The three networking semiconductor stocks to buy are targeting growth in artificial intelligence opportunities to tap into one of the hottest technology trends in years. These three stocks are leading the way in a coveted market that investors increasingly have been eyeing to purchase to gain exposure to the cutting-edge artificial intelligence capabilities.
The three networking semiconductor stocks to buy each offer Ethernet technology that holds advantages such as scalability, compatibility and vast ecosystems, according to BofA Global Research. Those companies also should benefit from the rise of artificial intelligence (AI) workloads.
NVIDIA Noses Past Rivals as One of Three Networking Semiconductor Stocks to Buy
The three networking semiconductor stocks to buy each offer Ethernet technology that holds advantages such as scalability, compatibility and vast ecosystems, according to BofA Global Research. Those companies also should benefit from the rise of artificial intelligence (AI) workloads, the investment firm added.
Importantly, Ethernet has a wide range of workloads it caters to, from those that require high bandwidth to ones that need extensibility. Traditional Ethernet is best-effort and over provisioned, so not suitable for training clusters, BofA noted.
However, new versions of Ethernet incorporate features that improve latency, throughput and reliability, BofA reported. A leader in Ethernet technology is NVIDIA Corporation (NASDAQ: NVDA), a Santa Clara, California-based provider of accelerated computing capability. The company is credited with inventing graphics processing units (GPUs) that spurred growth of the personal computer gaming market, as well as enhancing computer graphics and artificial intelligence.
NVIDIA obtained a $500 price objective from BofA, based on valuations that assessed data demand potential, as well as strong, long-term demand.
Chart courtesy of www.stockcharts.com
Skousen Champions NVIDIA Among Three Networking Semiconductor Stocks to Buy
Mark Skousen, PhD, an economist who serves as a Presidential Fellow at Chapman University and heads the Forecasts & Strategies investment newsletter, recently recommended NVIDIA profitably in his TNT Trader service that includes both stocks and options. The stock soared 34.13% in less than one month, while he advised his TNT Trader subscribers to sell half the options for 65.45% in just 13 trading days, then instructed his subscribers to sell the remainder for a 326.74% return in only 18 trading days. The two options trades combined to average a return of 196%.
Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.
Key risks faced by NVIDIA are possible weakness in the consumer-driven gaming market, stiff competition with Intel (NASDAQ: INTL), Advanced Micro Devices (NASDAQ: AMD), Marvell Technology Group Ltd. (NASDAQ: MRVL) and Broadcom (NASDAQ: AGVO). Further risks include internal cloud projects and other private companies in accelerated computing markets, potential restrictions from U.S. government on shipments of advanced AI technologies to overseas customers, lumpy and unpredictable sales in new enterprise, data center and the automobile market. NVIDIA must also navigate potential for reduced capital returns, a possible slowdown in auto sales until advanced driver assist systems become more meaningful and increased operating expenditures, according to BofA.
Skousen Reaps Big Returns with One of Three Networking Semiconductor Stocks to Buy
Skousen, who is a descendant of founding father, diplomat and inventor Benjamin Franklin, worked for IBM as a consultant in the early 1980s. He noted that the technology sector has soared into bull-market territory during 2023, since it meets the standard definition of rising at least 20%, while rebounding from a poor performance in 2022. Investors who can accept the ups and downs of volatility may be best suited for purchasing stocks like NDVIA that are gaining a big lift from artificial intelligence advances.
Despite inflation, a tight Fed money supply and a brewing banking crisis after several recent financial institution failures, the NASDAQ Composite’s tilt toward technology has led to a 30.81% year to date, as of the close of trading on July 3.
I expect to see and hear Skousen July 12-15 at the annual FreedomFest that he organizes to bring together investment, political and social opinion leaders who will include former presidential candidate Steve Forbes, along with current presidential prospects such as former radio host Larry Elder and iconoclastic podcaster Robert F. Kennedy Jr. Also agreeing to attend and to speak is skilled trades advocate Mike Rowe, who hosts the popular “Dirty Jobs” TV series. Rowe, who I hope to interview there about how AI could might affect skilled trades workers, taped an amusing video about some of the reasons why he agreed to come to FreedomFest and serve as a keynote speaker. To register for a $50 discount, use the code EAGLE50. I invite my readers who attend to visit the Eagle booth in the exhibit hall to meet and talk to me personally.
