ChatGPT Takes the Tech World by Storm: 4 Stocks Poised to Benefit (Besides Microsoft)

If the AI wars start, semiconductor companies that make AI work like Nvidia should profit more than Microsoft or other giant tech platforms.

| More on:

Microsoft spent $1 billion on OpenAI in 2019 and has invested another $10 billion in the company, indicating that it sees great potential in this new, powerful AI engine. The software giant has introduced an OpenAI service on Azure, which developers may utilize in their software designs, and is trying to integrate ChatGPT’s capabilities into its software products, from Office to Bing. 

Every significant tech company will now invest extensively in AI to compete as AI appears to have reached a level at which it becomes table stakes in a wide range of enterprise and consumer applications.

If the AI wars start, the semiconductor companies that make AI work should profit more than Microsoft or other giant tech platforms. Here are four stocks poised to benefit.

Nvidia

Nvidia (NASDAQ:NVDA) dominates GPUs, which are needed for artificial intelligence. It’s intriguing that ChatGPT doesn’t even run on Nvidia’s latest chip, the H100, or “Hopper,” introduced late last year. 

The October-shipping H100 is expected to do AI “training” nine times faster than the A100 and “inference” 30 times faster. The H100 claims 3.5 times improved energy efficiency and three times lower total cost of ownership.

Grace, Nvidia’s first CPU, is designed to work with Hopper and Nvidia’s networking-focused DPUs. These comprehensive AI systems should offer ultra-fast GPU processing, networking, and data mobility.

In 2023, Nvidia will benefit from Hopper H100 chips and AI warfare. After its 50% drop in 2022, the stock has traded at a more reasonable valuation.

TSM Semiconductor

ASML Holdings and Taiwan Semiconductor Manufacturing Company (NYSE:TSM) make Nvidia GPUs.

ASML monopolizes the extreme ultraviolet lithography (EUV) technology used to make cutting-edge semiconductors. EUV lasers make semiconductors with transistors smaller than 10 nm apart by top chip firms. The AI wars will force chip foundries to produce more cutting-edge chips since artificial intelligence applications need the most transistor-dense, power-efficient devices. 

Creating a cutting-edge semiconductor requires more than lithography. Lithography, masking, etching, and deposition machines; metrology and inspection machines; and improved packaging are needed to make these complicated chips without flaws.

Taiwan Semiconductor’s experience as the world’s largest outsourced foundry gives it a competitive moat. TSMC’s size and scale advantage, as well as Intel’s current struggles due to the sluggish PC market, look to be increasing its lead in leading-edge chip production.

On a results call with analysts, management cited its high-performance computing segment for AI customers as the reason for its optimism. TSMC foresees a semiconductor market rebound in the second half of 2023.

ASML and TSMC cooperate, although both are competitors in generating the most advanced AI processing chips. 

Micron Technology

Finally, all that data processing demands lots of memory and storage, which should boost Micron Technology (NASDAQ:MU).

As PC sales plummet and cell phones and consumer electronics struggle, the memory market’s delicate supply-demand balance has collapsed, causing Micron’s profitability to decrease.

Despite worsening performance, Micron’s stock has strangely remained around June levels. The market is forward-looking, and the stock trades just above Micron’s book value. The chipmaker is one of three global firms that mass-produce DRAM memory and one of five that mass-produce NAND flash storage.

With minimal competition, Micron and rival SK Hynix have announced dramatic investment cuts for 2023, which should help restore supply-demand equilibrium in the second half of the year. 

Last year, Micron led this limited competition in technology. The memory and storage solution maker produced the first 1-beta DRAM chips and 232-layer NAND flash chips in six months. The company should profit in the second half of 2023 and beyond as demand for memory-intensive AI servers rises.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Stephanie Chateauneuf owns shares of Microsoft and Nvidia. The Motley Fool recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

More on Tech Stocks

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

telehealth stocks
Tech Stocks

Well Health Stock: Buy, Sell, or Hold?

Another record-breaking quarter and strong demand sets the stage for continued momentum for Well Health stock.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

profit rises over time
Tech Stocks

2 Non-AI Tech Stocks to Buy in November for Better Returns

Not all AI stocks are riding the hype train, and for many investors, well-understood and predictable growth stocks might be…

Read more »

worry concern
Tech Stocks

In a Few Years, You’ll Probably Regret Not Owning BlackBerry Stock

Here’s why I believe BlackBerry could be one of the most overlooked Canadian tech stocks right now.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

Is Constellation Software Stock a Buy for its 0.25% Dividend Yield?

Here's what investors may want to consider when it comes to Dollarama (TSX:DOL) and its relatively low dividend yield.

Read more »

Nurse talks with a teenager about medication
Tech Stocks

Shares of WELL Health Just Zoomed. Is It a Buy?

Given its improving financials and healthy growth prospects, WELL Health could deliver superior returns over the next three years.

Read more »