Why AI Chip Stocks Advanced Micro Devices, Arm Holdings, and Marvell Technologies Gathered This Week

Shares of AI-related semiconductor stocks Advanced microdevices (AMD 0.56%), Arm holds (ARM 4.83%)and Marvell technology (MRVL 1.00%) rose this week by 12.2%, 18.7% and 12.2%, respectively, at the close of trading on Thursday, according to data from S&P Global Market Intelligence.

AI stocks took a nosedive over the summer and early September as recession fears and doubts about the longevity of AI investments took hold.

But this week, some inflation readings and positive comments from both tech executives and analysts led investors to buy the chip dip.

Cooling inflation and hot spending in AI are driving chip stocks higher

AMD released its AI graphics processing unit (GPU) called the MI300 last year; is a genuine alternative to the industry leader Nvidia (NASDAQ: NVDA). Marvell is one of two chip names that make custom ASICs that go into AI accelerators designed by cloud giants. And Arm’s chip architecture is used in iPhones and Macs, which are now infused with more AI and increasingly used in data center servers. For example, Arm is used in Nvidia’s data center Grace processor, among others.

After the AI ​​chip stock pullback that began in September, AI names were ready to respond to any good news — and there was a lot of good news this week.

First, Goldman Sachs held the annual technology conference Communacopia, attended by virtually every top technology executive, including those from AMD and Marvell, in addition to industry leader Nvidia.

To a T, virtually all of these executives remained optimistic that artificial intelligence (AI) will continue to improve and that investment in AI infrastructure will continue next year and beyond. Specifically, Nvidia CEO Jensen Huang said demand for its products has been so high that conversations with customers have become “tense” and “emotional” to get enough supply.

AMD CEO Lisa Su also appeared at the conference, optimistically saying, “What really surprised me is how fast technology is moving… We’re learning at an incredibly fast pace.”

Meanwhile, the leading database and cloud provider Oracle (NYSE: ORCL) held up its earnings and a conference call Monday night. On the call, founder and chairman Larry Ellison said optimistically:

I think this is an ongoing battle for technical supremacy that will be fought by a handful of companies and maybe a nation-state for at least the next five years, but probably more than 10. So this business is growing bigger and bigger. . There is no slowing down or change coming.

Image source: Getty Images.

These upbeat comments from the executive also matched positive comments from the analyst community. Top foundry Taiwan Semiconductor Manufacturing (TSM 0.97%) released its August revenue figures this week, with revenue up 33% year-over-year. That puts the foundry on track to beat its third-quarter guidance, according to analysts at JPMorgan and Chase. And if TSMC beats its quarterly revenue guidance, that implies overblown growth for these three names, given that TSMC makes the chips for each of the companies above.

Meanwhile, AMD received buy ratings from both City Group and UBS this week, with UBS calling it “a top pick” for 2025.

Arm also received a boost from industry analysts and commentators. First, Apple (AAPL 0.03%) held the iPhone 16 launch event. Over the weekend, the Financial Times reported that the iPhone 16 will use the Arm V9 architecture, the most advanced — and therefore most expensive — neural processing architecture on the device to power the iPhone’s new Apple Intelligence capabilities.

In addition, Arm was named a “top pick” and given a $175 price target by analysts at Morgan Stanley — more than 25% above the current share price. Morgan Stanley noted that Arm has a material growth opportunity in high-end AI servers, which will see growing demand for low-power processing closer to where data is generated and used in the future.

Along with broadly upbeat AI commentary, this week’s Consumer Price Index (CPI) and Producer Price Index (PPI) inflation reports showed inflation continuing to ease, putting the Federal Reserve on track to cut interest rates. The combination has seen AI chip stocks bounce back strongly from near-term lows.

Still early innings for AI

Over the summer, older investors likely began to fear a slowdown in AI growth, as was the case at the end of the dot-com bubble and subsequent crash 25 years ago. However, industry commentary and TSMC results indicate an AI slowdown is not on the horizon anytime soon. When combined with moderating inflation and interest rate cuts likely to come soon, it’s no wonder these favorite AI chips made a comeback this week.