Gilder Recommends Sale of NVIDIA Shares for 229% Gain
Another proponent of recommending NVIDIA is futurist George Gilder, who produced a 229.68% gain for subscribers of his Gilder’s Technology Report investment newsletter. That trade only involved half the shares that Gilder recommended, while the other half continues to grow its gains on paper as the company’s share price climbs.
George Gilder gains a 229% return in Gilder’s Technology Report.
A third investment trader who produced profits in NVIDIA is Jon Johnson, who heads the Investment House advisory service. He averaged a double-digit-percentage gain in two short-term trades.
Jon Johnson Produced Double-Digit-Percentage Gains in Investment House.
Three Networking Semiconductor Stocks to Buy Include Marvell
Marvell Technology Group Ltd. (NASDAQ: MRVL), a Santa Clara, California-based developer and producer of semiconductors and related technology, received a $75 price objective (PO) from BofA, based on a 36x 2024 estimated P/E, which is supported by 15-20% longer-term compounded annual earnings per share (EPS) growth potential. The valuation also is in a normal 1x-2x range for high-growth semiconductor peers, BofA added.
Chart courtesy of www.stockcharts.com
Risks for Marvell to attain that valuation include integration challenges of recent acquisitions, the prospect of going to a position of net debt from net cash, uncertainty of attaining expected cost synergies in a timely manner, a potential slowdown in legacy hard disk drive, infrastructure spending and storage assets and competitive threats from larger, well-resourced rivals.
Marvell’s Marvelous Electro-Optics Opportunities
Marvell, Cisco (NASDAQ: CSCO) and NVDA also offer leading Ethernet options. Aside from Ethernet/InfiniBand switches and adapters, AI networking opportunities also include electro-optics/demand-side platforms (DSPs), BofA wrote.
The Yole Group estimates optical transceiver total addressable market (TAM) across datacom and telecom growing by 2027 to $16.8 billion, up from $5.8 billion in 2021, equaling a 19% compound annual growth rate (CAGR). Meanwhile, Marvell’s electro-optics software asset management (SAM) reached $1 billion in 2021 and is expected to double to $2 billion by 2024 — across 65% cloud and 35% carrier — growing at 26% CAGR, BofA wrote.
A conservative assumption is that MRVL 2024-2027 SAM would grow at the same rate as optical transceivers, even though MRVL SAM only includes high-speed silicon, not low speed, BofA wrote. In addition, BofA estimates switching ports of 400G+ speed to represent generative AI, which reached 14% of total data center ports in 2022 and could touch an estimated 40% by 2027. This results in MRVL generative AI electro-optics sales opportunity of about $1.4 billion by 2027, BofA wrote in a recent research note.
For context, MRVL has outlined total AI sales of more than $400 million in 2023 across PAM4 optics, PAM DSPs and data center interconnect, of which most should be for electro-optics, BofA wrote. Thus, the investment firm reiterated a “Buy” rating on MRVL, raising its price objective (PO) to $75 from $70 on optical upside.
Broadcom Breaks into Three Networking Semiconductor Stocks to Buy
Broadcom Inc. (NASDAQ: AVGO), a San Jose, California-based designer, developer and supplier of a range of semiconductor and infrastructure software solutions, received a $1,050 price objective from BofA. Risks to Broadband reaching that level include the semiconductor cycle, affected by sensitivity to U.S./China trade relations, high exposure to Apple with potential design out risks and competitive risks in networking, smartphone, storage and enterprise software markets, the investment firm added.
Other uncertainties to monitor are acquiring assets that may increase financial and integration shortfalls, as well as moving into non-core software businesses that can create execution risks, BofA added. Despite those risks, BofA boosted its price objective on AVGO to $1,050 from $950 per share.
