As chip companies continue to capitalize on the generative AI growth trend, semiconductor stocks remain popular with investors. Yet while there is much in the way of news and developments out there signaling which companies are benefiting the most from AI, you may also want names that are in the “Green Zone.”
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to your positions. View any move into the “Red Zone” as a warning sign to exit your position for now.
With this, let’s take a look at three top semiconductor stocks, each of which is currently in the “Green Zone.”
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is a semiconductor stock that has been in the “Green Zone” for over 11 months. Its time in the “Green Zone” coincides with its emergence as a top way to play the AI trend.
Nvidia has made the most progress capitalizing on soaring demand for generative AI chips, resulting in very high levels of growth. For instance, during Nvidia’s fiscal third quarter (ending in October), revenue was up 206% year over year and earnings were up 1,259% year over year.
While Nvidia’s growth during the current fiscal year will likely decelerate from the prior year’s levels, said growth may be sufficient to keep on moving the needle. Forecasts call for revenue growth of nearly 55%, and earnings growth of around 62.8%. TradeSmith’s volatility quotient for NVDA is 42.07%, which makes it a high-risk stock.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) has been in the “Green Zone” for over two months. AMD shares soared throughout 2023 due to rising excitement about AMD’s potential to capitalize on the above-mentioned AI trend.
Bullishness for AMD stock has continued. This is largely due to the company’s launch of its Instinct MI300 line of AI-compatible accelerators. While Advanced Micro Devices has conservatively estimated that this product line will bring in around $2 billion in revenue this year, one analyst believes sales could top $8 billion during 2024. AMD has also recently unveiled an AI PC chip.
The prospect of its initial success handily exceeding guidance signals that this stock’s wave of strong performance may not be over just yet. TradeSmith’s volatility quotient for AMD is 40.03%, which makes it a high-risk stock.
Micron Technology (MU)
Micron Technology (NASDAQ:MU) has been in the “Green Zone” for over a month. Rising bullishness about Micron’s AI potential helps to explain why this memory chip maker has become one of the semiconductor stocks in the “Green Zone.”
The rapid adoption of generative AI technology has resulted in a big jump in memory chip demand. As seen in the company’s latest fiscal results, this trend is helping Micron bounce back after experiencing a severe drop in sales, and big net losses, due to the tech slowdown.
Last quarter, sales were up by around 18% quarter over quarter. While not for certain, this growth trend, coupled with an overall rebound in memory and storage chip demand, may result in a revenue recovery, a return to profitability, and higher prices ahead for MU stock. TradeSmith’s volatility quotient for MU is 32.57%, which makes it a high-risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
