Artificial intelligence (AI) is changing the world at an incredible pace, and its earth-shaking impact is just beginning. The rapid evolution of this new category of software, which is poised to impact nearly every industry imaginable, is made possible by advanced semiconductors.
Most notably, the rise of AI has led to incredible stock price increases. Nvidia — Lead designer of graphics processing units (GPUs) used to run AI software. However, some promising companies in the AI semiconductor space are trading at deep discounts compared to historical highs.
With that in mind, see why two Fool.com contributors believe investing in these beaten-down chip stocks could help you reap big profits from the rise of AI. Let's.
Intel is taking smart turnaround measures
Keith Noonan: no mistake – intel (NASDAQ:INTC) Stock prices have been bad this year. The semiconductor giant's stock price has fallen about 40% through trading in 2024 and is now down 60% from its all-time high.
Unfortunately, Intel is facing strong headwinds in the near term, and the market is reassessing the company's turnaround prospects. Indeed, while Intel's core business units posted solid results in the first quarter, weak performance in each business and the company's growth bets over the past decade weighed on results. First-quarter sales still rose about 9% year-over-year to $12.7 billion, thanks in large part to easy comparisons to last year's terrible quarter, but the recent earnings report Afterwards, stock prices plummeted.
Additionally, the company faces geopolitical headwinds. Intel's revenue outlook is facing some pressure after China banned the use of Intel's processors in computers for government purposes. Recently, news broke that Intel has lost an export license that allows it to sell processors to Huawei, a major Chinese technology company. On the other hand, Intel may actually stand to benefit in the long term from rising tensions between the United States and China.
Unlike most semiconductor companies, Intel actually does the design. and manufacture Large portion of proprietary chips. Chip manufacturing is so resource-intensive that most chip companies choose to simply design their own semiconductors and contract manufacturing services with third-party providers.
When it comes to manufacturing high-performance chips used in AI and accelerated computing applications; taiwan semiconductor manufacturing remains the clear leader in this space, with a reported market share of around 90%. There are signs that China is moving to tighten its grip on Taiwan within the next decade, and TSMC's vital importance in the semiconductor supply chain poses significant economic and national security concerns to the United States and other Western countries. poses a threat.
In response, Intel has made manufacturing services for external customers a bigger part of its business, and is already receiving heavy subsidies from countries focused on increasing domestic chip production capacity. Intel's turnaround and emergence as a third-party factory is still in its early stages, but the long-term rewards for investors who support the stock at this point in its disrepair could be huge.
AI stocks ready for a rebound
Jeremy Bowman: Arm Holdings (NASDAQ:ARM) It's only been public for less than eight months, but the stock has seen significant fluctuations in that time.
The semiconductor stock went public last September at $51 a share and soared to $164 after reporting third-quarter earnings in February. Since then, the stock has tumbled along with the broader decline in AI stocks, and is now down 27% from its all-time high.
However, Arm looks likely to outperform in the short term and rise further in the long term.
First, the company has a close relationship with Nvidia, licensing its chips' CPU architectures, including the new Blackwell platform. Nvidia has not yet released its earnings for the current quarter, but all signs point to another strong quarter for the AI chip leader.
companies like tesla and Amazon Each company is emphasizing its relationship with Nvidia and touting its ever-growing fleet of GPUs, showing how in-demand Nvidia's products are. Arm also benefits from a long history of power-efficient chip design. This chip design is favored in AI because models like ChatGPT require a lot of power to run.
Additionally, demand for AI products remains strong, even though investors have been selling off AI stocks in recent weeks. super microcomputer just reported a 200% year-over-year increase in fiscal third-quarter sales, which bodes well for Arm's demand outlook.
While Arm won't have the spectacular growth potential of Supermicro as it moves into businesses outside of AI, its power-efficient architecture, close relationship with Nvidia, and licensing business model, as well as its A competitive advantage can be expected. We help companies recover losses and achieve superior long-term performance.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Jeremy Bowman has a position at Amazon. Keith Noonan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Intel and recommends options for long January 2025 $45 calls on Intel and his short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
“The Bull Market Has Arrived: Two Artificial Intelligence Stocks Drop 27% and 60% and You Can Buy Now” was originally published by The Motley Fool
