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Nvidia's ( NASDAQ:NVDA ) second quarter earnings results knocked the top off the ball, but the market didn't respond as favorably as one might think. Despite a healthy revenue and earnings beat, as well as a guidance raise, the company didn't beat earnings to the degree the market seemingly wanted to see. And that's saying nothing of the reported Department of Justice probe into the company's market dominance in certain areas, including its recent AI-related acquisitions, which Nvidia recently denied having received word of yet.
That whole saga is one we'll have to follow. But on the earnings front (what this article covers), there's plenty of meat to pick apart and dive into. The chip maker reported quarterly revenue which was up 15% sequentially and 122% from the same quarter the year prior, driven by incredible data center revenue growth (up 154% year-over-year). Additionally, earnings per share surged even higher, moving 168% higher on a year-over-year basis.
These numbers should certainly be cheered by the market, and provide a boon to the overall sector. If Nvidia succeeds and continues to grow, one might argue the following stocks should also see impressive appreciation.
Here's what Nvidia's impressive growth profile, as highlighted by its recent earnings report, could mean for these three major chip players moving forward.
Key Points About This Article:
- Nvidia's massive recent earnings beat wasn't enough to propel the stock higher this time, with the stock sinking following the report on a number of key issues.
- That said, if Nvidia's underlying growth and fundamentals continue from here, these three chip makers could also be key stocks for investors to watch.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.
Advanced Micro Devices (AMD)
An AMD office building
Advanced Micro Devices ( NASDAQ:AMD ) is among the Nvidia competitors that's seen similar volatility in recent weeks. However, unlike Nvidia, the leader in high-performance computing chips, AMD's price performance has been quite underwhelming this year, with the stock currently down on a year-to-date basis at the time of writing.
That's partly due to the fact that while AMD does have some AI chips in its arsenal, the company's market share pales in comparison to Nvidia. Some experts have highlighted Advanced Micro Devices as a key competitor in the chip industry, particularly in the future of AI chip development. And the company's upcoming slate of AI chips could provide that secondary option many investors are looking for, meaning AMD stock has been viewed by some as a call option on the insanity which is the AI race continuing.
The thing is, AMD's valuation does price in a considerable amount of growth moving forward, and its AI chip rollout has been slower than expected. But with impressive results posted in the second quarter, including 115% growth in data center revenue, the company's shift towards AI as its primary business could propel much more upside from here. Additionally, the company's $4.9 billion ZT Systems acquisition further strengthens its AI capabilities.
Despite recent stock price volatility, AMD's ongoing innovation positions it for strong future growth. With growing cash reserves and diversified opportunities, AMD is poised for continued growth in AI and related industries.
Taiwan Semiconductor (TSM)
TSMC office building
Taiwan Semiconductor ( NASDAQ:TSM ) is a leading chip foundry with over 60% of the global market . Providing foundry services to a wide range of chip makers (including Nvidia), TSMC is often viewed as a picks-and-shovels play on the AI picks-and-shovels play that is Nvidia.
Offering broad exposure to semiconductor growth trends with a less volatile stock price, I've viewed TSM as perhaps the best way to play this sector from a broad perspective, outside of owning an ETF. As the company continues to expand its advanced chipmaking capabilities, I think Taiwan Semi is well-positioned to ride the secular tailwinds in this space much higher.
Over the past quarter, the company posted strong revenue growth of 32%, with analysts estimating this company should see continued strong growth moving forward. I'm of the view that so long as the foundry market remains strong, TSMC's pole position in this high-growth sector should bode well for long-term investors looking to build a position.
TSM stock isn't cheap, trading around 10-times sales at the time of writing. However, as the chip market continues to expand, this company's total addressable market and overall revenue share should grow very fast as well. As far as quality is concerned, TSMC remains a top pick of mine in the chip sector right now.
ASML Holdings (ASML)
ASML office building
ASML Holdings ( NASDAQ:ASML ) is another "meta" play on the chip sector. The company provides key semiconductor production equipment to a range of foundries and direct producers in this space. Producing essential lithography systems for microchip manufacturing, the company's latest EUV scanner enables the creation of some of the smallest chips possible today. These chips are becoming increasingly crucial for AI and other key technologies. ASML continues to report strong growth driven by AI demand and improving inventory levels, with impressive prospects in certain areas of the chip market, such as within the electrification and AI-adjacent sectors.
The company reported mixed Q2 2024 results . Net service and field option sales rose 14.3% year-over-year to €1.48 billion, but total net sales dropped 9.6% to €6.24 billion. These results came on the sales of 89 new and 11 used lithography systems, marking significant increases from the prior quarter. Net bookings surged to 5,567, up from 3,611. Additionally, ASML and Imec also launched the High NA EUV lithography lab, enhancing access to cutting-edge technology.
ASML Holdings has improved lithography tool utilization for both logic and memory customers and is set to benefit from its investments in technology, particularly EUV infrastructure. With new fab orders and expectations for a stronger second half of 2024 and a 2025 upturn, ASML is enhancing capacity to meet growing demand with support from its supply-chain partners.
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