With semiconductor chip stocks and other names linked to artificial intelligence experiencing a remarkable surge over the last year, investors are constantly looking for the next chip stocks to buy.
In a recent note to clients, analysts at Wolfe Research highlighted four Outperform-rated names in the sector.
Chip stocks continue to outperform
As the demand for artificial intelligence grows and more use cases have become apparent, chip stocks have surged.
Nvidia (NASDAQ:NVDA) has been a standout performer in the industry, with its stock gaining a remarkable 220% over the last 12 months. The company's semiconductor chips are crucial for powering artificial intelligence models and applications, which have seen soaring demand, leading to a substantial increase in sales and profits for the company.
Advanced Micro Devices (NASDAQ:AMD) is another key player in the chip industry, closely competing with Nvidia. AMD has developed a series of microchips specifically for AI models and applications to rival Nvidia's offerings. As a result, its stock has also benefited, climbing 76% over the last year.
Another big winner has been Super Micro Computer (NASDAQ:SMCI), which has experienced a remarkable surge, with its stock leaping 784.5% in the last year. The company sells servers and storage systems for data centers and large enterprises.
Micron (NASDAQ:MU) has been on a strong upward trajectory, with its stock gaining over 118% over the last 12 months. Analysts believe that Micron's high-bandwidth memory (HBM) chip technology positions the company to benefit from the surging demand for AI, potentially increasing its market share.
Wolfe lists 4 chip stocks to buy
In a note covering the semi-cap equipment sector, analysts at Wolfe Research said they are increasingly confident in the long-term outlook.
The firm highlighted Outperform-rated Applied Materials Inc (NASDAQ:AMAT), ASML Holding NV ADR (NASDAQ:ASML) (AS:ASML), Lam Research Corp (NASDAQ:LRCX) and KLA Corporation (NASDAQ:KLAC) as three chip stocks it favors. It has a $250 price target on AMAT, a €930 price target on ASML, a $980 price target for LRCX and a $750 price target on KLAC.
AMAT remains the firm’s favorite long-term SCE stock with ASML also among its favorites.
“AMAT's leading market position in DRAM sets up the company well for CY24/CY25,” wrote the firm. “ASML continues to increase its wallet share of WFE while DRAM makers adopt EUV at 1-alpha/1-beta processes and foundry/IDMs continue to spend on 3/2nm nodes.”
For KLAC, the firm’s model implies a 15% upside to CY25 street revenue numbers which is largely a function of the memory spending rebound.
“As the market continues to utilize increasingly complex packaging techniques (i.e., hybrid bonding), KLAC will continue to benefit to a greater extent at the higher end of the inspection market,” said Wolfe.
Meanwhile, the firm believes LRCX is positioned well for continued HBM ramp and recovery in NAND. “While we are still uncertain of the timing of a recovery in NAND spending, our recent checks suggest that CY25 could see a meaningful uplift in NAND spending driven by a cyclical rebound in PCs and servers with a focus on 300+ layer NAND investments,” they wrote.