There’s an arms race going on right now in the semiconductor market. As AI fever grips the country, demand for high-powered chips is soaring, and everyone wants a piece of the action. After crashing in 2022, the PHLX Semiconductor Sector index has skyrocketed by 122%, nearly doubling the performance of the tech-focused Nasdaq Composite. Two chip manufacturers in particular are on pace to reap massive benefits from the AI frenzy.
Arm
It’s not necessarily a household name, but Arm Holdings currently powers the world’s leading cloud providers, including Microsoft, Amazon, and Alphabet’s Google. Arm-based chips also power nearly all cell phones globally. Analysts believe that it could be poised for a similar takeover of the PC market as next-generation AI PCs replace Intel x86-based models.
Arm’s unique business model is based on licensing its designs and collecting royalty revenue. This means high growth potential and a strong likelihood of high long-term returns. It’s currently trading at a premium, with a forward price-to-earnings ratio of about 100. But Arm is rapidly becoming the market leader for professional AI data centers, which may well justify its valuation. If you’re looking for an AI stock to buy and hold for a while, this could be a great choice.
Micron
Micron is a market leader in both dynamic random-access memory (DRAM) and non-volatile memory (NAND). As memory-hungry AI data centers open rapidly around the world, demand for Micron’s high-performance memory modules is exploding. A slump in memory prices hurt Micron financially in 2023, but the company has bounced back thanks to a current shortage in high-performance memory chips.
The cyclical nature of the industry does worry some investors, but Micron has a secondary weapon up its sleeve: the consumer PC market. Between the two, consensus estimates show earnings per share topping out at just over $1 this year before skyrocketing to more than $9 in 2025. This potentially skyrocketing growth means that now could be the right time to invest.
Neither Lisa Fritscher nor Stocks.News have positions in any of these companies.
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Contributing Writer
Lisa Fritscher has been a contributing writer for App.Stock.News since 2024. Lisa has been interested in investing since winning The Stock Market Game in high school. In more than a decade as a professional writer, she has written consumer-facing financial information and advice articles for a wide variety of publications. She has a Bachelor of Arts in Psychology from the University of South Flori...