2 Top Semiconductor Stocks to Buy Before Artificial Intelligence (AI) Sends Them Soaring
Investors are eyeing two top semiconductor stocks in anticipation of a boom driven by the rise of artificial intelligence technology. As AI continues to gain prominence, these stocks are expected to see significant growth. Experts suggest buying these stocks now before they soar even higher with the increasing demand for AI-related products. The semiconductor industry is poised for a bright future as AI applications become more prevalent in various sectors.
Semiconductor stocks have taken a hammering in the past month, which is evident from the 11% decline in the PHLX Semiconductor Sector index. A big reason behind the index's drop is the ongoing trade war triggered by the tariffs imposed by the Trump administration on Canada, Mexico, and China, along with the reciprocal tariffs that the U.S. plans to impose on April 2. The trade war has dampened economic sentiment in the U.S., and there are fears that the tariffs could lead to increased costs for major technology companies such as Apple and Nvidia.
Semiconductor stocks have been caught in the midst of the trade war as the risk-off sentiment on Wall Street means that wary investors have started booking profits during these times of uncertainty. What's worth noting is that investors have been overlooking the solid results delivered by companies in the semiconductor sector of late, driven by a major catalyst in the form of artificial intelligence (AI).
Marvell Technology
Marvell Technology (MRVL 0.51%) stock has dropped a whopping 35% in the past month. This significant drop has made the chipmaker an extremely attractive stock to buy right now as it is trading at just 22 times trailing earnings. One glance at Marvell's latest quarterly results and guidance will tell you why buying this chip stock right now could turn out to be a smart move.
Marvell finished fiscal 2025 with a 5% increase in revenue to $5.77 billion. The company's earnings also increased in the low single digits to $1.57 per share. However, Marvell's guidance for the first quarter of fiscal 2025 points toward a remarkable acceleration in its top- and bottom-line growth. The company expects to earn $0.61 per share in the current quarter on revenue of $1.87 billion. Those numbers would be a massive improvement over the year-ago period's earnings of $0.24 per share and revenue of $1.16 billion.
Marvell is looking to push the envelope in the custom AI chip market with its new 2-nanometer (nm) chips, which would be an upgrade over its current offerings that are based on 3nm and 5nm process nodes. A smaller process node will enable Marvell to deliver more computing power while reducing electricity consumption, and this could help the company corner a bigger share of the fast-growing custom AI silicon opportunity.
Arm Holdings
Arm Holdings (ARM -1.82%) stock has lost 26% of its value in the past month, and it is trading at a relatively cheaper valuation right now compared to where it was at the end of 2024. Arm currently has a forward earnings multiple of 58. Though that's expensive when compared to the Nasdaq-100 index's forward earnings multiple of 25, it is a tad cheaper than Arm's forward earnings multiple of 62 at the end of 2024.
Investors who aren't comfortable with this expensive valuation right now would do well to keep a watch on Arm stock and consider buying when it becomes even more attractive. However, those with a higher appetite for risk looking to add a top AI stock to their portfolios may start accumulating Arm considering the important role that it is playing in the global AI chip market.