ASML, AMD, and Super Micro Compute Soar on AI and Chip Demand

Semiconductor stocks extend gains as upgrade cycle and AI hype propel shares higher

7 min readJan 24, 2024

Trending Tech Stocks and How They’re Shaping the Industry

The semiconductor sector has been on a tear so far in 2024, and several stocks hit new highs today. ASML Holding, Advanced Micro Devices, and Super Micro Computer are three that are catching my eye and seem poised for further upside.

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ASML is a semiconductor equipment manufacturer based in the Netherlands. Their tools are critical for chipmakers like Intel, Samsung and TSMC to produce the most advanced chips. Bernstein analysts upgraded ASML to a Buy rating, noting the stock looks attractively priced compared to peers. They see strong earnings growth continuing through 2025 as the upgrade cycle for ASML’s extreme ultraviolet lithography machines kicks into high gear. This next-gen tech will allow chipmakers to cram even more transistors onto each chip.

The optimism propelled ASML to a fresh 2-year high, reclaiming its spot as Europe’s 3rd largest public company. With geopolitical tensions around technology supply chains, investors are recognizing ASML’s vital role enabling cutting edge chip production across the globe. Even with today’s gains, ASML still trades at a reasonable forward P/E of 26. I expect demand for their tools to remain robust, supporting further share price appreciation.

Advanced Micro Devices is down slightly today after an analyst at Northland Capital Markets downgraded AMD to Market Perform. The firm believes enthusiasm around AI computing power has inflated AMD’s valuation, with the actual opportunity more muted than markets anticipate. No doubt AI is transformative, but it seems prudent to temper short-term expectations.

AMD shares are still up over 12% year-to-date on hopes they can capitalize on AI’s emergence. While Nvidia captures most headlines for their graphics processing units optimized for AI, AMD competes across the full spectrum from chips to cloud computing. And with strong recent financial results, AMD should continue making inroads in this explosive market. AI caution may cool the stock near-term, but long-term growth drivers remain intact.

Speaking of AI hype fueling chipmakers, Super Micro Computer extended record highs after forecasting surging generative AI demand will drive quarterly results far beyond expectations. Supermicro makes servers and other hardware optimized for data center computing. With expertise optimizing systems for artificial intelligence workloads, Supermicro is emerging as a key AI infrastructure partner.

Unlike most semiconductor firms, Supermicro actually outpaced Nvidia’s growth over the past year. Trading at just 16 times forward earnings, Supermicro remains attractively valued given their leadership enabling the AI revolution. Companies racing to leverage generative AI could provide Supermicro’s next leg higher.

It’s an exciting time in technology, with seismic shifts underway in areas like artificial intelligence. The semiconductor industry sits at the center of enabling these innovations. ASML provides the tools for next-gen chip production. AMD competes across the AI chip spectrum. And Supermicro powers optimized AI computing infrastructure.

While hype can cause occasional hiccups, powerful secular trends point to robust growth. I’m keeping a close eye on these three stocks and think long-term investors will be rewarded. The future is being built on advanced chips, and companies delivering solutions to make AI real will thrive.

ASML Upgraded on Attractive Valuation and Strong Growth Outlook

ASML Holding, the dominant provider of lithography equipment for manufacturing semiconductor chips, received a boost today from a Bernstein analyst upgrade. Citing an attractive valuation compared to industry peers, Bernstein upgraded ASML to Buy from Neutral. They see the company continuing to deliver strong earnings per share growth through 2025.

The positive note pushed ASML shares to a fresh 2-year high, allowing the stock to regain its position as Europe’s 3rd largest public company by market capitalization. ASML plays a pivotal role enabling leading-edge chip production. Their extreme ultraviolet (EUV) lithography tools are required by foundries like TSMC and Samsung to manufacture the most advanced chips powering everything from smartphones to supercomputers.

Given geopolitical tensions around semiconductor supply chains and advanced chip capabilities, investors are recognizing the vital nature of ASML’s technology. EUV lithography breaks the laws of physics to print tiny features on silicon wafers not possible with traditional tools. ASML spent over a decade and billions of dollars developing EUV technology. Their expertise and unmatched capabilities provide a wide competitive moat.

With today’s gains, ASML stock trades around $850 per share. But even at these levels, shares still boast a reasonable forward price-to-earnings ratio of 26. EPS growth over 25% this year and next further supports the stock’s valuation. ASML also pays a small dividend yielding around 0.5%.

