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U.S. stocks saw significant volatility in July but ended with a strong rally, with the S&P 500 gaining 2.30% , its largest one-day increase since late 2022. This surge was fueled by reduced recession fears and stabilizing currency and derivatives markets. Stocks opened higher for three consecutive sessions, driven by increased calm in the yen and VIX. U.S. weekly jobless claims were released amid rising recession concerns, though overseas economic data was limited.
July’s jobless claims fell below expectations, signaling a tight labor market and countering recession fears, which led to a positive market reaction. Semiconductor stocks, a key bull market driver, faced a 27% drop from July highs but began to stabilize. The Philadelphia Semiconductor Index (SOX), closely watched for market trends, remains in a short-term pullback amid broader market uncertainty and high stock valuations.
Moreover, semiconductor stocks dipped after a strong start to 2024, as Wall Street adjusted valuations. Nvidia's ( NASDAQ:NVDA ) $3 trillion market cap, driven by its dominant AI GPU market share, has since cooled. Investors should watch emerging players for future growth, like these three below I highly recommend are worth doing some homework on right now.
Key Points About This Article:
- Nvidia has been the clear leader in the tech sector, but its rapid growth and multiple expansion could lead to pullbacks if we see broader economic headwinds form.
- Investors looking to play growth in the chips sector at more reasonable multiples may want to consider the following three stocks instead.
- 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.
ASML Holdings (ASML)
ASML logo on the side of an office building
Known for its world-class machines used in the manufacturing of AI chips, ASML Holdings ( NASDAQ:ASML ) operates a relative monopoly when its comes to extreme ultraviolet lithography technology. The company's tech results in the best chips being produced at 7nm, 5nm, and 3nm nodes. This has led to incredible demand for the company's machinery, essential in the development of next-generation AI chips. The reliance of other tech companies on ASML drives strong demand for the stock, supporting its long-term growth prospects.
By the end of Q1 2024 , ASML had a €38 billion order backlog, exceeding its full-year revenue forecast of €27.5 billion. The company started shipping its $380 million advanced chipmaking machines, and plans to boost production capacity.
Cantor is among the firms covering this stock that has highlighted ASML as a top semiconductor pick. ASML’s Q2 2024 results sparked 18% upside in its stock price, and more could be on the horizon. That's largely due to the fact ASM plans to grow its production capacity 50% next year and by the same margin in 2026. Revised growth estimates for ASML have come in at 13.3%, with the company's impressive compounded annual growth rate (CAGR) expected to exceed 20.3% through fiscal year 2026. Accordingly, it's clear ASML is well-positioned for impressive growth in the coming years.
With customers like TSMC pursuing smaller process nodes for AI workloads, ASML's order volume is expected to rise. Although its performance has been flat in 2024 so far, ASML’s revenue shows there’s more room to grow for the company.
Advanced Micro Devices (AMD)
Image of an AMD Athon II chip
Recently reporting impressive Q2 earnings and impressing the market once again, Nvidia’s rival Advanced Micro Devices ( NASDAQ:AMD ) has seen 49% revenue growth in its pivotal data center business. This growth is largely due to the company's MI300 Series accelerators, which compete with Nvidia’s H100. AMD plans to release its new AI chips every year, including its MI325X, MI350, AND MI400.
Despite significant growth, AMD’s data center revenue of $2.8 billion remains small compared to NVIDIA's $22.6 billion. The company's Ryzen CPUs saw a 49% increase in sales, while gaming revenue dropped 59% due to lower PlayStation and Xbox sales, though Radeon 6000 GPUs experienced year-over-year growth. Additionally, the AI-enabled Ryzen processors , featuring top-tier neural processing units, gained strong traction with customers like HP and Lenovo, with Ryzen AI 300 series notebooks receiving positive reviews.
AMD's Q2 earnings showed strong AI-driven growth, with projected annual growth over the next three to five years coming in at 33%. Despite recent volatility, AMD stock offers value if growth targets are met. With a promising data center expansion and a recent 30% drop, AMD remains an attractive buy for those who believe in the long-term potential of this AI chip maker.
Qualcomm (QCOM)
Qualcomm stadium sign
Emerging as one of the best players in the AI sector now, Qualcomm ( NASDAQ:QCOM ) has been gaining more traction due to its AI-driven PC and mobile tech. Its popular Snapdragon 8 Gen 3 Mobile Platform enables AI tasks on smartphones, including language translation and imaging. Moreover, its chips are known to power Microsoft’s Surface Laptop and SurfacePro, which is supported by AI even when offline. This could drive more growth for investors in QCOM stock in the coming years.
Wall Street analysts estimate that Qualcomm's revenue growth could breach the double-digit level this year, with earnings growing as much as 13.1% in 2025. Although the stock trades below the industry median, Qualcomm remains a big contributor to the AI discussion within the chip sector. In Q2 2024, demand from its Chinese handset makers rose 49%, alongside a 35% surge in its automotive revenue.
Qualcomm's AI-powered Snapdragon processors hold promise for smartphones, PCs, gaming, and automotive sectors. Despite a 20% drop in stock in July and ongoing concerns about the U.S. economy and handset market, Qualcomm's handset sales and automotive strength have rebounded. Revenue and earnings improved after a tough 2023, making Qualcomm a potentially attractive value play for long-term investors.
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