With Artificial Intelligence (AI) gaining prominence in our lives, it is hard to ignore the fact that AI companies are going to take a big slice of the pie this year. As per a report from Deloitte, the global semiconductor industry is expected to reach $1 trillion in revenue by 2030, doubling in this decade. While Alphabet (NASDAQ:GOOG , NASDAQ:GOOGL) is ready to unveil its AI for Google, there are already established players in the industry who are taking AI a notch higher. These are the semiconductor stocks to watch for AI in 2023 if you want to make big gains.
There is no denying the fact that AI can change our lives and it is here to stay. Early movers have a better advantage as the industry gears up for better days ahead. With that in mind, let’s take a look at the three semiconductor stocks for AI investing.
| NVDA | NVIDIA Corp | $288.85 |
| AMD | Advanced Micro Devices | $97.02 |
| MSFT | Microsoft | $312.31 |
Nvidia (NVDA)
It is not possible to talk about the best semiconductor stocks for AI without mentioning Nvidia (NASDAQ:NVDA). The tech giant is at the top of AI and has always been my favorite. The chip maker holds a strong position in the industry and is considered to be the biggest beneficiary of AI. Having already established the gold standard for its chips, the company is now making extraordinary hardware and software that help run AI applications. It is one of the best semiconductor stocks with high AI exposure.
Its data center business was the biggest growth driver in 2022 and even in an uncertain market, NVDA stock is up 73% in the past year. The stock has gone from $166 last May to $288 today. I am certain that it is inching closer to $300 and could hit a new 52-week high after its quarterly results which are scheduled to be announced on May 24. The previous quarter saw an 11% rise in data center revenue and its adjusted EPS stood at 88 cents.
Nvidia holds a dominating position for GPUs that are advanced enough to be used for machine learning and with the development of more AI platforms, there will be a rise in the demand for applications that can run the platform. This is where Nvidia will benefit. The company has already developed an AI supercomputer known as DGX Cloud which gives companies access to the infrastructure required to build advanced applications without having to purchase the GPUs.
Nvidia is a rock-solid business with massive growth opportunities and the stock isn’t cheap either. However, the sooner you buy, the bigger gains you can take home. If you are looking for one stock to buy and hold, NVDA stock is an ideal choice.
Advanced Micro Devices (AMD)
Another company and Nvidia’s major competitor, Advanced Micro Devices (NASDAQ:AMD) is also set to benefit from the AI boom. The tech giant reported earnings last week and beat the top and bottom line expectations. It reported earnings of 60 cents per share and revenue of $5.35 billion. However, investors weren’t too happy with the management’s guidance and this was reflected in the stock’s movement.
The revenue guidance shows almost a 20% drop from the second quarter. AMD stock dropped 9% on the day. The company’s revenue from client processors is falling sharply and CEO Lisa Su mentioned that the client processor business could have hit rock bottom. However, she believes that CPU sales could get stronger in the second half of the year.
However, I believe any drop in AMD stock is a solid opportunity to buy. The stock is trading for $97 today and is moving closer to the 52-week high of $109. It is up 51% year to date and I am certain that this momentum will continue. The company has recently joined hands with Microsoft to develop AI chips. That said, it also made a strategic acquisition in 2022 and bought Pensando, which delivers services for the cloud platform. The cloud market already uses AI and this acquisition will give AMD a stronghold in the sector.
The more AMD invests in AI, the more it will be able to diversify and depend less on PC sales. It may not be a leader in the AI industry today but there is massive growth potential for the long-term. Out of 26 analysts on TipRanks, 18 have a buy rating for AMD stock while 8 have a hold rating with a price target of $98.38.
Microsoft (MSFT)
This tech giant needs no introduction, Microsoft (NASDAQ:MSFT) is one company that does not leave out any opportunity to grow and it hasn’t taken AI lightly. The company is already a leader in the generative AI space and has a partnership with OpenAI which will bring in revenue and could boost the demand for Microsoft Bing. MSFT is one of the best semiconductor stocks with AI growth potential.
One solid reason I love the stock is how fast the company struck on the opportunity of ChatGPT. We are yet to see how well it plays out but CEO Satya Nadella is not someone who will sit back and watch the show. Instead, he runs the show. ChatGPT has already added 100 million users since the launch.
If you are looking for a safe stock, MSFT is the one to buy and hold for the long term. The company is also planning to collaborate with AMD to enhance the AI capabilities of its GPUs. We will see AI accelerating the company’s growth in the coming months. Microsoft may not be at the top of the AI game but it has enough liquidity to make strategic investments in the segment. It is one of the best tech companies with impressive top and bottom-line growth. MSFT stock has been on fire and is trading at $312 today. It is up 26% in the last six months and over 10% in the past month. With a market cap of $2.3 trillion, Microsoft generated $57.5 billion in free cash slow in the last 12 months.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.