The AI revolution is modeled after Nvidia (NASDAQ: NVDA). The corporation is valued $2.2 trillion, with $1.5 trillion added in the last year. Nvidia's data center chips for AI applications are driving its recent success.
Nvidia dominates investor attention, but there are other semiconductor opportunities. The Wall Street Journal reports that analysts rate AMD and Axcelis Technologies (NASDAQ: ACLS) overweight (bullish).
1. AMD is challenging Nvidia in data centers. Sony's PlayStation 5, Microsoft's Xbox Series X, and Tesla's electric vehicle infotainment systems use AMD CPUs. However, investors now focus on data centers. The company has started distributing its latest MI300 data center chips for AI workloads, which compete with Nvidia's H100 GPU. The MI300A is a GPU-CPU accelerated processing unit (APU), while the MI300X is a GPU.
Lawrence Livermore National Laboratory chose the MI300A to power the El Capitan supercomputer, which will be the fastest in the world when it launches this year. Oracle, Microsoft, and Meta Platforms are among major data center operators buying AMD MI300s.
AMD's data center income may rise in the next years due to the MI300. Nvidia will be hard to catch in that market. AMD dominates AI-enabled PCs with 90% market share. Users get faster response times because Ryzen 700 series (Ryzen AI) CPUs handle sophisticated AI tasks on-device instead of sending queries to the data center.
Ryzen AI chips have shipped in millions of Dell, HP, and Asus computers. Ryzen AI processors boosted AMD's Client segment revenue 62% in Q4 2023. This firm is only warming up when the company launches a new processor that is three times faster.
In 2024, AMD's best year yet is expected because to the MI300 series' $3.5 billion revenue contribution in their first full year. It's no surprise that most of The Wall Street Journal's 50 analysts rate AMD stock as a buy.
2. Axcelis Technologies is essential to chip fabrication. GPU maker Axcelis Technologies isn't as well-known as Nvidia or AMD. With only eight analysts covering its stock, The Wall Street Journal considers it ignored. However, most have given it the strongest buy rating, and it trades at an appealing value, which may persuade investors to follow the Street.
Ion implantation equipment from Axcelis is essential to chip production. The electric vehicle industry is a major buyer of silicon carbide power devices, which manage electric power in high-current workloads. Silicon carbide chemistry is more efficient than silicon, resulting in faster charging and higher battery mileage.
Increasing demand from AI-related semiconductor manufacturers is also being prepared for. Last year, the company stated that AI required more memory and storage, which might make DRAM and NAND chips more complicated and expensive to create.
Axcelis' 2023 revenue was a record $1.13 billion, up 22.9%. The kicker is: The corporation has a $1.2 billion order backlog in 2023, so 2024 should be another record year.
The stock has fallen 44% from its all-time high in the previous few months after rising over 400% in the last five years. Based on the company's $7.43 in 2023 profits per share, the stock trades at a 14.6 P/E ratio, which may indicate opportunity. That's 59% lower than the iShares Semiconductor ETF's 35.6 P/E ratio, making Axcelis' stock far cheaper than the semiconductor industry.
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