MW Why Nvidia and these other chip stocks were just deemed hot plays for the rest of the year

By Britney Nguyen

AI will continue to drive chip stocks and is 'an area of relative certainty' against a changing geopolitical and economic backdrop, Cantor analysts say

Analysts at Cantor said Nvidia is their top pick as AI drives chip stocks.

With spending on artificial-intelligence infrastructure by major cloud providers, sovereigns, neoclouds and enterprises slated to rise for the foreseeable future, Cantor Fitzgerald analysts see the technology as "the only meaningful growth driver" for chip stocks - and they have ideas on which ones will benefit the most.

As tech giants revise capital expenditures upward and cite the need to spend more on AI infrastructure, and AI-hardware companies show "strong product cycles," analysts at Cantor said in a note on Wednesday that they expect these trends "to continue driving the AI trade."

The Cantor team named Nvidia Corp. (NVDA) its top pick, as the company is still ramping its Blackwell AI platform. The analysts said the Blackwell ramp sets Nvidia "up for meaningful beats/raises," and for its earnings per share to potentially stretch to $8 next year, which would support their price target of $240. That would also come in well above the $6.31 consensus estimate for Nvidia's EPS next fiscal year.

See more: Nvidia earnings were a mixed bag. Here's what Wall Street has to say.

The other chip stocks that Cantor expects will get a boost from AI exposure are Taiwan Semiconductor Manufacturing Company Ltd. (TW:2330), Advanced Micro Devices Inc. $(AMD)$, Broadcom Inc. $(AVGO)$ and Micron Technology Inc. $(MU)$.

Geopolitical tensions and challenges in the economy have made AI "an area of relative certainty within a very uncertain world," the analysts said. TSMC, for example, confirmed with Bloomberg on Tuesday that its waiver for exporting certain chip-making equipment and technology to its plant in China has been revoked by the U.S. government, and that it will lose its validated end-user status on Dec. 31. Samsung Electronics Co. (KR:005930) and SK Hynix Inc. (KR:000660) also had their VEU status revoked.

But while momentum stocks have lost some of their shine, the analysts said that's only a temporary problem. Recent reports suggesting companies have had trouble incorporating AI into their businesses are "overdone," the analysts said. They're not concerned as they think the return on capital is "still strong" for the hyperscale cloud providers.

Across Microsoft Corp. $(MSFT)$, Meta Platforms Inc. (META), Alphabet Inc. $(GOOGL)$ $(GOOG)$ and Amazon.com Inc. (AMZN), capital expenditures are estimated to grow 57% this year and 20% in 2026, the analysts noted, whereas forecasts were for increases of 40% and 9%, respectively, two months ago.

The Cantor team also pointed to the AI trade experiencing "some agita" from reports that the Chinese government is discouraging local companies from adopting U.S.-made technology - specifically Nvidia's H20 chip, which it is waiting to sell to customers in China again after it was essentially banned from doing so by the Trump administration in April.

However, Cantor sees the issues "as noise today," and the analysts are doubling down on their "bullish thesis" that AI development and deployment are still in an infancy stage.

Meanwhile, the Cantor analysts said optimism is growing for AMD's data-center graphics processing units going into the company's analyst day in November. And while investors were concerned earlier this year that customers made purchases ahead of time to beat out potential tariff price increases later on, AMD's client and server central-processing-unit businesses have "only accelerated higher" due to higher average sales prices and share gains, as well as an "intact" outlook for its Instinct AI accelerator series. The analysts put AMD's earnings per share close to $4 for the year. The FactSet consensus is for $3.85.

Although AMD's data-center revenues are expected to stay "relatively small" at an estimated $6.5 billion this year, the chip maker's push into offering rack-scale solutions is one factor that gives the analysts "high hopes around the company's ability to significantly grow its penetration across the AI landscape." They also cited AMD's "vision of capturing a non-trivial share in large scale training clusters," and the growing need for AI inference.

-Britney Nguyen

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September 03, 2025 13:37 ET (17:37 GMT)

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