The largest technology companies in the world spend money every year enormous A lot of money is invested in building data centers, and they fill them with graphics processing chips (GPUs) designed for the development of artificial intelligence (AI).
GPUs are built for parallel processing, meaning they can process large amounts of data and multiple workloads simultaneously, which is essential for training AI models and performing AI inference. Based on recent financial reports:
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Microsoft spent $55.7 billion on capital expenditures (capex) during fiscal year 2024 (ending June 30), most of which went to AI data center infrastructure and chips.
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Amazon spent $30.5 billion on investments in the first half of 2024, mainly related to AI.
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Alphabet has spent $25 billion on AI investments in the first half of 2024.
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Metaplatforms plans to spend between $37 billion and $40 billion on AI investments throughout 2024.
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Oracle spent $6.9 billion on AI investments in fiscal year 2024 (ending May 31).
Microsoft, Amazon, Meta and Oracle have explicitly said they plan to spend equally more money for the coming year. That presents opportunities for the semiconductor industry, so here are five top chip stocks to buy heading into 2025.
1. Nvidia
When it comes to data center GPUs, Nvidia (NASDAQ: NVDA) is the undisputed leader. The H100 GPU set the benchmark for the AI industry last year and the company is now gearing up to deliver a whole new generation of chips based on the Blackwell architecture.
Blackwell-based systems like the GB200 NVL72 can perform AI inference at up to 30 times faster than comparable H100 systems. Additionally, individual GB200 GPUs are expected to sell for between $30,000 and $40,000 each, which is in line with what data center operators originally paid for the H100. In other words, Blackwell paves the way for a substantial improvement in cost efficiency for developers, who normally pay for computing capacity by the minute.
Nvidia CEO Jensen Huang expects Blackwell GPUs to start contributing billions of dollars to the company’s revenue in the final quarter of fiscal 2025 (which runs from November to January), and that shipments will scale up from then on.
Nvidia is on track to generate an estimated $125.5 billion in total revenue in fiscal 2025, up 125% from the previous year. The shares aren’t cheap, but they trade at a reasonable price-to-earnings ratio of 29.1, as measured against the company’s expected earnings per share for fiscal 2026.
Simply put, investors willing to hold Nvidia stock for at least the next eighteen months are likely paying a reasonable price today.
2. Micron technology
Micron technology (NASDAQ:MU) is a leading supplier of memory and storage chips for data centers, personal computers and smartphones. In AI data centers, memory chips complement GPUs by storing data in a ready state so that it can be called upon immediately for training and inference. Because AI needs mountains of data to learn and improve, the demand for more memory capacity is skyrocketing.
Micron’s latest 36 gigabyte (GB) high-bandwidth memory (HBM3E) units for the data center deliver up to 50% more capacity than any competing product, while consuming 20% less energy. It was selected to power Nvidia’s H200 GPU, and possibly the Blackwell GB200 GPUs as well. In fact, Micron is now completely sold out of HBM3E until 2026.
In addition to the data center, every tier-1 manufacturer of Android-based smartphones uses Micron’s LP5X DRAM memory. Many of them have launched AI-enabled devices this year with minimal memory capacity requirements doubling compared to their non-AI predecessors from last year. A similar trend is emerging in personal computing, with most AI-enabled PCs launching with a minimum DRAM capacity of 16 GB, up from 12 GB last year.
Higher memory requirements translate directly into more revenue for Micron. In the recent fourth quarter of 2024 (ended August 29), the company’s revenue rose 93% year over year to $7.7 billion, and it predicts more strength to come.
3. Axcelis Technologies
Axcelis Technologies (NASDAQ:ACLS) is not a semiconductor manufacturer. Instead, it makes ion implantation equipment that is critical to the manufacturing process of central processing units (CPUs), memory chips and power devices that control the flow of electrical energy in high-current applications.
AI data centers have become a new opportunity for electrical equipment manufacturers (and Axcelis equipment) because they consume significant amounts of energy. Some Axcelis customers have begun using trench MOFSET (metal oxide semiconductor field effect transistor) power devices with silicon carbide chemistry, which is more robust and heat efficient than traditional silicon chemistry. Silicon carbide power devices are more implant intensive, which is a direct tailwind for Axcelis’ business.
In addition, Axcelis benefits from the growing demand for high-capacity memory chips in data centers, computers and smartphones. As memory chip makers expand production to meet that demand, they will need more equipment from Axcelis, and the company has already started building inventories in anticipation of a strong 2025.
In fact, Axcelis’ guidance suggests that 2025 could be the strongest year in the company’s history, with a potential record $1.3 billion in revenue.
4. Broadcom
Broadcom (NASDAQ:AVGO) is a multi-faceted AI organization with a presence in semiconductors, equipment, cybersecurity, cloud software and more. Its semiconductor business is currently the focus of investors as several of its products are experiencing significant demand from companies building AI infrastructure.
Broadcom makes AI accelerators (data center chips) for large-scale customers (typically including Microsoft, Amazon and Alphabet). During the recent third quarter of 2024 (ended August 4), the company said revenue was up a whopping three-and-a-half times compared to the same period a year ago. Similarly, the company saw four-fold revenue growth in its Tomahawk 5 and Jericho3-AI Ethernet switches for the data center. These control how quickly data flows from one point to another.
In the third quarter, Broadcom is expected to generate total revenue of $51 billion in fiscal 2024, of which $11 billion can be attributed to AI. However, following the strong results I just highlighted, the company has revised these numbers upward to $51.5 billion and $12 billion respectively.
Broadcom is currently knocking on the door of the exclusive $1 trillion club, where only six US tech giants currently reside.
5. Advanced Micro Devices (AMD)
Advanced micro devices (NASDAQ: AMD) is one of the world’s largest chip suppliers in the consumer electronics industry. The hardware can be found in everything from Sony‘s PlayStation 5 to the infotainment systems in Tesla‘s electric vehicles. However, the company is now trying to compete with Nvidia in the data center segment with its new MI300 GPUs.
The MI300 is designed as an alternative to Nvidia’s H100 and is attracting top customers such as Oracle, Microsoft and Meta Platforms. However, now that Nvidia is set to launch its Blackwell series, AMD is already gearing up to release a faster GPU, the MI350, next year. It will be based on a new architecture called Compute DNA (CDNA) 4, which could deliver 35 times more performance than CDNA 3 chips like the MI300. AMD plans for this architecture to compete directly with Blackwell.
AMD is already the leader in AI chips for the personal computing segment, with an estimated 90% market share. It recently launched the Ryzen AI 300 series for notebooks, which features the fastest neural processing unit (NPU) in the industry. The company says more than 100 platforms will launch with these chips from leading PC manufacturers such as Asus, Acer, HP Inc.and more.
In the second quarter of 2024, AMD will achieve no less than 115% year-on-year growth in data center revenue and 49% in customer segment revenue (where the Ryzen AI chips can be found). But the AI revolution has only just begun. is heating up, so the best may be yet to come.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, HP, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
5 Super Semiconductor Stocks to Buy Heading into 2025 was originally published by The Motley Fool
