There is no denying the fact that artificial intelligence (AI) is the future and it is here to stay. We have already seen AI powering massive growth for tech companies in the last couple of months. With companies going all out with their AI investments, it is time to understand their future potential. Chips lie at the heart of tech companies and they lead growth. Tech companies are out of their tumultuous period and are steadily rising. This means investors should start looking for best semiconductor stocks for investment.
Internet of Things, 5G, or autonomous vehicles, all these segments are dependent on chips and even cloud computing works on chips. If you want to make the most of the growth of data centers and AI, now is the time to invest in chip-manufacturing companies. There’s a good chance we could see a few chip leaders in the industry over the next year.
Smart investors understand that to benefit from today’s trends, it is important to invest in high-growth potential companies. With that in mind, let’s take a look at the three top semiconductor stocks that could skyrocket in the next 12 months.
Top semiconductor stocks: Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is already trading near its all-time high but there is a lot more to come for this tech giant. Already a leader in the semiconductor industry, it is making the most of the AI boom. The recent quarterly results were impressive and the company expects even better quarters this year. NVDA stock is trading at $374 today and it is at a premium right now but there is potential for higher growth. Already up 161% year to date, Nvidia is a leader in the semiconductor space and it is taking big strides in the industry. Several tech companies are the beneficiaries of Nvidia’s success but if you want the gold stock, it is NVDA.
The company had expanded at a rapid pace in the pandemic when gaming took off. But its data center business took the revenue numbers to a new high. This was followed by the AI adoption and now there’s no stopping Nvidia. Many might argue that the stock is already at a high and is not cheap. Yes, it is true but you should not undermine the potential of NVDA stock.
While it might be trading near an all-time high, it will certainly hit a new high in the next 12 months. I’ve said it in the past and I’ll say it again, buy and hold NVDA stock for massive gains. The company expects the sales to reach around $11 billion in the three months ending July and with each quarter, it will report blowout numbers.
Bank of America considers NVDA stock a buy and has a price target of $500. The company virtually controls a large GPU market and it is set to benefit from the AI boom. The bank believes that the tech company has several under appreciated opportunities that can help expand its market share in the near future. There is a bullish sentiment towards the stock and I believe it can generate solid returns in the next 12 months. It is one of the high return semiconductor stocks to grab before it gets too late.
Advanced Micro Devices (AMD)
A big player in the semiconductor industry, Advanced Micro Devices (NASDAQ:AMD) garnered headlines for its AI partnerships. The company is here to gain its fair share of the AI boom. AMD aims to introduce new products that will help gain a larger market share. AMD will soon be launching the MI300 chip which will play a significant role in the AI space. The chip will combine the CPU and GPU cores with fast memory on a single chip package. I believe the demand for this chip will be strong and it will drive revenue for the company. If you are looking for semiconductor stocks to skyrocket, AMD is the one to own.
AMD’s chips are a favorite of several tech giants including Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), Alphabet (NASDAQ:GOOG), and Amazon (NASDAQ:AMZN). They use the chips for cloud computing and with more businesses joining this chipmaker, it will show strong growth. AMD stock is trading at $117 today and is up 84% year to date. The stock was at $64 in Jan and is steadily marching ahead. It has generated over 650% results in the last five years. Compared to the other semiconductor stocks in the industry, AMD looks fairly valued and is a strong buy before it skyrockets.
The company posted solid quarterly results and also raised the guidance. It has a market cap of $204 billion and its chips are one of the best in the industry. The company makes chips for AI applications and as the demand for chips continues to grow, AMD is set to benefit. If the company can manage to achieve the growth it showed over the last decade, it could become one of the biggest winners in the tech industry. BofA has raised the price target of the stock to $135 and Citi has a target of $150.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor (NYSE:TSM) is a popular but highly undervalued semiconductor company. One of the top semiconductor stocks, it holds about 60% of the total market share in chip fabrication and manufactures over 90% of the top semiconductors that are used today. Some of its biggest customers include Apple (NASDAQ:AAPL), Nvidia, and AMD. The company did see a drop in revenue year over year in the first quarter but the EPS rose by 2.1%.
As the demand for chips continues to grow, Taiwan Semiconductor has massive upside potential. It enjoys an operating margin of 45% and the management expects it to remain strong in the long term. TSMC is already enjoying a dominant position in the industry and it could be the biggest beneficiary of the AI boom due to its contracts with tech leaders in the industry. It has a market share that is hard to compete with which makes it one of the high potential semiconductor stocks today.
TSMC stock is trading at $100 today and is up 35% year to date. Like all the other semiconductor stocks, it has been moving upward for the past six months. Its 52-week high is $106 but I believe the stock will hit a new high very soon. It posted strong numbers in the recent quarter and its net income margin was close to 40%. A demand spike could take the numbers higher and I expect even better earnings growth in the coming quarters.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.