The semiconductor industry has been one of the larger focal points of economists and lawmakers over the last couple of years. The COVID-19 pandemic introduced myriad challenges beyond public safety. Labor constraints and resulting supply chain challenges were amplified, with semiconductors being one of the most critical industries hit.
Despite these hurdles, companies such as Nvidia (NVDA 4.25%), Advanced Micro Devices (AMD 1.91%), and Marvell Technology (MRVL 1.99%), have demonstrated consistent resiliency. Let's break down the big picture for each company, and analyze why 2023 may be a good time to initiate or add to your position.
The leadership speaks for itself
For the quarter and year ended Dec. 31, 2022, AMD reported $5.6 billion and $23.6 billion in total revenue, representing a 16% and 44% year-over-year increase, respectively.
This level of growth should not be discounted by investors. Big tech companies such as Microsoft have been reporting that sales growth in personal computing is slowing down due to trepidation in consumer spending driven by inflation. Yet, despite these macroeconomic challenges, AMD has consistently demonstrated that it is nimble and can grow beyond supplying semiconductors for hardware devices, such as personal computers.
During the earnings call, AMD's CEO Lisa Su said: "We accelerated our data center momentum and closed our strategic acquisition of Xilinx, significantly diversifying our business and strengthening our financial model. Although the demand environment is mixed, we are confident in our ability to gain market share in 2023 and deliver long-term growth based on our differentiated product portfolio."
This is an important passage for investors to digest. Su is illustrating that while there may be short- and intermediate-term challenges in the chip business, the company is still able to generate growth by its differentiated product suite, mainly through data centers. This dynamic makes sense. Despite tightening budgets, digital transformation remains a core component of data-driven growth for corporations of all sizes. However, it's obvious that there are long-term secular tailwinds for big data, and companies like AMD are poised to benefit regardless of broader economic conditions.
The company's strong quarter and full-year 2022 results demonstrate that AMD's leadership is hyper-focused on growth, and has shown investors that it can pivot in an efficient way, deriving growth from across the business and not relying on one particular segment.
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An investment to marvel
Marvell Technology may not grab as many headlines as AMD or Nvidia, but this stock should not be overlooked. The stock cratered over 50% during calendar 2022, but is up roughly 19% year to date. Given the positive momentum experienced by competitors, namely Nvidia, some retail investors have likely averaged down or initiated positions in Marvell suspecting it is undervalued.
For the fiscal third quarter of 2023, ended Oct. 29, 2022, Marvell reported total revenue of $1.5 billion, or 27% year-over-year growth, which was a company record. Similar to AMD, Marvell generated impressive growth from its data center segment. Revenue from data centers came in at $627 million for fiscal Q3, which was 25% growth year over year.
The semiconductor landscape and the end markets it powers, such as cloud and enterprise networking, should continue to grow in the long run. While Marvell is much smaller than AMD and Nvidia in terms of revenue and market capitalization, the company is poised to succeed and continue gaining market share.
Exciting is an understatement
Nvidia is possibly the most exciting name in the semiconductor space. The company is investing aggressively to build what it calls the omniverse, which leverages quantum computing and robotics to construct interactive spatial models or renderings in real time. While this this type of technology sounds like something out of science fiction, it is developing and coming sooner than one might think. The use cases and end markets for this augmented reality are limitless.
Like its colleagues, Nvidia is not immune to supply chain disruptions and consumer sentiment around inflation. Furthermore, while the crypto market loses some enthusiasm, miners for tokens may not be as eager to upgrade hardware devices like graphic processing units, which can affect Nvidia's top and bottom lines.
Despite these challenges, Silicon Valley venture capitalist and CEO of Altimeter Capital, Brad Gerstner, recently revealed during a CNBC interview that he had acquired a stake in Nvidia stock. The driving factor behind his bullish thesis revolves around the concept of artificial intelligence (AI).
As digital transformation becomes a core focus of companies of all sizes and industries, the AI landscape witnessed a flood of investment over the last couple of years. Perhaps most notable are the heavy investments big tech companies like Microsoft and Alphabet are making in AI. Gerstner believes Nvidia is leading the AI race and could evolve into the nucleus, powering smart applications globally.
Nvidia stock rocketed about 45% year to date as of the time of this writing. Long-term investors should not be deterred by such a short-term jolt in the stock. The company operates in a growing market and is quickly becoming the industry leader. Long-term investors should consider now to be an opportune time to buy the stock.
