5 Super Semiconductor Stocks to Buy Hand Over Fist Heading Into 2025

The world’s biggest technology companies are spending an enormous amount of money building data centers, and they are filling them with graphics processing chips (GPUs) designed for artificial intelligence (AI) development.

GPUs are built for parallel processing, meaning they can handle large volumes of data and multiple workloads at once, which is key to training AI models and performing AI inference. Based on recent financial reports:

• Microsoft spent $55.7 billion on capital expenditures (capex) during its fiscal 2024 year (ended June 30), most of which went toward AI data center infrastructure and chips.

• Amazon spent $30.5 billion on capex during the first half of 2024, mostly related to AI.

• Alphabet spent $25 billion on AI capex in the first half of 2024.

• Meta Platforms plans to spend between $37 billion and $40 billion on AI capex for the whole of 2024.

• Oracle spent $6.9 billion on AI capex in its fiscal 2024 year (ended May 31).

Microsoft, Amazon, Meta, and Oracle have explicitly said they plan to spend even more money in the coming year. That spells opportunity for the semiconductor industry, so here are five top chip stocks to buy heading into 2025.

1. Nvidia

When it comes to data center GPUs, Nvidia (NASDAQ: NVDA) is the undisputed leader. Its H100 GPU set the benchmark for the AI industry last year, and the company is now gearing up to ship an entirely new generation of chips based on its Blackwell architecture.

Blackwell-based systems like the GB200 NVL72 will perform AI inference at up to 30 times the speed of equivalent H100 systems. Plus, individual GB200 GPUs are expected to sell for between $30,000 and $40,000 each, which is in line with what data center operators originally paid for the H100. In other words, Blackwell paves the way for a substantial improvement in cost efficiency for developers, who normally pay for computing capacity by the minute.

Nvidia CEO Jensen Huang expects Blackwell GPUs to start contributing billions of dollars to the company’s revenue in the final quarter of fiscal 2025 (which runs from November to January), and shipments will scale up from there.

Nvidia is on track to generate an estimated $125.5 billion in total revenue in fiscal 2025, representing a 125% increase from the prior year. Its stock isn’t cheap, but it does trade at a reasonable forward price to earnings (P/E) ratio of 29.1 when measured against the company’s forecast fiscal 2026 earnings per share.

Simply put, investors who are willing to hold Nvidia stock for at least the next 18 months are likely paying a reasonable price today.

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2. Micron Technology

Micron Technology (NASDAQ: MU) is a leading supplier of memory and storage chips for data centers, personal computers, and smartphones. In AI data center settings, memory chips complement GPUs by storing data in a ready state so it can be called upon instantly for training and inference. Since AI requires mountains of data to learn and improve, demand is soaring for more memory capacity.

Micron’s latest HBM3E (high-bandwidth memory) 36 gigabyte (GB) units for the data center deliver up to 50% more capacity than any competing product today while consuming 20% less energy. It was selected to power Nvidia’s H200 GPU, and potentially also its Blackwell GB200 GPUs. In fact, Micron is now completely sold out of HBM3E until 2026.

Beyond the data center, every tier-1 manufacturer of Android-based smartphones uses Micron’s LP5X DRAM memory. Many of them have launched AI-enabled devices this year with minimum memory capacity requirements doubling compared to their non-AI predecessors from last year. There is a similar trend in personal computing, with most AI-enabled PCs launching with a minimum DRAM capacity of 16GB compared to 12GB last year.

Higher memory requirements directly translate into more revenue for Micron. In its recent fiscal 2024 fourth quarter (ended Aug. 29), the company’s revenue surged 93% year over year to $7.7 billion, and it’s forecasting more strength to come.

3. Axcelis Technologies

Axcelis Technologies (NASDAQ: ACLS) isn’t a semiconductor producer. Instead, it makes ion implantation equipment which is critical to the fabrication process for central processing units (CPUs), memory chips, and power devices that regulate the flow of electric power in high-current applications.

AI data centers have become a new opportunity for power device makers (and Axcelis’ equipment) because they consume substantial amounts of energy. Some of Axcelis’ customers have started using trench MOFSET (metal oxide semiconductor field effect transistor) power devices with a silicon carbide chemistry, which is more robust and heat-efficient than traditional silicon chemistries. Silicon carbide power devices are more implant intensive, which is a direct tailwind for Axcelis’ business.

Additionally, Axcelis is benefiting from the growing demand for high-capacity memory chips in the data center, computers, and smartphones. As manufacturers of memory chips expand production to meet that demand, they will need more of Axcelis’ equipment, and the company has already started building inventory in anticipation for a strong 2025.

In fact, Axcelis’ guidance suggests 2025 could be the strongest year in the company’s history with a record $1.3 billion in revenue potentially in the cards.

4. Broadcom

Broadcom (NASDAQ: AVGO) is a multifaceted AI organization with a presence in semiconductors, equipment, cybersecurity, cloud software, and more. Its semiconductor business is the focus for investors right now because several of its products are experiencing significant demand from companies building AI infrastructure.

Broadcom makes AI accelerators (data center chips) for hyperscale customers (which typically include Microsoft, Amazon, and Alphabet). During its recent fiscal 2024 third quarter (ended Aug. 4), the company said that business grew by a whopping three-and-a-half times compared to the year-ago period. Similarly, it saw fourfold sales growth in its Tomahawk 5 and Jericho3-AI Ethernet switches for the data center. These regulate how quickly data flows from one point to another.

Coming into Q3, Broadcom is expected to deliver $51 billion in total revenue for fiscal 2024, with $11 billion attributable to AI. However, following the strong results I just highlighted, the company revised those numbers higher to $51.5 billion and $12 billion, respectively.

Broadcom is currently knocking on the door of the exclusive $1 trillion club, which is home to just six U.S. technology giants right now.

5. Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ: AMD) is one of the world’s top chip suppliers in the consumer electronics industry. Its hardware can be found in everything from Sony‘s PlayStation 5 to the infotainment systems in Tesla‘s electric vehicles. However, the company is now trying to compete with Nvidia in the data center segment with its new MI300 GPUs.

The MI300 was designed as an alternative to Nvidia’s H100, and it’s attracting top customers like Oracle, Microsoft, and Meta Platforms. However, with Nvidia set to launch its Blackwell lineup, AMD is already gearing up to release a faster GPU called the MI350 next year. It will be based on a new architecture called Compute DNA (CDNA) 4, which could deliver 35 times more performance than CDNA 3 chips like the MI300. AMD intends for this architecture to compete directly with Blackwell.

AMD is already a leader in AI chips for the personal computing segment, with an estimated market share of 90%. It recently launched the Ryzen AI 300 series for notebooks, which features the fastest neural processing unit (NPU) in the industry. The company says more than 100 platforms will launch with those chips from leading PC manufacturers like Asus, Acer, HP Inc., and more.

AMD is coming off a whopping 115% year-over-year growth in its data center revenue and 49% growth in its client segment revenue (which is home to Ryzen AI chips) in the second quarter of 2024. But the AI revolution is just getting warmed up, so the best might still be to come.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, HP, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

5 Super Semiconductor Stocks to Buy Hand Over Fist Heading Into 2025 was originally published by The Motley Fool