3 Semi-Conductor Stocks to Watch Right Now for the Artificial Intelligence Revolution

The convergence of Artificial Intelligence (AI) and semiconductor technology is producing some of the most dynamic changes in the technology industry today.

To that end, the Motley Fool's three writers who cover tech and AI stocks brainstormed their top picks among semiconductors where the focus is on artificial intelligence today. They chose internal technology leaderMicron Technology Inc. (Micron) Technology ) (NASDAQ: MU)), Industry LegendsIntel)Nasdaq resonance stock code: INTC) and AI chip design leaderBroadcom ( Broadcom)(NASDAQ resonance stock code: AVGO)The

Read on to find out how these chip giants are benefiting from the rising tide of artificial intelligence.

Intel aims to overtake INVISTA and TSMC in one fell swoop

Billy Duberstein. ( Billy DubersteinEnglish(Terrell): Intel has lagged badly behind other AI companies in recent years and in 2024, with its stock down more than 25% over the year to date, and theNasdaq Resonance IndexThe number of new products has risen by nearly 81 TP3T.

This makes sense in a way - after all, Intel is currently in the midst of a multi-year effort to catch up in terms of its ability to produce 耑 chips.Taiwan Semiconductor ManufacturerThe Company. Success means not only that Intel-designed chips will once again achieve market leadership, but also that Intel will become a successful and profitable third-party foundry.

Achieving process technology leadership and winning new customers is a long and arduous process, but Intel has made good progress over the past year or so, achieving milestone after milestone on its projected timeline of five silicon nodes in four years.

Just last week, Intel announced its new Gaudi 3 chip, a gas pedal that Intel hopes will work with theINVISTA'sGPU competition. In a surprise move, Intel's management claimed that the new Gaudi chip outperforms the current Nvidia H100 on several key metrics, and while Nvidia has already launched its new Blackwell chip later this year, Gaudi is likely to find a small share of the AI market, which is going to be a very large one.

In addition to pure hardware capabilities, Intel is leading a large consortium that aims to form an open source solution for AI programming software, targeting NVIDIA's CUDA software moat, as well as an AI Ethernet network to challenge NVIDIA's Infiniband solution.

Intel has also just separated the financial data for its products and foundry divisions to give investors an idea of the profits Intel could generate without all the foundry capital burdens. Outside of Intel's foundry, its chip products generated operating profit of about $12.4 billion last year. That's not too bad, considering Intel's lagging process technology in recent years and the fact that it doesn't include much Gaudi revenue. It also means that Intel's valuation is not too demanding, with a market capitalization of just $160 billion.

In the last year alone, Intel's OEMs have beenLossesSeven billion dollars. But that's not entirely surprising, considering the huge amount of capital expenditures and depreciation Intel had to make before it could generate revenue.

Will Intel succeed? The company is investing heavily in a new product fromASML Holdings Purchased the first high NA EUV machine. Not only that, Intel has also locked up most of ASML's high-DNA EUV machines this year - an aggressive investment to catch up with TSMC by 2025.

For those looking for AI winners that haven't taken off yet, Intel could be an opportunity to invest in the CounterParty. But it's also riskier and more dependent on solid execution. That said, success over the next few years could still lead to significant upside for the stock - perhaps more so than other stocks that have already risen.

No matter who wins the gas pedal war, Micron is the best bet for AI

Anders Bylund (Micron Technology):Today, every chip design company worth its salt is coming out with powerful AI gas pedal chips. If you can't beat the raw performance of Nvidia's H100 and Blackwell chips, maybe you can offer a more energy-efficient solution, or a cheaper chip, and so on. The demand for AI systems and solutions is enough to create a variety of niches that can be exploited.

Micron Technology is capitalizing on the AI opportunity in a different way.

As a leading supplier of memory hardware, Micron has benefited greatly from the high-performance computing boom driven by artificial intelligence. Every High-Box number crunching machine requires large amounts of fast DRAM memory, and most rely on large arrays of solid state storage devices (SSDs) built around NAND memory chips.

The entire memory industry is on the rise, but Micron is one step ahead.

