Why are chip stocks like Nvidia and AMD considered hot investment targets for the rest of this year?

As major cloud service providers, sovereign funds, emerging cloud vendors, and enterprises are expected to continue increasing their spending on artificial intelligence infrastructure for the foreseeable future, analysts at Cantor Fitzgerald believe that AI is the "only significant growth driver" for chip stocks, and have identified which companies stand to benefit the most.

As tech giants continue to raise their capital expenditure forecasts and emphasize the need for more investment in AI infrastructure, while AI hardware companies demonstrate a "strong product cycle," Cantor analysts said in a Wednesday report that they expect these trends "will continue to drive AI-related trades."

The Cantor team named Nvidia (Nvidia Corp., ticker: NVDA) as their top pick, as the company continues to ramp up mass production of its Blackwell AI platform. Analysts said that the ramp-up of Blackwell will put Nvidia "on track for significant upside surprises and upward revisions," with earnings per share (EPS) potentially reaching $8 next year, supporting their $240 price target. This figure is well above the market consensus of $6.31.

Other chip stocks expected to benefit from AI include:

• TSMC (TSMC, ticker: TSM)

• Advanced Micro Devices (AMD, ticker: AMD)

• Broadcom (Broadcom Inc., ticker: AVGO)

• Micron Technology (Micron Technology Inc., ticker: MU)

“Certainty” in an Uncertain World

Analysts noted that geopolitical tensions and economic challenges make AI "a relatively certain area in an otherwise uncertain world." For example, TSMC confirmed to Bloomberg on Tuesday that the U.S. government has revoked its exemptions for exporting certain chipmaking equipment and technology to its factories in China, and will lose its Validated End-User (VEU) status on December 31. Samsung Electronics and SK Hynix have also had their exemptions revoked.

Although momentum stocks have recently lost some luster, analysts believe this is only a temporary issue. Recent reports have suggested that companies are facing difficulties in applying AI to their businesses, but the Cantor team believes these claims are "exaggerated." They are not concerned, as they believe the capital returns of hyperscale cloud providers remain "very strong."

According to analysts, Microsoft (MSFT), Meta Platforms, Inc. (META), Google (GOOGL/GOOG), and Amazon (AMZN) are expected to increase capital expenditures by 57% this year and by 20% in 2026. Two months ago, the forecasts were 40% and 9%, respectively.

Potential Upside for AMD

Cantor analysts said that as market expectations for AMD's data center GPUs heat up, the company will receive more attention at its Analyst Day in November. Although investors earlier this year were concerned about customers pulling forward purchases to avoid potential future tariff hikes, AMD's client and server CPU businesses have instead "continued to accelerate" due to higher average selling prices and increased market share, and the outlook for its Instinct AI accelerator series remains "solid." Analysts expect AMD's earnings per share to approach $4 this year, compared to the FactSet consensus of $3.85.

While AMD's data center revenue is still expected to be "relatively small" this year, at about $6.5 billion, the company is advancing rack-scale solutions, which gives analysts "strong confidence in its ability to significantly increase its penetration in the AI space." They also noted that AMD "intends to capture a meaningful share of large-scale training clusters," and that demand for AI inference continues to grow.

Why Nvidia and Other Chip Stocks Are Seen as Hot Picks for the Rest of the Year

As major cloud service providers, sovereign entities, emerging cloud companies, and large corporations continue to increase AI infrastructure spending for the foreseeable future, Cantor Fitzgerald analysts believe the technology is the "only significant growth driver" for chip stocks, and have identified which companies stand to benefit the most.

In a Wednesday report, Cantor analysts said that as tech giants raise capital expenditures and emphasize the need for more AI infrastructure investment, while AI hardware companies show a "strong product cycle," they expect these trends "will continue to drive AI sector trades." The team named Nvidia (NVDA) as their top pick, as the company is accelerating capacity expansion for the Blackwell AI platform.

Analysts noted that mass production of the Blackwell platform puts Nvidia "on track for significant upside surprises," with EPS potentially reaching $8 next year, supporting their $240 price target. This forecast is also well above the market consensus of $6.31 for Nvidia's next fiscal year.

Cantor believes other chip stocks that will benefit from AI exposure include: TSMC (2330), Advanced Micro Devices (AMD), Broadcom (AVGO), and Micron Technology (MU). Analysts said that geopolitical tensions and economic challenges make AI "a relatively certain area in an extremely uncertain world."

For example, TSMC confirmed to Bloomberg on Tuesday that the U.S. government has revoked its license to export certain chipmaking equipment and technology to its factories in China, and its "Validated End-User" status will expire on December 31. Samsung Electronics (005930) and SK Hynix (000660) have also had their VEU status revoked.

Although momentum stocks have recently lost some luster, analysts believe this is only a temporary phenomenon. Regarding reports that companies are facing difficulties in implementing AI in their businesses, they believe these issues are "overstated." Analysts are not concerned, as they believe the capital returns of hyperscale cloud providers "remain strong."

Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOGL GOOG), and Amazon (AMZN) are expected to increase capital expenditures by 57% this year and by another 20% in 2026, compared to forecasts two months ago of 40% and 9%, respectively.

The Cantor team also noted that reports of the Chinese government discouraging companies from adopting U.S. technology (especially Nvidia's H20 chip) have caused "some anxiety" in the AI sector. After the chip was effectively banned by the Trump administration in April, Nvidia is now waiting to resume sales to Chinese customers.

But Cantor views these issues as "noise for now" and maintains its "bullish stance," believing that the development and deployment of AI technology is still in its early stages. Meanwhile, analysts are increasingly optimistic about the prospects for AMD's data center GPUs ahead of its Analyst Day in November.

Although investors were concerned earlier this year that customers were pulling forward purchases to avoid potential tariffs, AMD's client and server CPU businesses have "continued to accelerate" due to higher average selling prices and increased market share, and the outlook for its Instinct AI accelerator series remains "intact." Analysts expect AMD's EPS to approach $4 this year, above the FactSet consensus of $3.85.

While AMD's data center revenue is expected to remain "relatively small" this year (about $6.5 billion), the company's move to launch rack-scale solutions has analysts optimistic about its "ability to significantly increase penetration in the AI space." They also mentioned AMD's "vision to capture a significant share of large-scale training clusters," as well as the growing market demand for AI inference.