Five Semiconductor Income Investments to Purchase for Artificial Intelligence Growth

Five semiconductor income investments to purchase for artificial intelligence growth offer a tempting way to profit from the technology. 

The five semiconductor income investments to purchase are targeting growth in artificial intelligence opportunities to tap into one of the hottest technology trends in many years. These five semiconductor income investments are leading the way in a coveted market that investors increasingly have been pursuing to gain exposure to the cutting-edge artificial intelligence capabilities.

A broad-based fund with a decent dividend yield that offers some exposure to semiconductor income investments tied to artificial intelligence is First Trust NASDAQ Technology Dividend Index (TDIV). The ETF tries to track the Nasdaq Technology Dividend Index, which is composed of technology and telecommunications companies.

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Pension Chairman Carlson Chooses One of Five Semiconductor Income Investments to Purchase

TDIV recently had 94 holdings, and its 10 largest positions accounted for 59% of its assets, said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter. The biggest weightings recently were Microsoft (NASDAQ:MSFT), Apple (NASDAQ: AAPL), Intel (NASDAQ: INTC), Broadcom (NASDAQ: AGVO) and IBM (NYSE: IBM). Roughly 13% of the fund is invested in communication services, while the rest fit into the technology sector, he added.

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The fund lost 22.12% in 2022 but is up 21.56% so far in 2023. Plus, the stock’s dividend yield hovers near 2.1%.

Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz.

The three of the five semiconductor income investments to purchase each offer Ethernet technology that holds advantages such as scalability, compatibility and vast ecosystems, according to BofA Global Research. Those companies also should benefit from the rise of artificial intelligence (AI) workloads.

NVIDIA Noses Past Rivals as One of Five Semiconductor Income Investments to Purchase

A leader in important Ethernet technology is NVIDIA Corporation (NASDAQ: NVDA), a Santa Clara, California-based provider of accelerated computing capability. The company is credited with inventing graphics processing units (GPUs) that spurred growth of the personal computer gaming market, as well as enhancing computer graphics and artificial intelligence. 

NVIDIA obtained a $500 price objective from BofA, based on valuations that assessed data demand potential, as well as strong, long-term demand. 

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Skousen Champions NVIDIA Among Five Semiconductor Income Investments to Purchase

Mark Skousen, PhD, an economist who serves as a Presidential Fellow at Chapman University and heads the Forecasts & Strategies investment newsletter, recently recommended NVIDIA profitably in his TNT Trader service that includes both stocks and options. The stock soared 34.13% in less than one month, while he advised his TNT Trader subscribers to sell half the options for 65.45% in just 13 trading days, then instructed his subscribers to sell the remainder for a 326.74% return in only 18 trading days. The two options trades combined to average a return of 196%.

Skousen held a video conference on July 7 that featured investment icons Jeremy Siegel and Burt Malkiel as guest speakers. Both University of Pennsylvania Wharton School Professor Siegel and Princeton University Professor Burt Malkiel agreed that dividend-paying stock beat the market. Better yet are stocks that have rising dividend policies, they added. Both economics professors have good, but not perfect, track records for their market predictions. In addition, Malkiel wrote a classic book, “A Random Walk Down Wall Street,” that became required reading in one of the finance courses I took at Johns Hopkins University, where I earned my master’s degree in business administration.

I expect to see and hear Skousen July 12-15 at the annual FreedomFest that he organizes to bring together investment, political and social opinion leaders who will include former presidential candidate Steve Forbes, along with current presidential prospects such as former radio host Larry Elder and iconoclastic podcaster Robert F. Kennedy Jr. Also agreeing to attend and to speak is skilled trades advocate Mike Rowe, who hosts the popular “Dirty Jobs” TV series. Rowe, who I hope to interview there about how AI could might affect skilled trades workers, taped an amusing video about some of the reasons why he agreed to come to FreedomFest and serve as a keynote speaker. To register for a $50 discount, use the code EAGLE50. I invite my readers who attend to visit the Eagle booth in the exhibit hall to meet and talk to me.

Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.

Investors should beware of risks faced by NVIDIA, such as possible weakness in the consumer-driven gaming market, especially from stiff competition with Intel (NASDAQ: INTL), Advanced Micro Devices (NASDAQ: AMD), Marvell Technology Group Ltd. (NASDAQ: MRVL) and Broadcom (NASDAQ: AGVO). Further risks include internal cloud projects and other private companies in accelerated computing markets, potential restrictions from U.S. government on shipments of advanced AI technologies to overseas customers, lumpy and unpredictable sales in new enterprise, data center and the automobile market. NVIDIA must also navigate potential for reduced capital returns, a possible slowdown in auto sales until advanced driver assist systems become more meaningful and increased operating expenditures, according to BofA.

Skousen Reaps Big Returns with One of Five Semiconductor Income Investments to Purchase 

Skousen, a descendant of founding father, diplomat and inventor Benjamin Franklin, noted that the technology sector has soared into bull-market territory during 2023, since it meets the standard definition of rising at least 20%, while rebounding from a poor performance in 2022. Investors who can accept the ups and downs of volatility may be best suited for purchasing stocks like NDVIA that are gaining a big lift from artificial intelligence advances.

