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What AI Bubble? NVIDIA & 2 Other Chip Stocks With Strong Price Upside
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Of late, the stock market has wavered, with tech stocks underperforming in July and August. The euphoria about the artificial intelligence (AI) revolution faded following the post-earnings decline in shares of prominent chipmakers, leaving Wall Street without a major driver.
Chip stocks tanked from a mid-July high as their stretched valuations raised doubts about their capability to sustain real revenue growth, which resembles the dot-com bubble of the late 1990s and early 2000s.
However, the AI boom is here to stay and will drive the prices of chip stocks northward. In reality, chip stocks have now begun to gain ground by banking on the strength of AI. Thus, it’s prudent for investors to keep an eye on chip stocks like NVIDIA Corporation (NVDA - Free Report) , Broadcom Inc. (AVGO - Free Report) and Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , which display a strong price upside and increase shareholders’ wealth.
AI is Not in a Bubble Like Dot Com
The foundation of AI is based on practical applications whereas the dot-com companies had business models based on speculative ideas. Moreover, several sectors, including technology, healthcare, transportation, agriculture and finance, are adopting AI, curtailing sector-related bubbles’ risks.
Companies from these sectors utilize AI for product innovation, efficiency and cost savings. Thus, AI has more tangible economic benefits in contrast to the abstract nature of the dot-com period. Mature infrastructure like cloud computing platforms supports the deployment of AI technologies. However, these established infrastructures were not there for dot-com ventures.
Booming AI to Boost the Stock Price of NVDA, AVGO, TSM
The global AI industry expanded beyond $184 billion in 2024, a jump of nearly $50 billion from 2023. The astounding growth is estimated to continue till 2030, with AI market size surpassing $826 billion, according to Statista.
AI market size worldwide from 2020 to 2030
(in billions of dollars)
Image Source: Statista
NVIDIA will benefit from this growth since the chip giant provides hardware and technologies vital for AI applications. NVIDIA’s graphic processing unit (GPU) is a core part of the computer server infrastructure required to train large language models and function AI interfaces.
Broadcom also plays a crucial role in the AI ecosystem. Its products used in data centers are important for AI applications. Broadcom’s CEO Hock Tan expects the company’s AI revenues to climb to $12 billion in fiscal 2024 and increase further in fiscal 2025 due to an uptick in demand for custom accelerators for AI data centers. Broadcom’s AI revenues increased 10% sequentially in the fiscal fourth quarter to about $3.5 billion.
Taiwan Semiconductor, or TSMC, manufactures chips for companies that make AI hardware and are therefore well-poised to gain from the flourishing AI industry. TSMC’s manufacturing capability is required for GPUs to be functioning. These GPUs are essential for data centers where huge amounts of data are stored. These data are needed for AI applications, whose demand has shot up and, in turn, is expected to boost TSMC’s business.
NVIDIA Stock – Offers Price Upside of Up to 71.1%
A possible green light from the U.S. government to export chips to Saudi Arabia, the launch of the much anticipated next-generation Blackwell chip and a wide competitive moat in the GPU market space will surely help the NVIDIA stock to scale northward (read more: 2 Reasons NVIDIA Stock Popped Yesterday With More Room to Run).
Brokers, thus, have jacked up the average short-term price target of NVDA by 27.7% from the stock’s last closing price of $116.91. The highest price target is $200, an upside of 71.1%.
Image Source: Zacks Investment Research
Broadcom Stock – Offers Price Upside of Up to 51.6%
Broadcom’s capability to pay off debts banking on strong cash flow should propel its stock price. Broadcom’s free cash flow (FCF) was $4.791 billion in the fiscal third quarter, while revenues came in at $13.07 billion. Thus, the FCF margin was 36.65% (i.e., $4.791 billion/$13.07 billion in revenues), slightly more than last quarter’s 36% (read more: Broadcom Selloff Explained! Should You Buy the Dip in AVGO Stock?).
Hence, brokers have increased the average short-term price target of AVGO by 20.3% from the stock’s last closing price of $158.27. The highest price target is $240, an upside of 51.6%.
Image Source: Zacks Investment Research
TSMC Stock – Offers Price Upside of Up to 46.9%
TSMC’s significant pricing power due to its supremacy in the high-end chip market, and being the exclusive manufacturer of Apple Inc’s (AAPL - Free Report) AI chips should help its share prices scale upward (read more: 2 AI Stocks That Can Be the Next NVIDIA).
Therefore, brokers have raised the average short-term price target of TSM by 20.3% from the stock’s last closing price of $170.23. The highest price target is $250, an upside of 46.9%.
Image Source: Zacks Investment Research
Shares of NVIDIA, Broadcom, and TSMC have soared 140.6%, 47.4% and 64.8%, respectively, so far this year.
