NVIDIA (NASDAQ: NVDA) will continue to lead the AI semiconductor market in 2024, but signs are growing other companies are also well positioned, and there is market share to be gained. The opportunity is twofold. First, the rapidly accelerating demand for AI chips is a ship that will lift all stocks. Second, there is a chance to nab share from NVIDIA. NVIDIA was estimated to have 80% of the data center market ahead of the AI boom, which is why its business boomed the way it has.
However, the demand for AI chips is so great that NVIDIA cannot meet demand. The company is ramping up production efforts but won't be able to scale fast enough to maintain its market share. This provides an opportunity for other chip manufacturers, and results from Oracle (NASDAQ: ORCL) highlight this issue. Oracle launched its new AI cloud but could not meet its clients' demand for AI infrastructure due to a shortfall of chips.
"There's this gold rush towards building the world's greatest large language model. And we are doing our best to give our customers what we can this quarter, and then dramatically increase our ability to give them more and more capacity each succeeding quarter," said Oracle chairman and cofounder Larry Ellison during the FQ2 earnings report.
To fill the void, Oracle is turning to names like Advanced Micro Devices (NASDAQ: AMD), which also produces cutting-edge AI accelerators. However, the real takeaway from Oracle's report is that it will support AMD and potentially other AI accelerators because they offer choice and better performance for some uses, suggesting that NVIDIA's dominant position could be fleeting.
Advanced Micro Devices gets upgrade from Bank of America
Bank of America (NYSE: BAC) analyst Vivek Arya upgraded Advanced Micro Devices to Buy from Hold, citing a rotation within the microchip sector. This year's price run-up has left names like AMD, well-positioned for the AI boom, lagging NVIDIA and the semiconductor index (NASDAQ: SOXX).
Because the Advanced Micro Devices MI300 line has been met with approval from names like Oracle, Microsoft (NASDAQ: MSFT) and OpenAI, sales are likely to outpace CEO Lisa Su's robust estimates. As it is, the company expects the MI300 line to be the fastest product to hit $1 billion in AMD's history and should top $2 billion by year-end.
Bank of America's $165 price target isn't the highest, but it is well above the $137 consensus tracked by Marketbeat. More importantly, the revision trend is upward, leading the market with an implied target near the all-time high of about $165. The consensus rating is Moderate Buy.
Intel looks more intelligent than ever
CEO Patrick Gelsinger's turnaround of Intel (NASDAQ: INTC) took another leap forward when the company revealed the Gaudi 3. The Gaudi 3 is a 3rd generation AI accelerator that is supposed to outperform the H100 in data center operations and deep-learning workloads. It will launch in 2024, and for several reasons, the stock has seen a shift in analysts' sentiment. Several analysts, including Bank of America, issued positive commentary, upgrades or revisions that put the stock price in rally mode. The takeaway is that a combination of factors, including AI, reshoring US production and demand for foundry services support the business.
Since late October, Intel stock analysts have issued three upgrades and four boosted price targets. They've raised the sentiment to Hold from Reduce and the price target by 12%. The consensus lags the market, but recent activity suggests it will trend higher as we enter 2024 and the year progresses.
Micron upgraded on normalization, return to growth
Micron (NASDAQ: MU) is another chip stock upgraded by Bank of America. It is uniquely positioned to benefit from the consumer chip rebound and is expected to return to YOY growth this quarter. The company is expected to see sequential improvement in revenue, margin, cash flow and earnings as the year progresses and may outpace consensus due to AI strength. AI is moving closer and closer to the edge, which means there is a robust demand for embedded memory products to help make it work.
Micron is one of MarketBeat's Most Upgraded Stocks. A steady string of upgrades and boosted price targets have been seen since the FQ4 results, and analysts may extend the trend following the FQ1 release. However, the consensus expects revenue at the high end of guidance, so it may take an NVIDIA-like outperformance to catalyze upward revisions now.
