Let’s address the elephant in the room: When it comes to artificial intelligence (AI), no one’s going to forget Nvidia (NASDAQ: NVDA). I know I certainly won’t. The company is the standard bearer for the accelerating adoption of AI thanks to its gold standard AI chips and has thus far been the one undisputed beneficiary of the AI revolution. The stock price has gained more than 200% over the past year alone, led by triple-digit revenue and profit growth in each of the preceding four quarters — which is memorable, to say the least.
That said, some investors are already looking to the next wave of AI adoption as the potential windfall expands beyond Nvidia, as it no doubt will. In fact, analysts are particularly bullish on two semiconductor stocks that provide compelling alternatives for investors looking to expand their exposure beyond Nvidia.
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Super semiconductor buy No. 1: Arm Holdings
While Arm Holdings (NASDAQ: ARM) is best known for providing the central processing units (CPUs) that underpin 99% of the world’s smartphones, the company’s portfolio is much more expansive. Its semiconductors are also staples in personal computers, tablets, smartwatches, networking equipment, and data centers.
The accelerating adoption of AI represents the next big opportunity for both Arm and investors, as many of the world’s high-end AI processors incorporate Arm’s latest technology. Nvidia’s GH200 Grace Hopper Superchip, which integrates accelerated CPU and graphics processing unit (GPU) technology to better handle the rigors of AI processing, uses 144 of Arm’s version 9 (V9) CPU cores, while Microsoft‘s data-center chips use more than 100. Furthermore, Arm’s customer list includes other well-known players in the AI space, including Advanced Micro Devices and Alphabet‘s Google, among others.
For its fiscal 2024 fourth quarter (ended March 31), Arm delivered record results. Revenue jumped 47% year over year to $928 million, driven by licensing revenue for its AI chips, while its net income of $224 million jumped 74-fold. Evidence suggests its growth…
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