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Semiconductors: The Lifeblood of the AI Revolution
As is often the case in the 2000s, semiconductors have made their way to the top of the yearly winner scoreboard during a bull market (the Vaneck Semiconductor ETF ((SMH - Free Report) ), a proxy for semiconductors, is up a scorching 65% year-to-date). However, this cycle, semi-stocks are being driven by a substantial technological advance – the AI Revolution.
Semiconductors serve as the lifeblood of the AI industry because they are the fundamental building blocks of computer chips, powering the processing units essential for AI computations. AI applications, like machine learning and deep learning, rely heavily on complex mathematical calculations and data processing. Semis enable the rapid and efficient execution of these tasks by facilitating the flow of electrical signals and managing the transfer of information within AI systems. As AI technologies advance and demand for more powerful and energy-efficient processors grows, semiconductor technology will play a pivotal role in shaping the capabilities and performance of AI applications such as ChatGPT. However, with the already robust YTD gains, is it too late to jump aboard semiconductor stocks? Below are five reasons there may be more “meat on the bone”:
Insiders Are Extremely Bullishon the Future
Advanced Micro Devices ((AMD - Free Report) ) is off to a hot start this month and is already up double digits. What’s behind the move? In a recent television interview, AMD CEO Lisa Su proclaimed, “We’re still at the very, very early innings of AI.” In a tweet from Sunday, investor Jonah Lupton illustrated just how bullish Su has become:
Image Source: Jonah Lupton via X.com
EPS Estimates are Robust, to Say the Least
While AMD appears to be gaining momentum in the AI space, the undisputed leader in AI chips remains Nvidia ((NVDA - Free Report) ) – by a long shot. Thus, investors should attribute the most weight to Nvidia’s earnings estimates. Zacks Consensus Estimates suggest that, in Q1 of 2024, NVDA’s EPS will four-bag. For full-year 2024, analysts expect growth of 267%, year-over-year. Earnings expansion of this magnitude is unprecedented for a stock of NVDA’s size.
Image Source: Zacks Investment Research
Bullish Price Action & Relative Strength
Want to know the easiest way to find the next double? Identify which stocks doubled the year prior. The momentum in semiconductor stocks is undeniable. Even Intel ((INTC - Free Report) ), a legacy player and slower grower, is exhibiting scorching-hot price action and is up more than three times that of the S&P 500 Index. Remember that the trend is your friend.
Image Source: Zacks Investment Research
Global Demand + US Arms Race – us leader / US race in the beginning innings google
Currently, the U.S. is the faraway leader in AI. However, as global economy powerhouses such as China, India, and the UAE play catch-up, demand should soar. Meanwhile, stateside, the AI race is in the early innings. Just last week, Alphabet ((GOOGL - Free Report) ) launched “Gemini,” its most powerful AI offering yet.
Dry Powder: Money Market Funds are Full
Total money market fund assets increased by $61.65 billion to $5.90 trillion for the week ending December 6th. In other words, though stocks have been rallying, the unprecedented $5.90 trillion on the sidelines suggests that most investors have not participated in the gains, and there is still a ton of money on the sidelines to keep the bull flame lit. Investors who have missed the rally in semis thus far are likely to pile in as they realize the potential growth that the AI revolution presents.
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Semiconductor Stocks: Meat Left on the Bone?
Semiconductors: The Lifeblood of the AI Revolution
As is often the case in the 2000s, semiconductors have made their way to the top of the yearly winner scoreboard during a bull market (the Vaneck Semiconductor ETF ((SMH - Free Report) ), a proxy for semiconductors, is up a scorching 65% year-to-date). However, this cycle, semi-stocks are being driven by a substantial technological advance – the AI Revolution.
Semiconductors serve as the lifeblood of the AI industry because they are the fundamental building blocks of computer chips, powering the processing units essential for AI computations. AI applications, like machine learning and deep learning, rely heavily on complex mathematical calculations and data processing. Semis enable the rapid and efficient execution of these tasks by facilitating the flow of electrical signals and managing the transfer of information within AI systems. As AI technologies advance and demand for more powerful and energy-efficient processors grows, semiconductor technology will play a pivotal role in shaping the capabilities and performance of AI applications such as ChatGPT. However, with the already robust YTD gains, is it too late to jump aboard semiconductor stocks? Below are five reasons there may be more “meat on the bone”:
Insiders Are Extremely Bullish on the Future
Advanced Micro Devices ((AMD - Free Report) ) is off to a hot start this month and is already up double digits. What’s behind the move? In a recent television interview, AMD CEO Lisa Su proclaimed, “We’re still at the very, very early innings of AI.” In a tweet from Sunday, investor Jonah Lupton illustrated just how bullish Su has become:
Image Source: Jonah Lupton via X.com
EPS Estimates are Robust, to Say the Least
While AMD appears to be gaining momentum in the AI space, the undisputed leader in AI chips remains Nvidia ((NVDA - Free Report) ) – by a long shot. Thus, investors should attribute the most weight to Nvidia’s earnings estimates. Zacks Consensus Estimates suggest that, in Q1 of 2024, NVDA’s EPS will four-bag. For full-year 2024, analysts expect growth of 267%, year-over-year. Earnings expansion of this magnitude is unprecedented for a stock of NVDA’s size.
Image Source: Zacks Investment Research
Bullish Price Action & Relative Strength
Want to know the easiest way to find the next double? Identify which stocks doubled the year prior. The momentum in semiconductor stocks is undeniable. Even Intel ((INTC - Free Report) ), a legacy player and slower grower, is exhibiting scorching-hot price action and is up more than three times that of the S&P 500 Index. Remember that the trend is your friend.
Image Source: Zacks Investment Research
Global Demand + US Arms Race – us leader / US race in the beginning innings google
Currently, the U.S. is the faraway leader in AI. However, as global economy powerhouses such as China, India, and the UAE play catch-up, demand should soar. Meanwhile, stateside, the AI race is in the early innings. Just last week, Alphabet ((GOOGL - Free Report) ) launched “Gemini,” its most powerful AI offering yet.
Dry Powder: Money Market Funds are Full
Total money market fund assets increased by $61.65 billion to $5.90 trillion for the week ending December 6th. In other words, though stocks have been rallying, the unprecedented $5.90 trillion on the sidelines suggests that most investors have not participated in the gains, and there is still a ton of money on the sidelines to keep the bull flame lit. Investors who have missed the rally in semis thus far are likely to pile in as they realize the potential growth that the AI revolution presents.