3 Stocks Set to Skyrocket with Nvidia’s Continued Growth in 2024

Did you know that Nvidia's relentless growth in AI and gaming could send ripples through the tech industry, creating unprecedented opportunities for certain stocks? Imagine riding the coattails of one of the fastest-growing tech giants to bolster your investment portfolio. Nvidia's rise isn't just a solo act; it's a symphony that lifts others in its wake. As Nvidia's stock continues to soar, the benefits extend far beyond its own bottom line, transforming other companies into potential gold mines.

In this post, I’m going to dive into the drama and excitement surrounding three stocks that stand to gain the most from Nvidia’s unstoppable ascent. We’ll explore how Taiwan Semiconductor Manufacturing Company (TSMC), Advanced Micro Devices (AMD), and Micron Technology (MU) are strategically positioned to capitalize on Nvidia’s innovations and market dominance. These aren’t just peripheral players; they’re key allies in Nvidia’s mission to dominate the tech world. Buckle up, because we’re about to uncover the intricate web of partnerships and technological dependencies that make these companies prime beneficiaries of Nvidia’s success. Let’s cut through the noise and get to the heart of why these stocks are set to skyrocket alongside Nvidia.

1. Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC is the world’s largest contract chip manufacturer and a key supplier for Nvidia. As Nvidia’s demand for advanced semiconductors grows, TSMC stands to benefit immensely. In 2023, TSMC generated 11% of its revenue from Nvidia, amounting to approximately $7.73 billion. TSMC plays a crucial role in producing Nvidia's H100 and upcoming Blackwell architecture AI chips using advanced 4-nanometer processes and CoWoS packaging technology. The increasing demand for AI processors directly boosts TSMC’s revenue and growth prospects​​.

Reasons:

1. Technological Leadership: TSMC’s leadership in semiconductor technology makes it the go-to manufacturer for Nvidia’s most advanced chips. The company’s ability to produce 5nm and 4nm chips is critical for Nvidia’s high-performance GPUs, which are essential for AI, gaming, and data centers. This technological edge ensures that TSMC remains indispensable to Nvidia’s supply chain​​.

2. Capacity Expansion: To meet the growing demand from Nvidia and other clients, TSMC is heavily investing in expanding its production capacity. In 2024, TSMC plans to spend between $32 billion and $36 billion on capital expenditures, primarily to enhance its manufacturing capabilities. This investment will enable TSMC to support Nvidia’s future product launches and maintain its competitive edge in semiconductor manufacturing​​.

3. Strategic Importance: Nvidia’s reliance on TSMC for its cutting-edge chips underscores TSMC’s strategic importance in the tech ecosystem. Nvidia’s success in AI and gaming directly translates to increased production volumes for TSMC, ensuring a steady and growing revenue stream. As Nvidia continues to push the boundaries of AI and gaming technology, TSMC’s role becomes even more pivotal, cementing its position as a critical supplier​​.

4. Partnerships and Collaborations: The collaboration between Nvidia and TSMC goes beyond a simple supplier relationship. Both companies work closely to develop and refine chip technologies, ensuring that Nvidia’s products leverage the latest advancements in semiconductor manufacturing. This partnership not only boosts Nvidia’s performance but also drives TSMC’s innovation and growth​​.

5. Market Demand: The global demand for AI and gaming applications is surging, and Nvidia is at the forefront of this trend. As more industries adopt AI technologies, the need for high-performance GPUs grows, directly benefiting TSMC. The proliferation of AI-driven applications in healthcare, finance, autonomous vehicles, and more amplifies the demand for Nvidia’s products, thereby driving TSMC’s production and revenue​​.

Financial Performance: For 2023, TSMC reported a revenue increase of 26.5%, driven by strong demand for its advanced 5nm and 7nm chips. The company's net income for the year was $21 billion, representing a 23% year-over-year increase. TSMC's gross margin also improved to 54%, highlighting its operational efficiency and strong market position.

Future Prospects: TSMC’s continued investment in cutting-edge manufacturing technologies positions it well to meet Nvidia’s increasing demand for more powerful and efficient chips. The company is leading the charge in developing next-generation 3nm and 2nm processes, which are expected to further enhance the performance of Nvidia's GPUs and AI accelerators. With Nvidia’s focus on AI and gaming driving the need for high-performance semiconductors, TSMC is set for sustained growth. Analysts predict that TSMC's revenue from AI-related applications will continue to grow, further solidifying its partnership with Nvidia and its position as a critical player in the semiconductor industry​​.

2. Advanced Micro Devices (AMD)

While traditionally a competitor, AMD also collaborates with Nvidia in various technology areas. AMD’s CPUs and GPUs complement Nvidia’s offerings, especially in data centers and gaming. As the demand for advanced computing solutions grows, AMD stands to gain from the overall expansion of the market. AMD's innovative products like the Ryzen and EPYC processors play a critical role in supporting Nvidia's ecosystem, particularly in data centers and high-performance computing.

Reasons:

1. Complementary Products: AMD's CPUs and GPUs often complement Nvidia's offerings, especially in high-performance computing and gaming sectors. For instance, data centers frequently pair Nvidia's GPUs with AMD’s EPYC processors to optimize performance, thereby creating a symbiotic relationship that boosts AMD’s sales whenever Nvidia’s products are in demand​​.

2. Strategic Collaborations: AMD’s partnerships with major cloud service providers enhance its market presence. These collaborations often include Nvidia's GPUs, leading to increased adoption of AMD's CPUs in cloud and data center environments. As Nvidia continues to lead in AI and machine learning, the demand for AMD’s high-performance processors is expected to rise in tandem.

