NVIDIA Pulls Up Artificial Intelligence Semiconductor Space – June 6, 2024
On Jun 5, the stock price of the undisputed global leader of the generative artificial intelligence (AI) market, NVIDIA Corp. (NVDA – Free Report) jumped 5.2% to $1,224.40, touching a new all-time high. NVIDIA also crossed the $3 trillion market capital threshold for the first time.
Driven by NVIDIA’s gain, the tech-heavy Nasdaq Composite closed at 17,187.92, advancing 2%, marking a fresh all-time high. Wall Street’s broad-market benchmark — the S&P 500 Index — rose 1.2% to finish at a new closing high of 5,354.03. Moreover, the Philadelphia Semiconductor Index (SOX) climbed 4.5% to end at 5,347.44, also marking an all-time closing high. In intraday trading, the index hit an all-time high of 5,348.91.
On Jun 2, at the Computex technology trade show in Taipei, NVIDIA unveiled its new AI chip architecture called “Rubin”. Notably, in March, the generative AI chipset giant announced its upcoming AI platform called “Blackwell.” This shows, severe competition in this space as industry leaders are busy upgrading their offerings in a record-low time.
On May 22, CEO Jensen Huang said that the company’s next-generation AI chip, Blackwell, is the upcoming driver. These chips will be available in data centers in the fourth quarter of fiscal 2025. Huang said, “We will see a lot of Blackwell revenue this year.” These chips are essential for customers’ interconnected infrastructure.
The Rubin architecture will have new GPUs to launch AI systems, CPUs and networking chips. It will also have new features like a central processor called “Vera”. Rubin is set to be introduced in 2026.
On May 22, NVIDIA reported that blockbuster first-quarter fiscal 2025 revenues of $26.04 billion, soared 262% year over year, marking the third straight quarter of growth in excess of 200%. The metric also exceeds the consensus estimate of $24.33 billion.
Adjusted earnings per share were $6.12, ahead of the Zacks Consensus Estimate of $5.49. This compares to earnings of $1.09 per share a year ago. NVIDIA expects sales of $28 billion in the fiscal second quarter. NVIDIA currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Generative AI Market to Flourish
The AI market has gathered pace in the past few years buoyed by the rapid penetration of digital technologies and the Internet. Despite an improving supply of AI chipsets, demand is likely to outpace supply, resulting in price hikes for chips. The market for AI is expected to show strong growth in the coming decade. Its current size of $200-$300 billion is expected to grow to nearly $2 trillion by 2030, as estimated by several research agencies.
PricewaterhouseCoopers International Ltd. estimated that AI could contribute up to $15.7 trillion to the global economy in 2030. Of this, $6.6 trillion is likely to come from increased productivity and $9.1 trillion is likely to come from consumption-side effects.
Stocks in Focus
Here we will discuss four stocks that are likely to benefit from the massive explosion of AI-based processers.
Advanced Micro Devices Inc. (AMD – Free Report) is benefiting from portfolio strength and an expanding partner base. Data Center revenues benefited from the strong adoption of AMD Instinct MI300X GPUs and a double-digit percentage increase in CPU sales. In cloud, server CPU revenues increased year over year and sequentially as North American hyperscalers expanded fourth Gen EPYC Processor deployments to power their internal workloads and public instances.
On Jun 3, at the Computex technology trade show in Taipei, AMD introduced its latest AI-based MI325X processor to be marketed in fourth-quarter 2024. AMD also unveiled an upcoming series of chips titled MI350. This new chip platform is expected to perform 35 times better in inference compared to its currently available MI300 series of AI chips. MI350 is expected to be available in 2025.
Zacks Rank #3 (Hold) Advanced Micro Devices has an expected revenue and earnings growth rate of 11.5% and 29.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days. On Jun 5, the stock price of AMD surged 3.9%.
Micron Technology Inc. (MU – Free Report) produces memory chips used in NVIDIA’s GPUs and other AI-based chipsets. The enormous growth of AI applications boosted demand for MU’s high bandwidth memory chips. MU is benefiting from improved market conditions, robust sales executions and strong growth across multiple business units.
MU anticipates the pricing of DRAM and NAND chips to increase, thereby improving its revenues. The pricing benefits will primarily be driven by rising AI servers, causing a scarcity in the availability of cutting-edge DRAM and NAND supplies. Also, 5G adoption in IoT devices and wireless infrastructure is likely to spur demand for memory and storage.
Zacks Rank #2 (Buy) Micron Technology has an expected revenue and earnings growth rate of 58.4% and more than 100%, respectively, for the current year (ending August 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last seven days. On Jun 5, the stock price of MU climbed 5.6%.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM – Free Report) is one of the largest manufacturers of NVIDIA’s chipsets along with other major AI-based chipset developers. TSM provides a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.
TSM also offers customer and engineering support services, manufactures masks, and invests in technology start-up companies. It researches, designs, develops, manufactures, packages, tests, and sells color filters, and provides investment services. TSM’s products are used in high-performance computing, smartphones, the Internet of Things, automotive and digital consumer electronics.
Zacks Rank #3 Taiwan Semiconductor Manufacturing has an expected revenue and earnings growth rate of 22% and 18.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. On Jun 5, the stock price of TSM jumped 6.9%.
QUALCOMM Inc. (QCOM – Free Report) is benefiting from the development of Snapdragon Dev Kit for Windows in collaboration with Microsoft boosting commercial prospects in the AI PC market. QCOM AI Hub is witnessing significant market traction among leading global PC manufacturers.
On Jun 5, Kneron — a Taiwanese AI-based chipset startup backed by QCOM and iPhone assembler Foxconn — introduced its latest AI-chip KNEO 330, its second-generation “edge GPT” server.
The major feature of KNEO 330 is that it aimed at businesses wishing to run their own AI applications from their own premises rather than relying on outside servers owned by third-party big cloud service providers.
Kneron also unveiled its latest KL830 processor chip will be in a new PC. This chip will enable the PC to run AI applications on the device rather than connecting to the Internet. This will improve privacy.
Zacks Rank #3 QUALCOMM has an expected revenue and earnings growth rate of 6.6% and 17.1%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 30 days. On Jun 5, the stock price of QCOM advanced 3.7%.
The chart below shows the five above-mentioned stocks year to date.
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