My 3 Top Artificial Intelligence (AI) Semiconductor Stocks for August 2024

The biggest beneficiaries of the AI boom are semiconductor stocks, as chips lay the foundation for parallel computing used for AI workloads.

| More on:
A microchip in a circuit board powers artificial intelligence.

Source: Getty Images

Developing semiconductors is one of the most complex and expensive forms of technology. With the speed at which computing power is growing, building a chip from scratch will take years and billions of dollars. China has been looking to generate its own chips but failed to beat the United States in advanced chips. Such entry barriers make Artificial Intelligence (AI) semiconductor stocks a worthy investment.

However, note that semiconductor stocks are cyclical. Technology has a short product lifecycle. Whenever a new tech trend comes, you see an upgrade cycle. As soon as the industry finishes upgrading, chip stocks enter a down cycle. Semiconductor stocks surged in 2021 as the work-from-home mania, electric vehicle demand, crypto bubble, and generative AI frenzy drove demand for chips.

Three top AI semiconductor stocks for August

The Nasdaq saw a correction in early August as a few tech giants released tepid earnings, and U.S. job data fueled fears of recession. None of these events have anything to do with the AI revolution shaping the future of technology. However, the bear market has created an opportunity to buy AI semiconductor stocks, which can give assured returns.

Nvidia stock

Created with Highcharts 11.4.3Nvidia PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Nvidia (TSX:NVDA) stock has slipped more than 20% since mid-June amid market weakness. It is also seeing some delays in its AI chip Blackwell due to design flaws. However, these delays are unlikely to impact Nvidia’s competitiveness as there is still significant demand for its existing AI semiconductor chips. Moreover, Nvidia is more than just a chip designer. It offers a full stack of AI hardware/software solutions with different libraries that serve as the foundation models for deploying artificial intelligence.

Nvidia has built these libraries over the years, working with different verticals to understand their workings and integrate artificial intelligence into their systems. It has worked with automakers, healthcare providers, product and building architects, and movie makers to develop software stacks compatible with its AI chips. This AI infrastructure is what makes Nvidia sticky and a market leader.

So far, generative AI has only unleashed the data centre potential. Upcoming technologies of robotics, omniverse, and autonomous cars will create new growth cycles, and Nvidia will be a key beneficiary. It is a stock to buy on the dip and hold even if its valuation seems high because the growth is exponential.

Broadcom and AI

Created with Highcharts 11.4.3Broadcom PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Broadcom (NASDAQ:AVGO) is picking up on the AI trend. It learned that semiconductors alone are not enough. Today’s technology needs a full stack of hardware and software solutions to give businesses a headstart in AI applications. Thus, it acquired cloud solutions provider VMWare to build on its cloud capabilities and make its networking and storage chips more relevant.

Broadcom is working on a custom AI ASIC (application-specific integrated circuit) with Meta Platform and Alphabet’s Google. It expects artificial intelligence chips to represent a US$150 billion opportunity. The company is playing on its strengths and upgrading its technology with time. It is seeing an increasing demand for its networking switches as companies upgrade to AI. Broadcom stock could help you ride the AI cycles from time to time.

AMD stock

Created with Highcharts 11.4.3Advanced Micro Devices PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Advanced Micro Devices (NASDAQ:AMD) is another semiconductor stock you can bank on to ride the AI wave. It has a comprehensive portfolio of central processing units (CPUs) for pre-AI computing, graphics processing units (GPUs) for parallel computing power, and fixed programmable gate arrays (FPGAs) for accelerators.

AMD has compiled all its chip capabilities to build an end-to-end AI infrastructure. Like Nvidia, AMD has been investing in building software capabilities and libraries to make the adoption of its chips in various applications easier. While Nvidia is still a leader, AMD’s AI solutions are also in demand as they are cost-effective and give companies a good alternative.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool recommends Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. Fool contributor Puja Tayal has no position in any of the stocks mentioned.

More on Tech Stocks

Safety helmets and gloves hang from a rack on a mining site.
Tech Stocks

Where I’d Invest $300 in the TSX Today

A TSX stock with a leading-edge safety technology is a screaming buy today for its high-growth potential.

Read more »

Map of Canada showing connectivity
Tech Stocks

1 Magnificent Canadian Stock Down 16% to Buy and Hold Forever

This Canadian stock might be one of the best opportunities out there right now while shares are down.

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

This AI Stock Could Turbocharge Your TFSA With Substantial Growth Potential by 2030

Down almost 60% from all-time highs, AMD is an AI stock that has significant upside potential. Is the tech stock…

Read more »

a-developer-typing-lines-of-ai-code-while-viewing-multiple-computer-monitors
Tech Stocks

Constellation Software Looks Like a Tremendous Buy Today 

Constellation Software stock, which crossed the $5,000 mark, is trading below $4,500, presenting a compelling buy opportunity.

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Top Canadian Stocks to Buy for Great Growth in 2025

There are some Canadian stocks starting to recover, and these two look like top choices.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Canadian Artificial Intelligence Stocks to Buy and Hold Until 2040

These three Canadian tech stocks to help you benefit from the surging demand for AI tech and infrastructure in the…

Read more »

money goes up and down in balance
Tech Stocks

Billionaires Are Selling Apple Stock and Buying This TSX Stock in Bulk

Billionaires might be dumping Apple stock after it lost over US$600 billion last week. But this other tech stock looks…

Read more »

Data center woman holding laptop
Tech Stocks

Better Tech Stock: Lightspeed Vs. Kinaxis?

These two tech stocks were once on top of the world, but after coming down in price, it might be…

Read more »