Between technology megatrends like 5G connectivity, artificial intelligence, high performance computing, and automotive electronics, demand for advanced logic and memory chips continues accelerating. ASML’s order book already stretches into 2025. While uncertainty always exists predicting the future, ASML looks well positioned to continue growing at a healthy clip.

Bernstein’s upgrade recognizes ASML’s reasonable valuation given their leadership, growth trajectory, and pivotal role fueling technology innovation globally. The analyst community remains overwhelmingly bullish on ASML with 15 Buy ratings and only 4 Hold ratings among firms tracked by Bloomberg. With today’s fresh highs, I expect the upside can continue for this premier semiconductor equipment maker.

AMD Shares Pressured as Analyst Cools AI Enthusiasm

Advanced Micro Devices (AMD) stock is modestly lower today after Northland Capital Markets downgraded shares to Market Perform from Outperform. The firm believes investor enthusiasm around artificial intelligence computing power has driven AMD’s valuation too high, with the actual financial opportunity more muted than markets anticipate. It seems prudent to temper short-term AI expectations, although the long-term outlook remains explosive.

No doubt AI represents a transformative emerging workload, although real-world adoption and infrastructure build-out takes time. AMD shares are still up over 12% year-to-date largely on hopes the company can capitalize on AI’s emergence. Nvidia captures most headlines for their graphics processing units (GPUs) purpose-built for AI workloads. However, AMD competes across the full spectrum from optimized AI chips to cloud computing.

And with strong recent financial results, AMD continues making inroads powering AI solutions. Last quarter, AMD reported 68% annual revenue growth along with a 60% surge in net income. Demand for their latest Ryzen and EPYC processors remains very robust. Data center revenue, which includes server CPUs and AI/ML focused GPUs, grew a staggering 175% year-over-year.

AMD has come a long way since a brush with bankruptcy in 2015. Under CEO Lisa Su’s leadership, the company executed a remarkable turnaround built on chip design innovation and solid execution. So while today’s downgrade adds some caution around AI hype, AMD’s long-term growth story remains intact. The emergence of artificial intelligence, along with trends like cloud computing and gaming, provide strong tailwinds.

Near-term, AMD stock will likely cool off if AI optimism moderates. Shares still trade for a lofty 44 times forward earnings. But over the long run, AMD should continue gaining share across a range of attractive, high-growth markets. AI solutions will remain a priority, even if the hype outpaces reality for now. Risks always exist, but I believe AMD has the talent and technology to deliver upside from current levels.

Super Micro Surges on White-Hot AI Demand

Super Micro Computer saw its shares extend record highs after the company forecast surging demand related to generative artificial intelligence will drive fiscal third quarter results well beyond expectations. The server and IT infrastructure leader predicts revenue for the quarter ending March 31st will easily eclipse the high end of their prior outlook.

Earnings per share are now expected to land between $2.50 to $2.70, crushing the previous forecast of $1.70 to $1.90. Supermicro is seeing rapidly growing customer interest related to research and deployment of generative AI models like ChatGPT. Their hardware optimized for AI workloads provides significant performance advantages, leading to booming order activity.

Unlike most semiconductor and hardware firms, Supermicro actually managed to outpace Nvidia’s revenue growth over the past year. While Nvidia rightfully garners attention for their leadership in graphics processing units powering AI, Supermicro is emerging as a critical backend infrastructure partner. Their systems integrate best-in-class components like GPUs into solutions tailor-made for artificial intelligence workloads.

Trading at just 16 times forward earnings, Supermicro remains attractively priced given rapid growth and leadership enabling the AI revolution. The stock’s valuation gap to other chipmakers has narrowed but more upside seems likely as generative AI gains momentum. Many organizations are still experimenting with how to best leverage the technology, providing a long runway for growth.

Demand for Supermicro’s hardware and expertise continues accelerating across technology, academic, and government customers. Large hyperscale cloud operators like Microsoft and Meta are also key buyers. As companies race to productize generative AI, Supermicro looks poised to continue riding the wave higher.

Powerful secular trends are colliding, from exponential data growth to increased computing prowess to software breakthroughs like deep learning and generative AI. As a hardware backbone enabling these innovations, Supermicro enjoys multiple demand drivers. Today’s guidance increase provides the latest sign of vigorous growth. I’m bullish on Supermicro’s prospects capitalizing on surging AI demand over the coming years.