Investing in the semiconductor sector has been a hot topic on Wall Street this year, with the VanEck Semiconductor ETF (SMH) surging by 51% in 2024. This growth has been primarily driven by the ongoing artificial intelligence (AI) tailwinds that are fueling the sector. While popular names like Nvidia and Super Micro Computer have seen significant gains, some investors are beginning to have concerns about frothy valuations.
Despite the recent pullbacks in some stocks, many analysts and investors remain optimistic about the industry’s prospects in the second half of the year. The AI theme is expected to continue driving growth, with opportunities in a variety of contrarian plays. CFRA Research analyst Angelo Zino believes that the setup for the industry looks strong for the remainder of the year and into 2025, supported by both AI and cyclical themes gaining momentum.
Nvidia, a leading AI company, continues to attract bullish sentiment from portfolio managers like Ken Mahoney from Mahoney Asset Management. While the stock has rallied significantly this year, Mahoney believes that Nvidia’s strong fundamentals justify its valuation. Other analysts, like John Belton from Gabelli Funds, acknowledge the near-term strength of Nvidia but caution that uncertainties lie ahead as the market evolves.
In addition to Nvidia, other companies like Broadcom are also seeing increased attention from investors due to their exposure to the AI market. The recent stock split and strong earnings from Broadcom have boosted its stock by 48% year-to-date. With significant design contracts in place, Broadcom is poised to benefit from the growing demand for AI applications.
Looking beyond the traditional AI plays, some investors are exploring opportunities in semiconductor equipment makers. Companies like ASML Holding, Applied Materials, and KLA Corp. are well-positioned to benefit from the increased demand for semiconductor fabrication plants to support AI development. Similarly, Synopsys and Cadence Design Systems offer potential for growth as AI sophistication drives the need for more advanced design systems.
As the AI industry continues to expand and demand for greater memory capacity grows, companies like Micron Technology are expected to see tailwinds. Despite a recent pullback in Micron’s stock price, many analysts view this as a buying opportunity, with expectations for market share gains in high-bandwidth memory.
Qualcomm is also a key player in the AI space, particularly in consumer devices like smartphones. As AI features become more prevalent in devices, Qualcomm stands to benefit from this trend. With the potential for AI use cases to expand into vehicles and automotive, the outlook for Qualcomm remains positive.
Overall, the semiconductor sector presents a range of investment opportunities driven by the ongoing AI revolution. While some volatility may be expected in the near-term, the long-term growth potential of this industry is attracting investors looking to capitalize on the AI-driven future. Stay tuned to Extreme Investor Network for expert insights and analysis on the latest trends in the investing world.