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Shares of global chipmakers have continued to advance, presenting attractive chip stocks to buy. This comes amid a more favorable macroeconomic backdrop and unprecedented demand for high-end chips that power artificial intelligence (AI) applications. The investment attractiveness of these stocks received a notable boost after Semiconductor manufacturing in Taiwan (NYSE:TSM), the world’s largest chipmaking company, reported April revenue up nearly 60% compared to the same period last year.
This is the largest growth rate for 2024 so far. TSMC is a crucial supplier for tech giants such as Apple (NASDAQ:AAPL) And Nvidia (NASDAQ:NVDA). Its strong performance indicates expected growth in customer operations.
Chip stocks maintain a favorable outlook on the risk-reward potential of global semiconductor stocks. Here, we take a look at three chip stocks to buy that are considered safe bets in the chip manufacturing sector.
Broadcom (AVGO)
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Broadcom (NASDAQ:AVGO) is a leading global technology company and one of the top chip stocks to buy. The company designs, develops and delivers various semiconductor and infrastructure software solutions. Known for its broad product portfolio, Broadcom’s offerings span data center networking, broadband access, software and wireless connectivity.
Most recently, Barclays initiated coverage on Broadcom with a positive outlook, giving it an overweight rating and a price target of $1,405. The brokerage noted that Broadcom leads the data center silicon market and is poised to benefit from burgeoning advances in artificial intelligence (AI).
Broadcom’s inclusion in Barclays’ list of preferred names for the year stems from its strong data center silicon portfolio. Despite the semiconductor industry’s vulnerability to cyclical downturns, the company’s growing software business is recognized as a critical part of strengthening profitability and free cash flow.
Barclays’ attention to AI the potential comes at the right time. The company forecasts a mid-to-high 20% growth rate for Broadcom next year. This push will continue for the long term, fueled by the company’s expertise in custom silicon and switching solutions.
Micron (MU)
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Micron technology (NASDAQ:UM) is a leading global provider of innovative memory and storage solutions. Micron’s product portfolio includes DRAM, NAND flash, and NOR flash, which are integral to advanced computing, mobile applications, and data centers.
The company’s shares have surged this year on strong demand for high-bandwidth memory. Micron is the supplier of these chips, alongside Samsung Electronics (OTC: SSNLF) And SK Hynix (OTC:HXSCL). With this in mind, Baird analysts recently raised their rating on Micron stock.
The brokerage cited significant growth opportunities for the company amid growing demand for AI applications. The company changed its rating from neutral to outperform. He anticipates substantial upside potential for the largest U.S. memory chip maker.
This upgrade comes after Baird analysts studied the semiconductor industry and identified positive trends in the dynamic random access memory (DRAM) market that could benefit Micron. According to Baird, recent checks within the canal have revealed a memory outlook that could be favorable over the next 12 to 18 months.
In addition, Morgan Stanley (NYSE:M.S.) recognized Micron’s strong performance and market position. He upgraded his rating from “underweight” to “equal” and significantly increased his price target from $98 to $130, an increase of more than 32%.
Baird’s report highlights that DRAM prices are exceeding expectations, which could limit supply growth industry-wide. They expect growth to slow to low single digits quarter-over-quarter in the second half of 2024.
This slowdown is partly due to capacity changes to high-bandwidth memory (HBM). It is expected to enter a new supercycle that could significantly improve Micron’s gross margins. The investment firm highlighted Micron’s production of HBM3E, the latest generation of high-bandwidth memory. It has the potential to achieve a gross margin of over 60%.
Super microcomputer (SMCI)
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Super Micro Computer Inc. (NASDAQ:SMCI), known as Supermicro, is a global leader in high-performance, high-efficiency server technology and innovation. The company provides advanced server solutions, storage systems and cloud computing technologies.
Wall Street analysts recently highlighted SMCI as one of the top chip stocks to buy, describing the stock as the “Switzerland of AI» following the company’s announcement of another set of strong quarterly results. Rosenblatt analysts, known for their expertise on chip stocks, pointed out that the company AI Dynamics is “a sweet spot for enterprise building block architecture, green computing, rapid broad platform deployment, and much-needed liquid cooling capabilities.”
Likewise, analysts at Loop Capital reiterated their Buy rating on Super Micro Computer shares, maintaining a price target of $1,500. The company anchors its positive position on the stock in the well-positioned sector of Super Micro AI dynamic, driven by the company’s modular architecture.
As of the date of publication, Shane Neagle did not hold (directly or indirectly) any positions in any securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com’s publishing guidelines.
Shane Neagle is fascinated by how technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.
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