My 3 Favorite AI Stocks to Buy on the Continued Chip Sell-Off
Three semiconductor stocks, Nvidia, Advanced Micro Devices, and Broadcom, are favored by analysts for their growth opportunities in the AI infrastructure space.
Intelligence analysis by Llama
The stocks have come under pressure due to fears of a slowdown in data center build-out, but analysts believe this is a typical market breather after a nice run. Nvidia, AMD, and Broadcom are well-positioned to continue dominating the market for AI model training and inference.
Imagine you have a super powerful computer that can do lots of things at the same time. This is what AI is all about. There are three special companies, Nvidia, AMD, and Broadcom, that make these powerful computers. They are like the LEGO blocks that help build the AI world. These companies are very good at making these blocks and are going to keep growing because people will always need more powerful computers to do more things with AI.
Analysis
A $60B Vote of Confidence
Nvidia's stock has pulled back, taking its valuation down to a forward price-to-earnings ratio (P/E) of 16 times analysts' estimates for its fiscal 2028. This makes it one of the best bargains in the chip space. Given the moat its CUDA software platform has established, the company is set to continue dominating the market for AI model training, as most foundational AI code was written on CUDA and optimized for its graphics processing units (GPUs).
Why Cursor?
Advanced Micro Devices is currently riding two of the hottest trends in AI: inference and agentic AI. The company's chip offerings make it much better positioned to take a larger slice of the AI inference pie, and it already has large GPU deals in place with OpenAI and Meta Platforms. Inference is much more about fast memory access than raw compute power, and this is where AMD has focused its efforts. Its chiplet design allows its GPUs to be packaged with more memory, while its recent acquisition of memory optimization platform MEXT will allow it to virtually expand memory capacity without sacrificing performance, helping customers reduce costs.
The Road Ahead
Broadcom has been one of the biggest beneficiaries of the trend among hyperscalers to deploy custom AI accelerators to help save costs. It helped Alphabet develop its Tensor Processing Units (TPUs), and with the search giant set to spend up to $190 billion on AI infrastructure this year, Broadcom is set to see rapid growth. Adding to that, Alphabet has agreed to sell Anthropic $21 billion worth of TPUs. The success of TPUs led other hyperscalers to turn to Broadcom for help in developing custom AI chips. It expects this to grow into a more than $100 billion business in its fiscal 2027, while Citigroup has projected that Broadcom's AI revenue could rise to $180 billion in its fiscal 2028.
Key points
- Nvidia's stock has pulled back, making it a good buy at its discounted valuation.
- Advanced Micro Devices is well-positioned to take a larger slice of the AI inference pie.
- Broadcom's AI revenue could rise to $180 billion in its fiscal 2028.
- The three companies are expected to see huge revenue increases if the trend of AI growth continues.
- However, if the trend of AI growth slows down, the three companies could see a significant decline in revenue.
If the trend of AI growth continues, these three companies could see huge revenue increases. Nvidia's stock could reach $300 by 2028, AMD's stock could reach $600, and Broadcom's stock could reach $500.
However, if the trend of AI growth slows down, these three companies could see a significant decline in revenue. Nvidia's stock could drop to $150, AMD's stock could drop to $200, and Broadcom's stock could drop to $200.
