The AI and semiconductor boom shows no signs of slowing down, with governments and major venture capital players ramping up investments to drive further development. In the US, the CHIPS Act continues to allocate funds to domestic chipmakers, while just yesterday, SoftBank CEO Masa Son, alongside Donald Trump, announced plans to invest $100 billion in the US, focusing on AI and its supporting infrastructure.
Although we have been talking about the emerging AI industry consistently for the last two years, there is still so much room for it to grow. From new chip designs to massive data centers to power these compute-hungry large language models. Just yesterday Amazon (AMZN) announced plans to invest another $25 billion in data centers in Ohio alone.
Three semiconductor stocks have recently emerged as potential new leaders in this space—two of which are now outperforming Nvidia (NVDA)—and all have exciting catalysts driving their development. Last week, Micron Technology (MU) secured a $6.1 billion subsidy through the CHIPS Act to fuel its expansion in New York and Idaho, where it plans to invest another $125 billion in manufacturing. Meanwhile, Broadcom (AVGO) and Marvell (MRVL) delivered stellar quarterly earnings, driven by the rapidly growing demand for custom AI silicon. These stocks are now showing notable relative strength within the semiconductor industry, supported by improving earnings estimates.
Image Source: Zacks Investment Research
Custom AI Silicon is the Next Big Trend
Over the past few weeks, I’ve been diving deep into the custom AI chip industry, and it’s absolutely exploding. While Nvidia remains the clear leader in AI infrastructure with its full-stack solutions, hyperscalers are increasingly demanding chips tailored to manage specific workloads. This is where custom designers like Marvell Technology (MRVL) and Broadcom (AVGO) come into play.
Broadcom’s custom AI networking segment grew an impressive 158% year-over-year, adding billions in new revenue, while Marvell’s AI business is experiencing tremendous momentum, with the company projecting sequential 20% quarter-over-quarter growth in the coming year. What we’re witnessing is the rapid emergence of an entirely new semiconductor industry, and these two companies are leading the charge.
Broadcom recently rose from a rank #4 to a Zacks Rank #3 (Hold), indicating upward earnings revisions, but I would not be surprised if more upgrades began rolling in, and it soon jumped to a top rank. Marvell Technology on the other hand now boast a Zacks Rank #1 (Strong Buy) rating, with earnings estimates climbing by as much as 13.7% in the last 30 days. Furthermore, both stocks are showing incredible stock price momentum and are now the clear leaders in the semiconductor industry. Although both Marvell and Broadcom have surged in recent weeks because of the custom AI developments, I expect them to consolidate into year end and began another bull run soon.
Image Source: TradingView
Micron Technology Shares Primed to Rally
Micron Technology, though not yet as entrenched in the AI ecosystem, is still projected to do very well in the coming year. Because of the insatiable demand for servers and memory due to AI expansion, sales of DRAM and NAND chips are expected to surge next year, with Micron’s sales expected to climb 52% this year and 24% next year and earnings to jump 566% and 45% respectively.
Micron is also trading at a very reasonable valuation, with a forward earnings multiple of just 13x. Since Micron’s business is primarily focused on memory—traditionally a less lucrative segment of the semiconductor industry—it tends to command a lower multiple. That said, this valuation is right around its long-term historical median, while sales and earnings are projected for huge growth.
While Micron does not show quite the momentum or relative strength of Broadcom and Marvell, its technical setup is quite appealing. It has also outperformed semiconductor juggernaut Nvidia over the last three months. If MU stock can break out above the $110 level, I expect it to go on a major bull run.
Image Source: TradingView
Should Investors Buy Shares in MU, AVGO and MRVL?
The outlook for these three stocks is quite compelling, and investors looking to increase their exposure to semiconductors or AI may consider adding them to their portfolios. Broadcom and Marvell are leading the charge in the emerging custom AI silicon industry, while Micron is poised for strong growth and trades at an attractive valuation relative to those growth forecasts.
Additionally, US policy remains highly supportive of the semiconductor industry and the broader business environment. With these tailwinds in place, now appears to be an exciting and promising time to invest in the markets.
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