Reviewing 3 AI Stocks: NVDA, TSM, and SNPS
At first glance, the performance of Apple and other prominent Big Tech companies may appear to be the driving force behind the S&P 500’s positive performance this year. However, if we exclude the impact of artificial intelligence (AI), the index would be in negative territory.
Among these AI-focused companies are Nvidia, whose shares have more than doubled in value this year due to its AI integration plans into chips. In this article, we look at Nvidia and 2 other AI stocks notably Taiwan semiconductor, and Synopsys Inc.
Nvidia stocks (NVDA: XNAS)
Nvidia is a renowned technology company that specializes in the design of graphics processing units (GPUs).
Despite the underwhelming sales of the RTX4070 gaming card, Nvidia’s long-term commitment to new AI applications positions the company well for growth. For instance, the company’s graphics processing units play a crucial role in powering the AI software utilized by Open Ai’s highly acclaimed ChatGBT program. It is of note that NVIDIA has outperformed the market over the past 20 years by 20.98% on an annualized basis producing an average annual return of 28.66%. Currently, NVIDIA has a market capitalization of $770.34 billion.
Moreover, NVIDIA’s AI focused strategy has the potential to revitalize Nvidia’s earnings and propel its stock price, making it an appealing choice for long-term investors. Nvidia’s positive sentiment is enforced by virtue that about 74% of Wall Street analysts have Buy or equivalent ratings for the stock.
Technical analysis of Nvidia
- For the year, the stock seemed to have been consolidating between the 21st of March and the 28th of April (Inclusive).
- A breakout was formed on the first of May, and the stock has been making higher highs ever since (at the time of writing). And, despite a slight gap down in the stock due to China’s ban on Micron Technology’s products, Nvidia’s shares recovered and traded near flat during Monday’s session.
- Moreover, the stock price has bounced off the trend line indicating a strong uptrend. Short term traders may wait for price to retrace back to the trendline before entering a long position on this stock.
Taiwan Semiconductor Stocks (TSM: xnys)
TSM is a prominent multinational corporation based in Taiwan. It operates in the semiconductor industry and specializes in contract manufacturing and design services for semiconductors. It is also the world’s largest dedicated independent semiconductor foundry, and its customers include Apple, Qualcomm, Nvidia, and AMD. Additionally, TSM’s expertise in advanced chip manufacturing, customized AI solutions, manufacturing capacity, collaboration with AI innovators, and continuous technological advancements make it a highly relevant player in the AI world.
However, since TSM’s HQ is based in Taiwan, it found itself caught in the middle of the ongoing chip wars between the U.S. and China. Conversely, a senior executive from Taiwanese chip manufacturer TSMC has revealed that the company is considering the construction of a factory in Germany as a strategic move to mitigate potential concerns regarding the future supply chain.
Furthermore, TSM, and Samsung Electronics, have announced their own projects in the U.S. ahead of the passage of the Chips Act. They are expected to seek federal subsidies for their chip factories in Ohio, Arizona, and Texas.
Technical Analysis of TSM
- The price action for this stock is not as clear as Nvidia.
- Since it is fairly close to a resistance line, investors may wait for a breakout at USD 91.70 before considering a long position.
Synopsys Inc Stocks (SNPS: xnas)
Synopsys Inc provides electronic design automation (EDA) tools and software solutions for designing and manufacturing semiconductors, integrated circuits, and electronic systems. Synopsys Inc is a highly relevant player in the AI world due to its significant contributions in enabling and advancing artificial intelligence technologies.
As a result of the company’s Q2 financial results surpassing expectations and its issuance of FY23 guidance, the stock has experienced a rise in its share price. The company’s earnings for the quarter amounted to $272.91 million, or $1.76 per share, in contrast to $294.78 million, or $1.89 per share, in the second quarter of the previous year. After adjusting for certain items, Synopsys, Inc. disclosed adjusted earnings of $393.28 million, or $2.54 per share, for the period.
Subsequently, JP Morgan analyst Jackson Ader has reiterated an Overweight rating for Synopsys. Ader has also raised the price target for Synopsys from $440 to $470, indicating an optimistic outlook for the company’s stock.
Technical analysis of Synopsys Inc
- The stock is trading above both the 21,50 and 200 simple moving averages.
- And is currently trading above a support line which was previously a resistance line until price broke through last Thursday the 18th of May.
- If price bounces off the support line of USD 389, that might present a long opportunity for investors.
Investors Note
Among the 3 stocks reviewed, it is submitted that Nvidia is more consistent in terms of fundamentals and price action. However, as an AI stock, Synopsis has also shown promising potential especially since it has beaten recent earning expectations. And investors may keep an eye on whether Synopsis will bounce on the current support line of $389.