• Currently, Micron's main competitors, Samsung andSK HynixMicron hasn't yet been able to solve the capacity problem with its latest High Bandwidth Memory (HBM) products. This should make Micron the best choice for situations that require large amounts of high-speed DRAM storage - such as supercomputers that train artificial intelligence engines with gas pedals from Nvidia and its competitors.

• In fact, Nvidia's Blackwell AI gas pedals are equipped with up to 192 gigabytes of Micron HBM per module - in other words, Micron is riding Nvidia's coattails in an incredible way.

Now that Micron investors have seen these growth catalysts arrive, the stock is trading just a bit below its all-time highs. Micron's valuation ratios are also high. If you're looking for a low-priced button trade, then this is not the stock for you.

But if you believe that the memory market is undergoing deep and fundamental changes, and that Micron is in a golden age of technological leadership in the game-changing AI boom, then that's another story. With that in mind, Micron's high valuation is probably just the "new normal," with the potential for further upside in the coming years.

Therefore, you should try to determine your tolerance for market risk and act accordingly. For growth investors with a high risk tolerance, Micron offers a direct investment in the AI boom without having to pick winners in the gas pedal chip wars.

The real heart of the Big Tech AI chip is this top-of-the-line semiconductor stock.

Nicholas Rosolillo. ( Nicholas Rossolillo (Broadcom): It's been a busy week in the AI and semiconductor space.AlphabetReleased aBased on Arm Holdings'New Processors. Google also discussed how its newest Tensor Processing Unit (TPU) trains the Google AI.Meta PlatformsThe company has released its latest custom AI chip to process some of the calculations in its data centers. Even Intel is trying to jump on the bandwagon, debuting its latest Gordy 3 AI chip.

On that note, all of the tech giants that make up the "Magnificent Seven" have at least hinted that they're developing something in the name of competition with NvidiaEast and West The

In reality, these companies are not so much competing with Nvidia as they are looking for a way to save money.

In any case, what few investors realize is that most of these big tech chip designs are not entirely their own work. In fact, they had to design these AI systems using the semiconductor industry itself, and they were able to do so because they were so well-funded.

Currently, the biggest custom AI processor designer is chip giant Broadcom, which is helping Google design custom TPUs and providing heavy design work for Meta and another AI project at an as-yet-unnamed tech giant.

As a result, approximately 35% of Broadcom's 2024 semiconductor sales are expected to come from AI.

Today, the market is focused on how Broadcom will be able to profit from its mega-acquisition of cloud computing software essential VMware. But AI chips could really change the long-term game. With Broadcom's shares trading at 28 times this fiscal year's projected earnings per share, the company's stock actually remains fairly valued over the long term.

Should you invest $1,000 in Intel now?

Before buying Intel stock, consider the following:

Motley Fool Stock AdvisorA team of analysts have just selected what they believe to be the most popular analysts in the world at the moment.-est (superlative suffix)The name of the person is suitable for the investor to purchase10Only ...... and Intel were not among them. The 10 stocks selected will bring in good returns over the next few years.

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*Stock Advisory Rates as of April 8, 2024

Alphabet executive Suzanne Frey is a member of The Motley Fool's Board of Directors. Randi Zuckerberg, former Facebook Market Development Armsmaster and Spokeswoman, and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's Board of Directors. Anders Bylund holds positions at Alphabet, Intel, Micron Technology and Nvidia. Billy Duberstein holds positions at ASML, Alphabet, Broadcom, Meta Platforms, Micron Technology and Taiwan Semiconductor Manufacturing Company. Nicholas Rossolillo has holdings in ASML, Alphabet, Broadcom, Meta Platforms, Micron Technology and Nvidia. The Motley Fool owns and recommends ASML, Alphabet, Meta Platforms, Nvidia and Taiwan Semiconductor Manufacturing Company. The Motley Fool recommends Broadcom and Intel, and also recommends the following options: long Intel January 2023 $57.50 calls, long Intel January 2025 $45 calls, and short Intel May 2024 $47 calls. The Motley Fool has a disclosure policy.

3 Semi-Conductor Stocks to Watch Right Now in the Artificial Intelligence Revolution was originally published by The Motley Fool.