The AI rocket ship has turned Nvidia into an investing gold mine.
A $1,000 investment in 2015 would be worth $349,960 today, according to Yahoo Finance data. The same $1,000 in Advanced Micro Devices (AMD) would've yielded $96,190, compared to $3,422 from the S&P 500 (^GSPC).
However, $1,000 into the then-industry leader Intel (INTC) would become only $1,145 as the once-dominant chipmaker misses out on the AI train.
If you have $1,000 to invest in chip stocks today, it's no surprise that the pick for many analysts is still Nvidia.
Goldman Sachs analyst James Schneider noted that despite growing talk of “peak concerns,” the company has further upside due to its product leadership, diversified customer base, and an “attractive valuation” relative to growth prospects. The firm reiterated its Buy rating and $185 price target.
Broadcom (AVGO) is another top pick. The California-based chipmaker has become a leader in custom silicon for hyperscalers like Google (GOOG) and Meta (META). Schneider said Broadcom will continue generating steady, growing profitability in its infrastructure business and estimated AI will account for more than 40% of the company's revenue by 2026.
Wedbush analyst Matt Bryson told Yahoo Finance that Nvidia and Broadcom, whose stock has jumped nearly 3,500% in the past 10 years, have the clearest path to continued growth.
“Nvidia is going to remain the share leader in AI for the next three to five years partly due to the moat they've created,” he said. “I think Broadcom is going to remain the key provider in basics.”
AMD has also gained market share and positioned itself as a rival in GPUs. Despite strong execution in traditional computing, AMD's stock upside is likely “capped” given its more limited share in AI, Schneider wrote in a recent note.
“I would argue they [AMD] have the greatest growth potential, but also potentially the greatest risk to their growth potential,” Bryson said.
He noted that AMD's solution is the closest to Nvidia's, but the company would need to grow its AI market share to high single digits to deliver meaningful stock gains.
Meanwhile, some smaller players are hovering under the radar.
Silicon Motion (SIMO) has quietly emerged as a potential AI-era beneficiary. The company designs and manufactures controllers used in solid-state drives (SSDs), smartphones, and automotive storage.
According to Bryson, Silicon Motion has historically traded like a memory company, with lower valuations compared to design-focused peers like Nvidia. But as it expands into enterprise storage controllers, its growth profile could improve, possibly leading to higher valuation multiples.