Despite inflation, a tight Fed money supply and a brewing banking crisis after several recent financial institution failures, the NASDAQ Composite’s tilt toward technology has led to about a 30% rise year to date, as of the close of trading on July 7.

Gilder Recommends Sale of NVIDIA Shares for 229% Gain

Another proponent of recommending NVIDIA is futurist George Gilder, who produced a 229.68% gain for subscribers of his Gilder’s Technology Report investment newsletter. That trade only involved half the shares that Gilder recommended, while the other half keeps rising as its gains on paper as increase.

George Gilder gains a 229% return in Gilder’s Technology Report.

A third investment trader who produced profits in NVIDIA is Jon Johnson, who heads the Investment House advisory service. He averaged a double-digit-percentage gain in two short-term trades.

Jon Johnson Produced Double-Digit-Percentage Gains in Investment House. 

Five Semiconductor Income Investments to Purchase  Include Marvell

Marvell Technology Group Ltd. (NASDAQ: MRVL), a Santa Clara, California, developer and producer of semiconductors and related technology, received a $75 price objective (PO) from BofA, based on a 36x 2024 estimated P/E, which is supported by 15-20% longer-term compounded annual earnings per share (EPS) growth potential. The valuation also is in a normal 1x-2x range for high-growth semiconductor peers, BofA added.

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Risks for Marvell to attain that valuation include integration challenges of recent acquisitions, the prospect of going to a position of net debt from net cash, uncertainty of attaining expected cost synergies in a timely manner, a potential slowdown in legacy hard disk drive, infrastructure spending and storage assets and competitive threats from larger, well-resourced rivals.

Marvell’s Marvelous Electro-Optics Opportunities

Marvell, Cisco (NASDAQ: CSCO) and NVDA also offer leading Ethernet options. Aside from Ethernet/InfiniBand switches and adapters, AI networking opportunities also include electro-optics/demand-side platforms (DSPs), BofA wrote. 

The Yole Group estimates optical transceiver total addressable market (TAM) across datacom and telecom growing by 2027 to $16.8 billion, up from $5.8 billion in 2021, equaling a 19% compound annual growth rate (CAGR). Meanwhile, Marvell’s electro-optics software asset management (SAM) reached $1 billion in 2021 and is expected to double to $2 billion by 2024 — across 65% cloud and 35% carrier — growing at 26% CAGR, BofA wrote. 

A conservative assumption is that MRVL 2024-2027 SAM would grow at the same rate as optical transceivers, even though MRVL SAM only includes high-speed silicon, not low speed, BofA wrote. In addition, BofA estimates switching ports of 400G+ speed to represent generative AI, which reached 14% of total data center ports in 2022 and could touch an estimated 40% by 2027. This results in MRVL generative AI electro-optics sales opportunity of about $1.4 billion by 2027, BofA wrote in a recent research note.

For context, MRVL has outlined total AI sales of more than $400 million in 2023 across PAM4 optics, PAM DSPs and data center interconnect, of which most should be for electro-optics, BofA wrote. Thus, the investment firm reiterated a “Buy” rating on MRVL, raising its price objective (PO) to $75 from $70 on optical upside.

IBM Is Another of the Five Semiconductor Income Investments to Purchase 

International Business Machines (NYSE: IBM), of Armonk, New York, is introducing cloud-related artificial intelligence (AI) capabilities. In fact, the company’s management held IBM’s Think 2023 event in Orlando, Florida, on May 9, with Chief Executive Officer Arvind Krishna, Chief Financial Officer Jim Kavanaugh and other senior leaders discussing many of their AI initiatives.

“The firm helps businesses and governments reconfigure their IT departments for the cloud era,” Skousen recently wrote to his Home Run Trader subscribers when recommending the stock. “It also ensures that technological systems are not only faster and more efficient, but far more secure.”

IBM allows organizations to boost innovation, productivity and resilience, as well as enables them to scale up and cut costs, Skousen continued. Investors who can accept the ups and downs of volatility may be best suited for purchasing stocks like cloud-savvy IBM that are gaining a lift from artificial intelligence advances. Skousen worked as a consultant in the early 1980s for IBM, an early developer of both business machines and personal computers.

Skousen, who also heads the TNT Trader advisory service that recommends both stocks and options, as his Home Run Trader does, instructed subscribers to take a profit on May 25 of 323.96% by selling call options in Nvidia Corp. (NASDAQ: NVDA) that he recommended on May 2. The stock rose 34% in just a few months during the time Skousen recommended it, while the options sold in parts at varying levels to produce an average gain during the same time of 196%.

“The bears are on the run,” Skousen quipped to his Forecasts & Strategies subscribers. As they say on Wall Street, “Bull markets climb a wall of worry,” wrote Skousen, quoting his own “Maxims of Wall Street” book (www.skousenbooks.com).

