Generative artificial intelligence (AI) technology is expected to positively impact multiple industries in the long run, creating a massive annual revenue opportunity worth $1.3 trillion in 2032, according to Bloomberg Intelligence.
Nvidia has been the go-to stock for investors looking to capitalize on this lucrative market. Shares of the company have jumped 205% in the past year as the solid demand for its graphics cards has led to a terrific increase in its revenue and earnings. That’s not surprising as Nvidia’s graphics processing units (GPUs) form the basic building blocks for training AI applications because of their immense computing power.
As it turns out, the demand for Nvidia’s graphics cards is so strong that customers are reportedly waiting for as long as a year to get their hands on the company’s hardware. Not surprisingly, Nvidia is expected to deliver another year of terrific growth and its stock could keep rising thanks to the company’s dominant share of the fast-growing AI chip market.
However, certain investors may think that they have missed the Nvidia gravy train because of the expensive valuation it trades at. The company’s price-to-sales ratio of 37 and the trailing earnings multiple of 87 are not in value territory. However, investors can buy chipmaker Skyworks Solutions (NASDAQ: SWKS), which is known for supplying chips for Apple‘s iPhones, at a much cheaper valuation.
Let’s see how AI could supercharge Skyworks stock.
Skyworks Solutions is sitting on a red-hot AI opportunity
Skyworks Solutions sells radio frequency (RF) semiconductors that are deployed in multiple markets ranging from automotive to aerospace to defense, but smartphones are its bread and butter. Apple is Skyworks’ biggest customer as the iPhone maker produced 66% of its total revenue in the previous fiscal year.
Too much reliance on a single customer isn’t a good thing, which is evident from the tepid top- and bottom-line performance Skyworks delivered in fiscal 2023 (ended Sept. 29, 2023). Apple’s smartphone shipments increased just 3.7% in 2023 in a tough smartphone market,…
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