The semiconductor and chip stock market is experiencing a slight dip on Wednesday, with notable players like Nvidia Corp (NVDA), Taiwan Semiconductor Manufacturing Co (TSM), Broadcom Inc (AVGO), Marvell Technology Inc (MRVL), and Lam Research Corp (LRCX) all trading lower. This downturn comes ahead of Nvidia’s highly anticipated fiscal second-quarter earnings release, reflecting the interconnected nature of the semiconductor ecosystem.
The sell-off is also attributed to recent news regarding Nvidia partner, Super Micro Computer, Inc (SMCI). The company has been called out by Hindenburg Research for alleged accounting malpractices, related-party transactions, and other issues, leading to a delayed annual report filing. As a result, Super Micro’s stock has plummeted by nearly 27%.
However, the overall outlook for the semiconductor industry remains positive, driven by the continued rise of artificial intelligence (AI). Nvidia’s second-quarter fiscal 2025 revenue guidance of $27.44 billion to $28.56 billion represents a substantial increase from the $13.51 billion reported in the previous quarter. This growth underscores the strong AI tailwind the company is experiencing. Notably, Nvidia’s stock has soared over 172% in the past 12 months.
JPMorgan analyst Harlan Sur believes Broadcom is well-positioned to capitalize on the $150 billion+ AI semiconductor opportunity over the next five years. Sur highlights Broadcom’s strategic partnerships with key players like OpenAI (the creator of ChatGPT) and its role in developing Alphabet Inc’s (GOOG, GOOGL) next-generation 3nm TPU AI processor. Broadcom’s stock has gained over 87% in the past year. Sur also emphasizes Broadcom’s dominant position in the data center/AI Ethernet switching and routing chipset market, holding an estimated 80% market share. This dominance puts Broadcom ahead of competitors like Nvidia and Marvell Technology.
Taiwan Semiconductor, a major supplier to Nvidia and a leader in the global foundry market with a 62% share, is another beneficiary of the AI boom. The company projects third-quarter revenue of $22.4 billion to $23.3 billion, a significant increase from the $17.3 billion reported a year ago. This growth is fueled by robust demand for AI chips in high-performance computing and smartphones. To maintain profitability, Taiwan Semiconductor plans to increase prices for its 3nm and 5nm process products. Its stock has risen over 80% in the last 12 months.
Super Micro, a prominent AI server company, is experiencing a surge in demand for its products from major tech giants. The company expects first-quarter revenue of $6 billion to $7 billion, compared to the $2.12 billion reported a year ago. This strong growth has driven Super Micro’s stock up over 61% in the past year.
Marvell Technology anticipates second-quarter revenue of $1.19 billion to $1.31 billion, compared to $1.34 billion a year ago. This growth is attributed to increasing demand for custom AI silicon in data centers, enterprise networking, and carrier infrastructure. Marvell’s stock has climbed over 24% in the last 12 months.
Finally, Lam Research, a leading provider of wafer fab equipment, expects first-quarter revenue of $3.75 billion to $4.35 billion, an increase from the $3.48 billion reported a year ago. This growth is driven by the demand for AI-powered chips, allowing Lam Research to capitalize on the significant spending in wafer fab equipment. Lam Research’s stock has gained over 20% in the past year.
While the recent sell-off in some semiconductor stocks might raise concerns, the strong AI tailwind and the continued growth expectations from key players in the sector point to a promising future for the industry. The overall trend suggests that the semiconductor industry is well-positioned to benefit from the increasing adoption of AI technologies.
