Prediction: 1 semiconductor stock to reach Nvidia level in 10 years

Semiconductor stocks have captivated Wall Street since the start of 2023. Advances in the chip market have allowed dozens of other industries to take their technologies to the next level. Sectors such as artificial intelligence (AI), cloud computing, virtual/augmented reality, consumer technology, self-driving cars and more have benefited from new chip designs from companies such as Nvidia (NVDA -2.17%) and Advanced microdevices (AMD -2.76%). As a result, semiconductor companies have become some of the best choices for technology investments.

Shares of Nvidia and AMD have climbed 782% and 132% since the start of 2023, when an artificial intelligence boom began. Nvidia managed to get a head start on the industry and was able to immediately start supplying its chips to AI developers around the world. Meanwhile, AMD needed more time to produce competitive hardware.

However, AMD has made promising strides in AI in 2024 and could be on its way to making significant gains in the coming years. It’s a semiconductor stock that I predict will reach Nvidia’s $3 trillion market cap within 10 years.

AMD is expanding to better meet the demand for AI

Shares of AMD have climbed 12% since the release of second-quarter 2024 earnings on July 30, leading investors to a gain in artificial intelligence that proves the market has become the biggest driver of growth.

Total revenue rose 7% year-over-year to just under $6 billion, driven primarily by 115% growth in its AI data center segment and 49% growth in its customers. The quarter benefited from an increase in sales of AI graphics processing units (GPUs) and central processing units (CPUs).

In the past year, AMD has gone all-in on AI, expanding into several areas of the industry that will likely pay off over the next decade. The company unveiled its most powerful GPUs yet and announced plans to acquire server builder ZT Systems for $5 billion. Both moves make the company more competitive with Nvidia, with the acquisition allowing AMD to more quickly roll out its AI GPUs at a scale needed by cloud providers.

AMD’s chips have already attracted some of AI’s biggest players, with the company signing on Microsoftit’s Azure, Meta platformsand Oracle as clients. These cloud giants are in fierce competition with each other, requiring powerful hardware to stay competitive. As a result, demand for AI chips is likely to continue to grow for the foreseeable future, with AMD well positioned to enjoy major gains.

AI opportunities beyond GPUs

In addition to GPUs, AMD is planting seeds in the AI ​​market to diversify its positions and take advantage of future growth catalysts.

The company has a massive opportunity in AI central processing units. CPUs have been AMD’s specialty for years, with CPU market share rising from 18% in 2017 to 34% this year as it steadily took market share from Intel. Meanwhile, data from Verified Market Reports shows that the AI ​​CPU sector was valued at $15 billion last year and is expected to reach $410 billion by the end of the decade, expanding at a compound annual growth rate ( CAGR) of 29%.

Its processor expertise also gives AMD a potentially lucrative role in the rapidly expanding AI-enabled PC market. As demand for AI services has grown, so has the need for more powerful hardware. As a result, AI-enabled computers are expected to account for approximately 40% of all global computer shipments in 2025, with the market growing at a CAGR of 44% through 2028.

Nvidia’s market cap was $359 billion at the start of 2023. However, it hit $3 trillion in June 2024, just 18 months later, after a rally that boosted its stock by 738%. The company’s success was primarily fueled by massive growth in its AI GPU sales. Nvidia has successfully shown what is possible in one facet of AI. Meanwhile, AMD has laid the groundwork in several areas of the industry that could deliver significant stock gains.

AMD’s market cap is currently around $251 billion. The company’s stock should rise 1,200% to reach $3 trillion over the next 10 years. It’s a lofty goal, but not unattainable. With AMD stock up more than 3,000% since 2014, it might not be too far off.

Data by YCharts.

The chart above shows that AMD’s earnings will reach just over $7 per share by fiscal 2026. Multiplying that number by the company’s price-to-earnings ratio of 46 results in a share price of $336, projecting potential upside for the stock of almost 115% by 2026.

However, Nvidia’s spectacular growth in AI and AMD performance over the past 10 years suggests that growth may be conservative. As a result, AMD could be on a growth path to reach that coveted $3 trillion market cap within the next decade. The company is expanding rapidly and you won’t want to miss out.