Artificial intelligence, commonly known as AI, has attracted considerable interest in the stock market due to the substantial growth observed in companies specializing in this field. Many corporations have announced plans to utilize AI and generative AI technologies to enhance productivity and refine their offerings.
The AI sector is still in its nascent phase, with AI tools becoming more prevalent, providing an enticing opportunity for investors. These tools often depend on semiconductors to operate, with semiconductor firms even designing chips specifically tailored for AI applications.
Consequently, investors looking to capitalize on the AI trend may consider exploring leading semiconductor stocks like Supermicro (SMCI) and Broadcom (AVGO).
Supermicro (SMCI)
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Supermicro (NASDAQ: SMCI) is emerging as a key player in the AI industry and is potentially set for inclusion in the S&P 500 index this year. The stock has surged by 700% in the last year, underscoring the company’s prominent position in AI technologies.
In contrast to manufacturing AI chips, Supermicro focuses on producing servers capable of managing the intense workloads of AI tools, effectively complementing these chips. The company has experienced increased demand from existing clients and attracted significant interest from new customers.
During the second quarter of fiscal 2024, Supermicro achieved an impressive 103% year-over-year revenue growth rate. With a market capitalization of around $38 billion, the stock offers a low valuation and a P/E ratio of 52, coupled with a PEG ratio of 0.76, indicating undervaluation.
Broadcom (AVGO)
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Broadcom (NASDAQ: AVGO) is a leading provider of semiconductors and software that has consistently rewarded its investors. Over the past five years, Broadcom has outperformed many stocks, delivering a 355% gain through dividend growth, stock appreciation, and share buybacks.
Broadcom’s Trident 5-X12 chip offers improved efficiency, consuming 25% less power per 400G port compared to the current market leader, Trident 4-X9. This advancement positions Broadcom to capture a larger market share and drive financial growth, catering to companies looking to harness AI capabilities.
In the third quarter of fiscal 2023, Broadcom reported 5% year-over-year revenue growth, 7.4% year-over-year net income growth, and a net profit margin of 37.2%. With its industry expertise and exposure to diverse growth prospects, Broadcom presents an appealing option for long-term investors.
Advanced Micro Devices (AMD)
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Advanced Micro Devices (NASDAQ: AMD) has made a comeback after a challenging period, ending 2023 on a positive note with a 10% year-over-year revenue growth. The company also recovered from low profits in Q4 2022, achieving $667 million in net income during Q4 2023.
Over the past five years, AMD has surpassed the stock market with an impressive 628% gain, including a substantial 112% increase in the past year. Positioned to benefit from AI trends, AMD offers a variety of AI chips such as Instinct MI300X Accelerators, Ryzen Processors, and Radeon Graphics Cards.
While Nvidia leads the industry, AMD has the potential to expand its market share and drive significant revenue growth in the future, establishing itself as a major player in the semiconductor arena.
Please be advised that as of the publication date, Marc Guberti held long positions in SMCI and AVGO. The opinions expressed in this article are those of the author and are subject to the InvestorPlace.com Publishing Guidelines.
Marc Guberti is a financial freelance writer at InvestorPlace.com and the host of the Breakthrough Success Podcast. His work has been featured in various publications, including U.S. News & World Report, Benzinga, and Joy Wallet.
