Just as the ancient Roman Empire was powered by human labor deployed in agriculture, the modern era relies on semiconductors to power the digital age. This makes investing in semiconductor stocks an easy proposition, as it is investing in the civilization itself.
Globally, the semiconductor stocks market is headed for a 10% CAGR by 2029 at $980.80 billion, according to Statista Market Insights. In the meantime, investors should put these stocks on a watchlist, if they haven’t already.
Let’s explore three top semiconductor stocks to consider for massive portfolio returns.
Nvidia (NVDA)
Widely viewed as overweight at a 72.29 price-to-earnings (P/E) ratio, the psychological effect of the Nvidia (NASDAQ:NVDA) 10-for-1 stock split is not to be underestimated. Compared to its competitor AMD (NASDAQ:AMD), NVDA stock is priced cheaper. Simultaneously, it holds 88% dominance in the GPU market, per Jon Peddie Research as of Q1 of fiscal year 2024.
With equal cornering of the artificial intelligence (AI) generative demand market by providing both GPUs and a full-stack software suite for early large language model (LLM) trainers, much is also expected of Nvidia’s Blackwell architecture. This new lineup of B100 and B200 GPUs purportedly offer up to 15x performance while drastically lowering power consumption.
Moreover, according to a recent report, the B200 series AI chips are on their way to be repackaged as “B20”, a somewhat hobbled version intended for China due to US export control restrictions. Although China is busy building its own semiconductor foundries to counteract US pressure, the reliance of Chinese AI companies on Nvidia’s CUDA platform is still in effect.
At the same time, the US could hit China with another block. If this happens to the H20 chip, the one Nvidia specifically designed to go around the export control license, the company could lose up to $12 billion revenue, according to Jeffries’ latest notes to investors.
With that in mind, Piper Sandler (NYSE:PIPR) upped NVDA stock target from $120 to $140. UBS is even more optimistic, citing robust Blackwell demand, having raised their price target from $120 to $150.
According to 39 analyst inputs aggregated by Nasdaq, the average NVDA price target is $142.67 per share. At present $112.28 price, NVDA shares are below the 52-week high of $140.76. In the last three months, NVDA stock is up 53%.
Arista Networks (ANET)
In the computer networking category, key player Arista Networks (NYSE:ANET) caters to growing data center needs. The firm sells both multilayer network switches and software solutions to large enterprises. Those include cloud computing to high-performance computing (HPC) used in the training of AI models.
In light of the CrowdStrike (NASDAQ:CRWD) debacle, it should also be noted that ANET uses a Linux-derived Extensible Operating System (EOS). The open standard OS is exceedingly customizable. It defines Arista Network’s suite of products to scale data centers and connect multiple clouds.
The multi-purpose architecture of EOS separates protocol processing from state information. In other words, an in-service software upgrade with EOS wouldn’t have disrupted the global economy as CrowdStrike with Microsoft (NASDAQ:MSFT) Windows did.
On July 30th, Arista is scheduled to announce its Q2 FY24 earnings. In the prior quarter, the company reported 16.3% year-over-year (YOY) revenue growth to $1.57 billion. Net income was even better, having increased by 46% to $637.7 million. In Q2, the company expects $1.62 to $1.65 billion revenue range.
And, subsequent quarters may exceed that range. At the present price of $314.12, ANET stock is close to its 52-week high of 376.50, up 40% in the last three months. The average ANET price target is $324.5 with the high target of $385 per share.
NXP Semiconductors (NXPI)
NXP Semiconductors (NASDASQ:NXPI) provides automakers with integrated circuits that make vehicles easier to drive and connect to digital platforms. Those include Ford (NYSE:F), Hyundai (OTCMKTS:HYMTF), BMW (OTCMKTS:BMWYY) and Volkswagen (OTCMKTS:VLKAF). Further, Tesla (NASDAQ:TSLA) was among the first to push this concept known as software-defined vehicles (SDVs).
However, Tesla preferred to partner with Nvidia as NXP’s direct competitor in the automotive solutions arena. Additionally, NXPI offers ultra-low-power microcontrollers alongside high-performance processors for the broad application in IoT and mobile’s near-field communication (NFC) embedded systems.
In Q2 earnings delivered on Monday, the Dutch company reported $3.13 billion revenue, down 5% YOY. Likewise, the company’s net income dropped 5.7%, at $658 million. This means that, although NXP beat earnings estimates for three consecutive quarters up until Q2, the surprise was only -0.71%, at $2.82 estimated versus $2.8 earnings per share reported.
However, as a cyclical company, investors should expect to see tailwinds ahead, riding on NXPs S32 CoreRide platform for the next generation of SDVs. This makes NXPI as one of top semiconductor stocks in this exciting new market.
Presently priced at $247.51, NXPI shares are up 20% over the last three months. Expected average price target is $294.52 per share. The high estimate is $370 based on Nasdaq data.
On the date of publication, Shane Neagle 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.