The influence of artificial intelligence (AI) extends across all economic sectors, creating numerous opportunities for investors to capitalize on. Notably, the latest financial reports indicate that leading semiconductor firms remain ideally suited to generate impressive long-term returns for their investors.
Based on predictions by MarketsandMarkets, the market for AI chips is projected to expand at a yearly pace of approximately 24%, reaching an impressive $311 billion by 2029. If you’re considering investing $3,000 today, I recommend looking into these two chip stocks as potential long-term investments:
1. [Stock name 1]
2. [Stock name 2]
1. Advanced Micro Devices
I find myself in a landscape where Advanced Micro Devices (AMD) has become a prominent player, its chips extensively utilized within the consumer PC market. Particularly noteworthy are their Ryzen processors, which have managed to carve out a substantial portion of the market previously dominated by Intel. Interestingly, AMD is one of just two key manufacturers, alongside Nvidia, that supply general-purpose graphics processing units (GPUs), these being indispensable for artificial intelligence tasks.
Despite Nvidia dominating the GPU market, it won’t capture 100%, offering a significant chance for the second place competitor to thrive. Notably, AMD’s data center division has seen impressive growth, with revenue from this sector increasing by 57% year-on-year during the first quarter.
AMD is providing affordable options in the chip industry, while Oracle’s cloud business is expanding significantly. Currently, Oracle, a key partner of AMD, offers up to 131,072 AMD Instinct MI355X GPUs for AI purposes within its cloud infrastructure. Next year, AMD will launch the MI400 series, which promises enhanced performance for AI training and inference tasks.
With an increasing proportion of AMD’s overall income coming from data center sales, these transactions are boosting profit margins. This margin growth led to a 55% year-on-year rise in adjusted earnings during the last quarter. Due to the vast potential of the AI chip market, estimated by AMD to be worth $500 billion in the long term, investors may be underestimating the future profits that AMD stands to gain.
The current stock valuation, based on projected 2025 earnings, has a high forward price-to-earnings (P/E) ratio of 38. However, this ratio decreases to 25 when considering 2026 estimates. Given AMD’s expected growth in its data center business and expanding margins, the stock could potentially provide substantial returns over the coming years and beyond.
2. Broadcom
Moving beyond the escalating need for all-purpose chips provided by AMD, there’s a rising interest in chips tailored for specific duties. Broadcom (AVGO) stands out as an excellent stock choice for capitalizing on the increasing demand for custom chip solutions.
For several years, Broadcom has consistently excelled as a leading semiconductor firm, providing essential components across numerous industries, such as Apple’s iPhone. However, the interest in Broadcom’s specialized application-integrated circuits (ASICs) designed for Artificial Intelligence is experiencing unprecedented surge.
1) Last quarter, the company experienced a 46% increase in revenue from its AI chips compared to the same period the previous year. As the need for custom Application-Specific Integrated Circuits (ASICs) expands, so does the demand for networking devices capable of handling quicker data transmission. This is crucial for achieving superior performance in advanced Artificial Intelligence applications.
Broadcom’s latest Tomahawk 6 Ethernet switch boasts a data capacity sufficient for approximately 100,000 AI chips to collaborate in training the cutting-edge AI models of the future. In the previous quarter alone, the company’s networking division experienced a remarkable 170% increase in revenue, accounting for nearly 40% of its total income derived from artificial intelligence technologies.
Over the long term, management anticipates that demand for their custom AI chips will surpass sales of their networking products. This presents a significant opportunity, as demonstrated by Broadcom’s success. They foresee consistent growth in AI until fiscal 2026, which could potentially lead to new record highs for the company’s stock.
Broadcom consistently achieves significant profit margins, suggesting a promising earnings outlook for the upcoming year due to favorable demand trends. Despite trading at 41 times this year’s projected earnings per share (EPS), the multiple decreases to 33 when considering next year’s EPS estimate. Although these multiples are not low, Broadcom’s investment in artificial intelligence (AI) technology indicates potential for significant growth among leading chipmakers in the coming years. This growth should contribute to impressive returns for investors.
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2025-07-19 14:37