Chart courtesy of www.stockcharts.com
Connell Likes AVGO as One of Three Networking Semiconductor Stocks to Buy
Among the three networking semiconductor stocks to buy, Michelle Connell, who heads the Dallas-based Portia Capital Management, told me that she prefers Broadcom. Despite the stock’s ascent this year, it could have further upside, she added.
“However, like any of the tech names that have had a significant gain, I would build out positions on weakness,” Connell counseled. “I would emphasize that AVGO is a good long-term holding. I would be patient.”
The hedge fund community is enamored with Broadcom, building out a $3.5 billion position, Connell wrote. The company has strong fundamentals and a relatively low debt to equity ratio, she added.
As far as Broadcom’s AI exposure, such chips account for 15% of the company’s current revenues. This revenue number could climb to 25% next year, Connell continued.
Michelle Connell heads Portia Capital Management.
If Broadcom continues to grow its AI chip business at its current pace, it will make the company the second-largest AI chip supplier right behind NVIDIA, Connell said. She opined that such a result would be a stronger AI chip provider than Marvel, Intel, AMD and Amazon’s (NASDAQ: AMZN) AI semiconductor businesses, she added.
To enhance shareholder value, Broadcom brought back $3.4 billion of stock in its April quarter, Connell continued. The company also committed to an additional $9 billion buyback by the end of 2023.
The share buyback could drive a significant increase in dividend payout, Connell counseled. As of now, the current dividend yield on Broadcom is 2.12%.
Russia’s War Does Not Directly Hurt Three Networking Semiconductor Stocks to Buy
Political risk remains a threat to investors due to Russia’s unrelentingly invasion of Ukraine. Even though the three networking semiconductor stocks to buy are not directly hurt by the conflict, economic fallout is felt in both Ukraine and Russia, as well as neighboring countries that otherwise would conduct further trade.
Ukraine’s deputy defense minister reported “heavy fighting” on July 3 as the country’s troops tried to regain land near Bakhmut that Russian soldiers — aided by the Wagner Group before its recent exile to Belarus by President Vladimir Putin — had seized previously. The Ukrainian military official estimated that his nation’s forces last week had recaptured 14.4 square miles, or 37.4 square kilometers, of territory.
Russian missiles hit the center of Kramatorsk in eastern Ukraine on Tuesday, June 27, killing 11 people, including three teenagers, and injuring 61 others, Ukrainian officials said. A residential community took the blow as a restaurant filled with diners and a shopping area were slammed by the strike. Kramatorsk is under Ukrainian control but close to Russian-occupied parts of Ukraine.
An ongoing catastrophe is that drinking water supplies could be harmed for more than 700,000 people after the destruction of the Kakhovka dam in southern Ukraine as the latest calamity that has accompanied Russia’s attacks. With the threat from Russia unabated, Ukraine’s President Volodymyr Zelensky keeps rallying his country’s people to defend their nation and freedom from the invaders, while seeking further weapons from allies to do so.
Russia reportedly has moved tactical nuclear weapons to neighboring Belarus as a potential launch site against Ukraine, which began a counteroffensive to push the attackers back to their own country. However, President Zelensky has acknowledged gains on the battlefield have proven to be “slower than desired.”
Russia Claims to Give 700,000 Children Refuge, While Ukraine Calls the Action Illegal
Aside from Russia’s continued attacks against Ukrainian residential communities, the invader of sovereign Ukraine territory has brought roughly 700,000 children to Russian territory, said Grigory Karasin, head of the international committee of the Federation Council, the upper chamber of Russia’s parliament.
Despite Russia initiating and maintaining bombing and shelling in Ukrainian land against those living there, Karasin described his country as giving the children a place of refuge. However, Ukrainian officials counter that the children have been illegally and forcibly removed from their homes and families in violation of international law.
With Russia’s invasion of Ukraine adding political risk for businesses in both nations, as well as countries that export and import with them, the ongoing conflict is a threat for investors. For that reason, investors may find the prospects of the three networking semiconductor stocks to buy offer ways to profit from artificial intelligence advances.
Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.