but AMD is growing fast and expects an increase in sales of almost 30% in 2025. The company also wants to differentiate itself with competitive solutions at lower prices and has invested heavily to expand into data centers. Specialize not on a component but on a sector, he continues Milan Finance, it could then be the winning move. Qualcomm, for example, is focused on integrating AI into mobile devices. The company has created Snapdragon, a suite of processors present in the latest Microsoft PCs, those that brought artificial intelligence technologies to computers. Also in this case the capitalization is small (235 billion), but the title has grown by more than 50% since the beginning of the year. Experts say the future outlook is promising thanks to the expansion of 5G, but the dependence on the mobile sector remains significant.
Then there is Broadcomanalyze Milan Finance, who followed the path of customization always within the world of AI. The company makes custom chips that have attracted orders from Alphabet and Meta. The growing demand for advanced networking solutions and customized accelerators has strengthened the market position of Broadcom, which has revised its 2024 revenue forecast upwards to 51 billion, with an expected EBITDA of 61%. Solid numbers, which pushed the capitalization at around 800 billion and now many are betting that the company can aspire to a path similar to that of Nvidia.
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