MW Chip stocks have beaten the S&P 500 this year. Here's where one analyst sees more gains.

By Britney Nguyen

Nvidia's opportunity in the data-center segment 'is enormous' and still in the early stages, Bernstein analysts say

The PHLX Semiconductor Index is up about 6% so far this year - doubling the gains seen for the S&P 500 - and several big chip stocks look poised for more gains on continued artificial-intelligence demand, analysts at Bernstein Research said in a note on Monday.

While investors are still concerned about President Donald Trump's steep tariffs, which are currently on pause, the analysts, led by Stacy Rasgon, said demand for AI "looks like it has legs" as large tech companies commit to high capital expenditures and as interest grows for sovereign AI development.

Nvidia Corp.'s $(NVDA)$ ramp of its Blackwell AI platform has assuaged earlier worries from investors about demand for AI hardware, the analysts said. And customer spending on the company's AI chips "is strong enough to cover over the bulk of the China bans," Bernstein said, referring to recently implemented U.S. export controls disallowing Nvidia from selling its specially designed H20 chips to Chinese firms.

Read more: Nvidia is going all-in on sovereign AI. Can that help fix its China problem?

The chip maker said it will see a loss of $8 billion in China revenue for the current quarter due to the ban. However, those losses, "having been zeroed out of [Nvidia's] trajectory, now represent upside if [the bans] are relaxed or if the company can work around them."

"The data-center opportunity is enormous, and still early, with material upside still possible," the analysts said about Nvidia.

Bernstein is also positive about Broadcom Inc.'s $(AVGO)$ AI opportunity, which "looks really strong into 2026" as hyperscalers focus on AI inferencing, which is the process after training when a model can generate its own responses to queries. The analysts see the company's trajectory sustaining on "software, cash deployment, and superb margins & [free cash flow]." Broadcom's shares are up more than 8% so far this year. The company's core, non-AI chip business, however, is still weak, the analysts said.

Bernstein analysts "like both stocks, but would probably lean toward [Nvidia] at the moment just given valuation," they said.

Meanwhile, the analysts said they are "modestly encouraged" by Advanced Micro Devices Inc. $(AMD)$, which is "working to close the performance and timing gap" with Nvidia.

Now read: AMD just showed signs of progress. But can it really take on Nvidia?

The company hosted its annual Advancing AI event last week, where it unveiled its upcoming Instinct MI350 series accelerators and shared plans for the MI400 and MI450 series.

But while AMD's new MI355 chips "[seem] solid for what it is we believe it will still have trouble competing against [Nvidia's] rack-scale offerings," the analysts said. The MI450, which is still at least a year away, "seems to be where the rubber will hit the road for them."

According to Bernstein, AMD's AI efforts "have lagged" behind expectations, and in the near term, the company's strength with customers "may prove unsustainable."

The analysts said in a previous note that after the event, the MI350 series will "finally close the (raw) GPU performance gap to Nvidia's Blackwell offerings" but is a year behind in doing so. The MI450 series, which will compete with Nvidia's next-generation Vera Rubin AI platform, "should be closer to Rubin than AMD's prior efforts assuming they can deliver."

Still, AMD's stock was enjoying a strong Monday performance, up more than 9% in morning trading. By contrast, Nvidia's stock was up 2%, while Broadcom's shares were climbing 1.5%.

-Britney Nguyen

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June 16, 2025 12:27 ET (16:27 GMT)

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