AMD, Broadcom, Marvell, Nvidia: Big Gains from New AI Spending

illustration of data center with man standing in entrance

Key points

  • Hyperscalers Microsoft, Alphabet, Amazon and Meta are expected to increase capital spending on cloud and AI by $45 billion.
  • Analysts expect a three-year growth cycle in capital spending in the sector, benefiting chipmakers AMD, Broadcom, Marvell and Nvidia, among others.
  • In addition to tech titans, industries such as healthcare and finance are adopting artificial intelligence models, spurring demand for chips.
  • 5 stocks we like most from Alibaba Group

A new report from Bank of America found that data center capital spending by four tech titans, Microsoft Corp. NASDAQ:MSFTAlphabet Inc. NASDAQ:GOOGLAmazon Inc. NASDAQ: AMZNand Meta Platform Inc. NASDAQ: META it bodes well for the fortunes of major chip makers.

These companies are known as hyperscalers. The term refers to large companies that provide large-scale cloud services and infrastructure, dominating the cloud computing industry.

Other companies considered hyperscalers include Alibaba Group Holdings Ltd. NYSE: CHILDInternational Business Machines New York Stock Exchange: IBM and Oracle Corp. NYSE: ORCL.

According to analysts, after three quarters of year-over-year declines, hyperscalers are expected to spend around $45 billion overall, an increase of 7%, led by Google and Microsoft.

Analysts at Bank of America said they believe the sector is in the early stages of a capital spending, or capex, cycle that they expect will last three years.

Several years of investment in artificial intelligence

“We remain confident that AI can support several years of investment,” they wrote, adding that the AI ​​infrastructure cycle is only at the beginning of its second year.

It should come as no surprise that AI chip giant Nvidia Corp. NASDAQ:NVDA is expected to be the biggest beneficiary of increased data center spending, but other top beneficiaries include Advanced Micro Devices Inc. NASDAQ:AMDMarvell Technology Inc. NASDAQ: MRVLand Broadcom Inc. NASDAQ: AVGO.

Of course, the demand for AI extends far beyond major hyperscalers. For example, data-centric industries such as healthcare and finance are actively pursuing AI models to increase operational efficiency and develop new insights into their data, according to analysts at B of A.

Supply of chips that meet the demand for AI

This could be a case where supply and demand align well: As hyperscalers increase their AI capacity, more and more chips hit the market.

This is a good sign for tech stocks as a whole in 2024.

Even with the S&P 500 at all-time highs, analysts expect further price increases in the coming months. When the broader market posts significant gains, it’s typical for growth sectors, including technology, consumer discretionary stocks, and communications stocks, to lead.

Advanced microdevices

The Advanced Micro Devices chart shows that the stock has advanced 25.73% over the past month, consolidating above its 21-day moving average below the Jan. 25 high of $184.92.

Analyst forecasts at Advanced Micro Devices show a consensus price target of $177.88, an upside of 5.95%. Bank of America sees the price rise even higher to $195.

Risks for AMD include competition from larger companies, erratic consumer and business spending, and a high reliance on an outsourced manufacturer. Bank of America did not specify which company it is, but Taiwan Semiconductor Manufacturing Co. Ltd. New York Stock Exchange: TSM is the main manufacturer of many of the best chip designers.


Broadcom analyst forecasts show a consensus price target of $981.45, a downside of 19.73%. Analysts have a “moderate buy” rating on Broadcom shares.

Again, Bank of America’s forecast is above consensus, with analysts seeing the price reach $1,250, based on double-digit earnings growth and high profitability in the semiconductor sector.

In 2024, Wall Street is targeting earnings of $40.88 per share, down 4%. However, such double-digit growth is expected next year, with analysts expecting Broadcom to earn $50.70 per share, up 24%.

Downside risks include high exposure to Apple Inc. NASDAQ:AAPL and Alphabet, at the risk of modifying designs that are no longer based on Broadcom chips.


Marvell is smaller than the other B of A chip companies cited in its recent report, both in terms of market capitalization and revenue.

Marvell analyst forecasts show a consensus view of “moderate buy”, with a price target of $69.96, an upside of 4.29%.

On the Marvell chart, you will see a pullback over the past three weeks from the January 25 high of $73.53. However, Marvell shares have maintained a gain of 11.85% over the past month.

Marvell is expected to see a fairly steep drop in earnings this year, to 82 cents per share, but a rebound is expected in 2025.

Bank of America cited competitive risks versus larger industry rivals among Marvell’s potential challenges.


Bank of America has a $700 price target on Nvidia stock, adding that Nvidia’s forward P/E, currently at 35, is “justified given greater future growth opportunities as gaming cycles and demand of data centers are potentially facing strong long-term demand dynamics.”

Nvidia analyst forecasts indicate a price target of $612.68, a downside of 10.20%.

Unlike other chip stocks that are taking a breather after recent rallies, Nvidia has continued to climb; So far in 2024, Nvidia shares are up 40%, leading the SPDR Technology Select Sector Fund NYSEARCA: XLK.

Risks for Nvidia include internal cloud projects, such as those developed by Alphabet and Microsoft, and a larger-than-expected impact from shipping restrictions in China or further restrictions imposed on operations in the region.

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