Semiconductor stocks are gaining importance as the technology is increasingly significant in everyday life. They’re in almost all advanced electronics, from your car to your smart refrigerator.
But semiconductors also play an essential role in the growth of artificial intelligence technology. If you’re convinced, as I am, that the development of AI will change the world, it only makes sense to look at semiconductor stocks as an AI play.
Semiconductor chips are essential. They can handle massive data loads and perform complex calculations rapidly.
Computers process data through graphics processing units and field-programmable gate arrays using semiconductors.
Semiconductors power AI accelerators that allow for real-time processing to power AI technology. There are plenty of semiconductor stocks from which you can choose. But if you look at the Portfolio Grader ratings, these seven semiconductor stocks rise to the top of the class.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) stock is up nearly 100% in 2023. It’s off to a tremendous start. While some may think that Nvidia’s already at or close to its peak, there’s still some time to jump on this rocket ship.
Nvidia’s A100 chip provides the processing power for OpenAI’s massively popular ChatGPT. That’s one reason why NVDA is up so much.
But Nvidia also works on DGX supercomputers, the ultimate machine learning-compatible hardware. Customers around the world are already using the DGX H100 supercomputer system, according to Nvidia CEO Jensen Huang.
Add Nvidia’s revolutionary work with AI to its already robust gaming business, and you have a semiconductor company with a bright future. NVDA stock has a “B” rating in the Portfolio Grader.
Enphase Energy (ENPH)
I like Enphase Energy (NASDAQ:ENPH) because it has a great business model. The company makes and sells microinverter-based solar storage systems allowing residential customers to collect and store solar power for their homes. They can even sell excess power back to suppliers.
The company has a heavy reliance on semiconductors and AI technology. The semiconductor-based system connects solar generation, storage and energy management into a single intelligent platform. The Enphase app allows customers to monitor how much power their home uses and adjust as needed.
Solar energy will be even bigger in the next few years. The Inflation Reduction Act signed into law last year includes $10 billion in new tax credits for developing green technologies.
Earnings for the first quarter included revenue of $726 million, a 64% increase from a year ago, and earnings per share of $1.37. Both topped analysts’ estimates.
ENPH stock has a “B” rating in the Portfolio Grader.
SolarEdge Technologies (SEDG)
An Israeli company, SolarEdge Technologies (NASDAQ:SEDG) sells solar inverters that help customers transfer solar energy into electricity. It uses semiconductors and AI to power its DC-optimized inverter system, which connects to each solar module and turns them into smart modules.
The SolarEdge system is compatible with utilities, commercial customers and residential systems, making it possible for customers to store solar energy.
Earnings for the first quarter included $943.9 million in revenue, which topped analysts’ estimates for $931.8 million. Earnings of $2.90 per share easily topped expectations of $1.95 EPS.
SolarEdge also got a boost from Deutsche Bank analyst Corinne Blanchard, who increased her price target from $305 to $375 and upgraded the stock from a “hold” to a “buy” rating.
SEDG stock is also highly rated in the Portfolio Grader, where it gets a “B.”
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is also getting a boost from the Inflation Reduction Act and is spending $1.2 billion to scale up production of its photovoltaic solar modules.
It also announced plans to buy Evolar, a European company whose acquisition will allow it to accelerate its development of next-generation PV technology. News of the Evolar deal pushed FSLR stock up 22% and is up more than 54% in 2023.
Analysts are taking notice. Bank of America raised its price target from $205 to $232, and Guggenheim raised its price target from $248 to $277.
FSLR’s first-quarter earnings of $548.29 million was up 49% from a year ago. It has an “A” rating in the Portfolio Grader, making it one of the semiconductor stocks you don’t want to miss out on.
Shoals Technologies Group (SHLS)
Shoals Technologies Group (NASDAQ:SHLS) develops products to make your solar platforms operate better. It develops electrical balance of system products that allow the energy collected by solar panels to be transferred to the power grid.
Its products include what it calls its Big Lead Assembly.
This is a simplified wiring system for solar panels that is free of traditional DC string combiners; a harness system that combines the functionality of cable assemblies, combiner boxes and fusing; and above-ground systems that eliminate the need for standard combiner boxes and conductor string wires.
Shoals is also in the EV charging business, including power stations and services for charge point operators that will allow them to deploy portable EV charging systems within a day.
Earnings in the first quarter included revenue of $105.09 million, an increase of nearly 55% from a year ago. The revenue and profits of 14 cents per share beat analysts’ expectations for $97.25 million in revenue and EPS of just 10 cents.
SHLS stock has an “A” rating in the Portfolio Grader, making it one of the best semiconductor stocks to buy.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) designs, manufactures and supplies semiconductors and software products used in broadband and wireless communications systems.
Last month, it unveiled its Jericho3-AI chip. It claims it’s “the industry’s highest performance fabric for artificial intelligence networks.”
Jericho3-AI helps network operators perform, even with heavy data loads required by AI demands. It can connect up to 32,000 GPUs simultaneously, making shorter job completion times possible.
Broadcom will be counting on the Jericho3-AI chip to boost the stock price. AVGO stock is up 14% this year – solid but far behind Nvidia’s 2023 performance.
Analysts have a consensus price target of $691, indicating a near-term upside of roughly 8%. But I wouldn’t be surprised for Broadcom to exceed those projections. AVGO stock has a “B” rating in the Portfolio Grader.
Analog Devices (ADI)
Headquartered in Massachusetts, Analog Devices (NASDAQ:ADI) designs, manufactures and sells analog, mixed-signal and digital signal processing integrated circuits.
Its entry into AI comes in the form of a line of AI microcontrollers that run AI commands hundreds of times faster and with lower energy than other products, according to the company.
The microcontrollers are designed for small machines, such as smart home thermostats, wearable devices and cameras.
Analog also has AI accelerators that are designed to handle the processing needs of deep learning neural network computation machines and machine learning.
Earnings for the company’s fiscal first quarter included revenue of $3.25 billion and profits of $2.75 per share, which topped expectations of $3.15 billion and EPS of $2.60.
ADI has a “B” rating in the Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NVDA, ENPH, FSLR, SHLS and AVGO. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.