SA Asks: What's the most attractive chip stock right now?

[Moscow, Russia - April 7, 2019: NVIDIA microchip on the motherboard]
Antonio Bordunovi

What's the most attractive semiconductor stock right now?

We asked Seeking Alpha analysts The Techie [https://seekingalpha.com/author/the-techie] and Oliver Rodzianko [https://seekingalpha.com/author/oliver-rodzianko] for their picks.

The Techie [https://seekingalpha.com/author/the-techie]: My chip stock of choice at current levels is Advanced Micro Devices (NASDAQ:AMD [https://seekingalpha.com/symbol/AMD]). While Nvidia (NASDAQ:NVDA [https://seekingalpha.com/symbol/NVDA]) is a close second, I think uncertainty around the China situation is nothing to be taken lightly (though I remain a buy on the stock in the long term). While AMD faces the same hurdles in China, the company, in my opinion, is less dependent on the Chinese market for its AI chip sales, with rather limited exposure.

My thesis on AMD is simple: the company’s focused strategy on the top 20% of AI spenders, backed by deep hyperscaler partnerships, growing CPU share, and a clear GPU market share target, positions it strongly to capture a meaningful slice of the $500 billion AI accelerator market by 2028.

What makes the stock more attractive to me than its peers is the fact that it's among the worst performers since it reported earnings. I think the market has overpriced in weakness and China uncertainty. I think investors should view the current pullback as a window to bet on the stock, not against it.

Oliver Rodzianko [https://seekingalpha.com/author/oliver-rodzianko]: While this might be the mainstream answer, sometimes that’s the pick that makes the most money, most reliably. Nvidia (NASDAQ:NVDA [https://seekingalpha.com/symbol/NVDA]) is still dominating the advanced chip industry with GPUs. Its data center revenue grew 56% year-over-year last quarter, and demand for GPUs looks robust through at least 2028, in my opinion.

Other players like Micron (MU [https://seekingalpha.com/symbol/MU]) have more vulnerability to cyclicality as new HBM capacity comes online in 2026; margins can be high one minute and moderate significantly the next. I much prefer the durable pricing power of Nvidia while the AI capex boom is in full swing.

Other mainstream chip stocks like Taiwan Semiconductor (NYSE:TSM [https://seekingalpha.com/symbol/TSM]) are also attractive but are definitely at high valuations from a sentiment perspective (14-week RSI at 73), which constrains the annual return potential. Some of the smaller foundry players and analog chip designers offer better investment value, but the real money in tech is made in momentum and durability, which Nvidia (NASDAQ:NVDA [https://seekingalpha.com/symbol/NVDA]) offers an abundance of right now.

In general, any AI-related semiconductor stock should fare very well over the next few years despite valuation concerns, given that the IEA’s base case has global data center electricity consumption doubling by 2030 to ~945 TWh, with AI as the biggest contributor. Nonetheless, my top pick is Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]).

MORE ON NVIDIA, AMD, ETC.

* The AI Bubble Everyone Fears Is Exactly Why Nvidia Is Strong [https://seekingalpha.com/article/4826632-the-ai-bubble-everyone-fears-is-exactly-why-nvidia-is-strong]
* AMD: Love The Products, Hate The Share Price [https://seekingalpha.com/article/4826285-amd-love-the-products-hate-the-share-price]
* Nvidia's Strong AI Moat Justifies The Premium [https://seekingalpha.com/article/4826276-nvidia-strong-ai-moat-justifies-the-premium]
* Nvidia leads chip stocks higher to start the week [https://seekingalpha.com/news/4499904-nvidia-leads-chip-stocks-higher-to-start-the-week]
* Taiwan Semiconductor dismisses report of Intel partnership talks [https://seekingalpha.com/news/4499758-taiwan-semiconductor-dismisses-report-of-intel-partnership-talks]