Key Points
Advanced Micro Devices and Marvell Technology are well-positioned to ride the AI infrastructure spending boom.
Both have declined significantly over the past month, but they are attractive buys on the dip.
- 10 stocks we like better than Advanced Micro Devices ›
The semiconductor sector is experiencing a modest sell-off. Many leading chipmakers have seen their shares plunge over the past week -- or in some cases, in the past month. What's going on? Some investors wonder whether artificial intelligence (AI) infrastructure spending will continue to rise. If it doesn't, now is as good a time as any to take some profits on those corporations that have already capitalized on it. Meanwhile, mounting competition from China-based companies is another factor behind the recent sell-off. Despite all that, several chip stocks are worth investing in right now and holding onto through the next five years. Let's discuss two examples: Advanced Micro Devices (NASDAQ: AMD) and Marvell Technology (NASDAQ: MRVL).
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1. Advanced Micro Devices
Advanced Micro Devices is a leader in the server CPU (Central Processing Unit) space and has a presence in the GPU (Graphics Processing Unit) market as well. Although the tech leader hasn't posed much of a challenge to Nvidia in the GPU industry, it has still benefited from soaring GPU demand. It could continue doing so, especially as companies increasingly seek to diversify away from Nvidia's hardware. AMD recently signed a deal with Anthropic, a leading developer of large language models and the company behind the AI assistant Claude. Anthropic plans to deploy up to 2 gigawatts' worth of AMD's chips to train and run AI models.
While this deal is noteworthy, and AMD's GPU business is important, the company's biggest opportunity is in its CPU segment. The rise of agentic AI will drive soaring demand for CPUs, a market where AMD has a much stronger foothold than in the GPU space. AMD has also managed to win market share from its most important competitor, Intel, in recent quarters. AMD's shares have declined 16% over the past month, but the company could rebound as its revenue and earnings growth accelerate, driven by the agentic AI boom.
2. Marvell Technology
Marvell Technology designs custom AI chips tailored to specific workloads. This is a booming business for reasons that go beyond the continued expansion of AI infrastructure spending. Custom AI chips can be highly cost-effective when deployed at scale, helping corporations save money. They can also allow them to diversify away from Nvidia's hardware. Some hyperscalers are doubling down on custom AI chips.
Alphabet and Amazon are even considering selling these chips to other companies (the former has already begun doing so), highlighting the rising demand for these products. Beyond custom AI chips, Marvell makes the networking, connectivity, storage, and data-processing chips that help data centers move and manage the massive amounts of information needed to run AI systems. So, the company could be a big winner in the medium run if the AI industry maintains a solid upward trend. Even though the stock is down 38% over the past month, it could still deliver strong returns over the medium term.
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Prosper Junior Bakiny has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