3. Technological Innovation: AMD's focus on innovation, particularly with its advanced 7nm and upcoming 5nm process technologies, ensures that its products remain competitive. This technological edge is crucial as it allows AMD to provide the high-performance computing power needed to complement Nvidia’s advanced GPUs in AI and gaming applications.

4. Expanding Market Share: AMD has been steadily increasing its market share in the CPU market, both in consumer and enterprise segments. This growth is bolstered by the performance and efficiency of its Ryzen and EPYC processors, which are often used alongside Nvidia's GPUs in high-demand applications, further driving AMD's revenue growth .

5. AI and Data Center Growth: The widespread deployment of AI is driving demand for significantly more compute across a broad range of markets. AMD’s data center business, which includes its EPYC processors and MI300 AI accelerators, is seeing substantial growth. This is directly related to the increased use of Nvidia GPUs, which require powerful CPUs and accelerators to function optimally​.

Financial Performance: In Q1 2024, AMD reported revenue of $5.5 billion, driven by strong performance in its Data Center and Client segments. The company's gross margin was 47%, and its net income reached $123 million. On a non-GAAP basis, AMD’s gross margin was 52%, with an operating income of $1.1 billion and net income of $1.0 billion, highlighting its robust financial health and profitability. The growth in AMD’s data center and AI segments underscores its strategic alignment with Nvidia's technological advancements​​.

Future Prospects: AMD’s innovation in processing power and energy efficiency, coupled with its strategic partnerships, positions it to capitalize on the expanding market for high-performance computing driven by Nvidia’s growth. Analysts forecast that AMD will experience significant revenue growth in 2024, further solidifying its market position. As Nvidia continues to lead in AI and gaming, AMD’s complementary technologies are expected to see increased adoption, driving sustained growth and profitability.

3. Micron Technology (MU)

Micron Technology is a leading provider of memory and storage solutions, essential components for Nvidia’s high-performance GPUs. As Nvidia’s sales and production scale, Micron benefits from increased demand for its advanced DRAM and NAND products. Specifically, Micron's High Bandwidth Memory (HBM3e) is used in Nvidia’s latest AI chips, which are integral to AI, gaming, and data center applications. The symbiotic relationship between Nvidia and Micron ensures that as Nvidia grows, so does Micron.

Reasons:

1. Key Supplier for AI Memory Needs: Micron has commenced mass production of HBM3e memory, which is a critical component for Nvidia’s H200 Tensor Core GPUs. This new generation of memory provides 30% better power efficiency compared to competitors, meeting the high demands of generative AI applications. This positions Micron as a pivotal supplier for Nvidia's AI initiatives​​.

2. Significant Revenue Contribution: In fiscal Q2 2024, Micron reported a revenue of $5.82 billion, a substantial increase from $3.69 billion in the same period last year. This surge is largely attributed to the growing demand for AI and data center applications powered by Nvidia’s GPUs. The tight supply of high-performance memory and increasing AI workloads are expected to drive further revenue growth for Micron​​.

3. Technological Advancements: Micron is at the forefront of memory technology with its HBM3e and upcoming HBM4 roadmaps. These innovations provide the high bandwidth and low latency required for advanced AI and machine learning workloads. By integrating these cutting-edge technologies, Micron ensures it can meet the future needs of Nvidia’s expanding product lines​​.

4. Strategic Partnerships and Collaborations: Micron's collaboration with Nvidia extends beyond simple supplier dynamics. Both companies work closely to develop and refine memory solutions that optimize the performance of Nvidia's GPUs. This deep partnership not only boosts Micron's sales but also drives joint innovation, creating a robust supply chain for AI and high-performance computing applications​​.

5. Market Demand for AI and Data Centers: The global demand for AI and data center solutions is surging, and Nvidia’s dominance in these markets translates to increased demand for Micron’s memory products. As AI models grow in complexity, the need for high-capacity, high-speed memory solutions becomes critical, positioning Micron for significant growth alongside Nvidia​​.

Financial Performance: In fiscal Q2 2024, Micron's revenue was $5.82 billion, up from $4.73 billion in the previous quarter and $3.69 billion in the same period last year. The company achieved a GAAP net income of $793 million, or $0.71 per diluted share, and a non-GAAP net income of $476 million, or $0.42 per diluted share. This strong financial performance reflects Micron's ability to capitalize on the growing demand for memory in AI and data center applications​​.

Future Prospects: Micron’s ongoing investments in advanced memory technologies and strategic expansions position it well to support Nvidia’s growing requirements. As AI applications and high-resolution gaming continue to expand, Micron is poised for sustained growth. Analysts project significant revenue increases for Micron, driven by its deep integration into Nvidia’s supply chain and the broader market demand for advanced memory solutions​​.

Conclusion

In summary, as Nvidia continues its meteoric rise, three companies are poised to benefit significantly from its success: TSMC, AMD, and Micron Technology. Each of these companies plays a critical role in supporting Nvidia's technological advancements, whether through manufacturing cutting-edge chips, providing complementary high-performance CPUs and GPUs, or supplying advanced memory solutions.

These companies are not just riding the coattails of Nvidia’s success but are also pivotal players in the broader semiconductor and technology ecosystems. However, investors should also consider the broader market conditions and potential challenges, such as supply chain disruptions or shifts in technology trends, which could impact these companies.

Final Thought

As Nvidia's influence in AI and gaming continues to grow, investing in companies that support and benefit from its success is a strategic way to diversify and strengthen your portfolio. TSMC, AMD, and Micron Technology are well-positioned to thrive alongside Nvidia, offering substantial growth opportunities. Stay informed and proactive in your investment decisions, and consider subscribing to our blog for more expert insights and analysis. Remember, understanding the interconnected nature of these technological giants can provide a significant edge in making savvy investment choices.

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