Image: Bigstock
What AI Bubble? NVIDIA & 2 Other Chip Stocks With Strong Price Upside
Of late, the stock market has wavered, with tech stocks underperforming in July and August. The euphoria about the artificial intelligence (AI) revolution faded following the post-earnings decline in shares of prominent chipmakers, leaving Wall Street without a major driver.
Chip stocks tanked from a mid-July high as their stretched valuations raised doubts about their capability to sustain real revenue growth, which resembles the dot-com bubble of the late 1990s and early 2000s.
However, the AI boom is here to stay and will drive the prices of chip stocks northward. In reality, chip stocks have now begun to gain ground by banking on the strength of AI. Thus, it’s prudent for investors to keep an eye on chip stocks like NVIDIA Corporation (NVDA - Free Report) , Broadcom Inc. (AVGO - Free Report) and Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) , which display a strong price upside and increase shareholders’ wealth.
AI is Not in a Bubble Like Dot Com
The foundation of AI is based on practical applications whereas the dot-com companies had business models based on speculative ideas. Moreover, several sectors, including technology, healthcare, transportation, agriculture and finance, are adopting AI, curtailing sector-related bubbles’ risks.
Companies from these sectors utilize AI for product innovation, efficiency and cost savings. Thus, AI has more tangible economic benefits in contrast to the abstract nature of the dot-com period. Mature infrastructure like cloud computing platforms supports the deployment of AI technologies. However, these established infrastructures were not there for dot-com ventures.
Booming AI to Boost the Stock Price of NVDA, AVGO, TSM
The global AI industry expanded beyond $184 billion in 2024, a jump of nearly $50 billion from 2023. The astounding growth is estimated to continue till 2030, with AI market size surpassing $826 billion, according to Statista.
AI market size worldwide from 2020 to 2030
(in billions of dollars)
Image Source: Statista
NVIDIA will benefit from this growth since the chip giant provides hardware and technologies vital for AI applications. NVIDIA’s graphic processing unit (GPU) is a core part of the computer server infrastructure required to train large language models and function AI interfaces.
Broadcom also plays a crucial role in the AI ecosystem. Its products used in data centers are important for AI applications. Broadcom’s CEO Hock Tan expects the company’s AI revenues to climb to $12 billion in fiscal 2024 and increase further in fiscal 2025 due to an uptick in demand for custom accelerators for AI data centers. Broadcom’s AI revenues increased 10% sequentially in the fiscal fourth quarter to about $3.5 billion.
Taiwan Semiconductor, or TSMC, manufactures chips for companies that make AI hardware and are therefore well-poised to gain from the flourishing AI industry. TSMC’s manufacturing capability is required for GPUs to be functioning. These GPUs are essential for data centers where huge amounts of data are stored. These data are needed for AI applications, whose demand has shot up and, in turn, is expected to boost TSMC’s business.
NVIDIA Stock – Offers Price Upside of Up to 71.1%
A possible green light from the U.S. government to export chips to Saudi Arabia, the launch of the much anticipated next-generation Blackwell chip and a wide competitive moat in the GPU market space will surely help the NVIDIA stock to scale northward (read more: 2 Reasons NVIDIA Stock Popped Yesterday With More Room to Run).
Brokers, thus, have jacked up the average short-term price target of NVDA by 27.7% from the stock’s last closing price of $116.91. The highest price target is $200, an upside of 71.1%.
Image Source: Zacks Investment Research
Broadcom Stock – Offers Price Upside of Up to 51.6%
Broadcom’s capability to pay off debts banking on strong cash flow should propel its stock price. Broadcom’s free cash flow (FCF) was $4.791 billion in the fiscal third quarter, while revenues came in at $13.07 billion. Thus, the FCF margin was 36.65% (i.e., $4.791 billion/$13.07 billion in revenues), slightly more than last quarter’s 36% (read more: Broadcom Selloff Explained! Should You Buy the Dip in AVGO Stock?).
Hence, brokers have increased the average short-term price target of AVGO by 20.3% from the stock’s last closing price of $158.27. The highest price target is $240, an upside of 51.6%.
Image Source: Zacks Investment Research
TSMC Stock – Offers Price Upside of Up to 46.9%
TSMC’s significant pricing power due to its supremacy in the high-end chip market, and being the exclusive manufacturer of Apple Inc’s (AAPL - Free Report) AI chips should help its share prices scale upward (read more: 2 AI Stocks That Can Be the Next NVIDIA).
Therefore, brokers have raised the average short-term price target of TSM by 20.3% from the stock’s last closing price of $170.23. The highest price target is $250, an upside of 46.9%.
Image Source: Zacks Investment Research
Shares of NVIDIA, Broadcom, and TSMC have soared 140.6%, 47.4% and 64.8%, respectively, so far this year.
Image Source: Zacks Investment Research
All these stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.