In the computing world, Computex Taipei is the equivalent of the Detroit Auto Show, an annual gathering of industry bigwigs and journalists, venture capital, and the interested public, to look at where computing is going and how it will get there. The annual expo is held in the capital of Taiwan, the center of the world’s semiconductor chip manufacturing.
This month saw the biggest names in chipmaking gather together. As with all trade shows, the firms involved showcased their own products, discussed the latest technological developments, and pushed for answers to the global issues that press on the tech sector – geopolitical turmoil, constrained supply and inventory backlogs, and the emergence of new technologies.
One key point of discussion was how to best prepare the tech field to fully harness the potential of new AI systems, a point that put two companies, Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), directly in the spotlight.
Looking at the confab and the topics, Cowen’s Matt Ramsay, a 5-star analyst rated in the top 1% of the Street’s stock pros, chimes in on both chip giants. Ramsay notes that Nvidia must be reckoned with as the current market leader in AI processors – but that AMD cannot be ignored, as it is the leading challenger to that top role.
We’ve used the TipRanks platform to look up the broader Wall Street take on Ramsay’s leading tech stock picks – not surprisingly, each gets a Strong Buy consensus rating. Let’s take a closer look.
Nvidia
First up is Nvidia, currently the clear leader in the world’s semiconductor chip industry. Nvidia is best known as the original developer of the graphics processor unit, the high-capacity processing chips originally designed for high-end game displays – but that has proven adaptable to professional graphic design use, data center server stacks, and now AI applications.
Nvidia’s leading role in GPU technology, research, and development, and its high demand from a wide range of customers, has pushed the stock sky-high in the last two years. Over the past 12 months, the stock has gained ~200%.
Along with the impressive stock gains, Nvidia has also seen a massive spike in its market cap valuation. About a year ago, the company passed $1 trillion in valuation, and in February of this year, it passed $2 trillion. Today, Nvidia has soared past the $3 trillion milestone, securing its position as the second-largest company traded on Wall Street.
In a move intended to maintain its leading position, Nvidia is starting to shift its focus, from GPU chips more towards accelerated computing. The proliferation of AI, especially generative AI, and the consequent need for high performance computing, is putting a premium on ever higher chip capacities. To that end, Nvidia last year married its Hopper GPUs to its Grace CPUs, creating the line of Grace/Hopper superchips, specifically designed for giant scale AI and HPC applications. These chip lines are capable of running applications that use terabytes of data, and boast 10x higher performance than earlier processors.
Looking at Nvidia in the wake of the Computex tradeshow, top analyst Ramsay points to the company’s shift into accelerated and high performance computing as the main theme going forward.
“The event left us more confident that NVIDIA remains the leader in accelerated computing (as we recapped in naming NVIDIA our Best Idea for 2024). NVIDIA commands diverse underlying growth vectors, underpinning its transformation from a GPU hardware company to the accelerated computing HW/SW platform provider. We believe the CPU/GPU/DPU combination of Grace/Hopper systems positions the company to sustain strong Datacenter growth in the coming years. While valuation is above core semis, the suite of superior technology, long pedigree of innovation, and extensive growth-oriented investments should allow for strong, sustained, above-peer growth across a widening set of verticals,” Ramsay opined.
Quantifying his stance, Ramsay gives NVDA shares a Buy rating. Yet, his $1,200 price target implies a modest downside of 2%. It will be interesting to see whether the analyst updates his target or changes his rating shortly. (To watch Ramsay’s track record, click here)
Overall, the outlook is in-line with the general Street take. Nvidia has 40 recent Wall Street reviews, breaking down to 37 Buys to just 3 Holds for a Strong Buy consensus rating. The shares are trading for $1,224.40 and have an average target price of $1,205.43, which implies a 1.5% downside. (See NVDA stock forecast)
AMD
Ramsay’s second choice among chip stocks is AMD. While not in the same size league as Nvidia, AMD is still a leading company in the semiconductor chip field, with a respectable market cap of $268.5 billion and annual revenue, based on the last four quarters, of $22.8 billion. These numbers put AMD in sixth place by market cap, and tenth by revenue, when compared to its peers.
So AMD is a contender in the chip industry, and it has gained that position through its successful combination of engineering and development prowess and solid marketing of high-end semiconductor chip products. AMD’s chip lines are known for high-capacity processing and are in demand by data center service providers and generative AI app developers, two of the leading growth segments of the tech sector.
AMD’s customer demand has been driven by its newer products, which are purpose-built to meet the specific needs of high-performance computing systems and generative AI applications. Importantly, AMD has made these products scalable, making them relevant for customers of varying sizes and needs. AMD has seen recent successes with its MI300 chips, as well as its Ryzen series, and is introducing new chipsets such as the EPYC 4004 series. AMD’s chipsets are already being used by major names in the computing world, such as Dell and Lenovo, and in high-performance computing, such as Supermicro.
Turning again to Ramsay, we find that the analyst sees AMD as a potential challenger to Nvidia’s leadership role in the AI field.
“We view AMD’s strong forward roadmap and its progress on building its networking ecosystem as reinforcing our confidence it can serve as the alternative to NVIDIA’s AI leadership (not to mention continuing to gain share in server with leadership general purpose CPUs). Genoa’s performance lead over Sapphire Rapids is significant and set to continue as Turin faces Emerald and Granite Rapids…amplified by an AI Datacenter GPU franchise that could pass the size of AMD’s server franchise within 2 years of first material MI300 sales,” Ramsay stated.
Ramsay goes on to elaborate on this, adding of AMD’s potential, “Against a very large AI compute TAM, we believe AMD is well on the way to cementing its position as the de facto alternative to NVIDIA’s leadership position.”
For the top Cowen analyst, this all adds up to another Buy rating, which he complements with a $200 price target that points toward a 20% upside potential on the one-year horizon.
Overall, AMD’s Strong Buy analyst consensus rating is based on 36 recent Wall Street reviews, which include 30 Buys and 6 Holds. The shares are currently trading at $166.17 and the average price target of $192.88 points toward a 16% one-year upside potential. (See AMD stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