Broadcom Breaks into Five Semiconductor Income Investments to Purchase

Broadcom Inc. (NASDAQ: AVGO), a San Jose, California-based designer, developer and supplier of a range of semiconductor and infrastructure software solutions, received a $1,050 price objective from BofA. Risks to Broadband reaching that level include the semiconductor cycle, affected by sensitivity to U.S.-China trade relations, high exposure to Apple with potential design out risks and competitive risks in networking, smartphone, storage and enterprise software markets, the investment firm added.

Other uncertainties to monitor are acquiring assets that may increase financial and integration shortfalls, as well as moving into non-core software businesses that can create execution risks, BofA added. Despite those risks, BofA boosted its price objective on AVGO to $1,050 from $950 per share.

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Connell Praises AVGO as One of Five Semiconductor Income Investments to Purchase

Among networking semiconductor stocks to buy, Michelle Connell, who heads the Dallas-based Portia Capital Management, told me that she prefers Broadcom. Despite the stock’s ascent this year, it could have further upside, she added. 

“However, like any of the tech names that have had a significant gain, I would build out positions on weakness,” Connell counseled. “I would emphasize that AVGO is a good long-term holding. I would be patient.”

The hedge fund community is enamored with Broadcom, building out a $3.5 billion position, Connell wrote. The company has strong fundamentals and a relatively low debt-to-equity ratio, she added.

As far as Broadcom’s AI exposure, such chips account for 15% of the company’s current revenues. This revenue number could climb to 25% next year, Connell continued.

Michelle Connell heads Portia Capital Management.

If Broadcom continues to grow its AI chip business at its current pace, it will make the company the second-largest AI chip supplier right behind NVIDIA, Connell said. She opined that such a result would be a stronger AI chip provider than Marvel, Intel, AMD and Amazon’s (NASDAQ: AMZN) AI semiconductor businesses, she added.

To enhance shareholder value, Broadcom brought back $3.4 billion of stock in its April quarter, Connell continued. The company also committed to an additional $9 billion buyback by the end of 2023.

The share buyback could drive a significant increase in dividend payout, Connell counseled. As of now, the current dividend yield on Broadcom is 2.12%.

Russia-Caused Political Risk Does Not Directly Imperil Five Semiconductor Income Investments to Purchase 

Political risk remains a threat to investors due to Russia’s unrelentingly invasion of Ukraine. Even though the five semiconductor income investments to purchase are not directly hurt by the conflict, economic fallout is felt in both Ukraine and Russia, as well as neighboring countries that have been been forced to find other trade partners.

Ukraine’s President Volodymyr Zelensky responded on July 7 that he was “happy to hear” Turkey supports his country’s bid to become a member of the NATO alliance. All current 30 NATO nations need to give their approval for Ukraine to gain membership. Zelensky, who spoke next to Turkey’s President Recep Tayyip Erdoğan at a joint press conference in Istanbul, said they talked about “key issues” ahead on his nation’s path to NATO admittance.

Meanwhile, Russia showed on July 7 why Ukrainian leaders have turned to potential NATO membership as an off ramp from the onslaught of attacks against its citizens. Russia fired a missile that struck an apartment building in Lviv in western Ukraine, killing 10 civilians. The city is on the opposite end of Ukraine from the war zone, but Russia’s leaders have shown no reluctance about targeting residential communities far away from the military battles.

With that backdrop, U.S. President Joe Biden announced on July 7 that he decided to provide Ukraine with controversial cluster munitions to give that nation and its people a fighting chance to pursue a successful counteroffensive against its attackers. Biden said he will approve sending the weapons because Kyiv needs ammunition in its counteroffensive against Russia. However, 100-plus nations, including the United Kingdom, France and Germany, have outlawed the munitions under the Convention on Cluster Munitions. But neither the United States nor Ukraine are signatories to the ban.

An ongoing crisis is that drinking water supplies have been harmed for more than 700,000 people after the destruction of the Kakhovka dam in southern Ukraine that accompanied Russia’s attacks. With the threat from Russia unabated, Ukraine’s President Volodymyr Zelensky keeps rallying his country’s people to defend their nation and freedom from the invaders, while seeking further weapons from allies to do so.

Russia reportedly has moved tactical nuclear weapons to neighboring Belarus as a potential launch site against Ukraine. President Zelensky has acknowledged gains on the battlefield from his country’s counteroffensive against Russia’s invasion have been “slower than desired.”

Russia Claims to Give 700,000 Children Refuge, While Ukraine Calls the Action Illegal

Aside from Russia’s continued attacks against Ukrainian residential communities, the invader of sovereign Ukraine land has brought roughly 700,000 children to Russian territory, said Grigory Karasin, head of the international committee of the Federation Council, the upper chamber of Russia’s parliament.

Despite Russia initiating and maintaining bombing and shelling in Ukraine against those living there, Karasin described his country as giving the children a place of refuge. However, Ukrainian officials counter that the children have been illegally and forcibly removed from their homes and families in violation of international law.

With Russia’s invasion of Ukraine adding political risk for businesses in both nations, as well as countries that export and import with them, the ongoing conflict is a threat to investors. Even so, investors may view the prospects of the five semiconductor income investment to purchase as viable ways to profit from artificial intelligence advances.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.