Nvidia (NASDAQ:NVDA) has been on an incredible rally, with its stock surging from $146.10 on December 30, 2022, to $443.09 on July 21, 2023, propelling its market cap to over $1 trillion. This remarkable growth of more than 203% year-to-date, which is roughly 11 times the increase in the S&P 500 index (SPY) ($SPX), can be attributed to the rapid advancements and widespread adoption of Generative AI (Artificial Intelligence). Nvidia has solidified its position as a key player in the AI realm, boasting a full AI stack that supports every framework and model. Unsurprisingly, analysts remain bullish on NVDA stock, with 28 out of 34 recommending a Strong Buy.
While Nvidia undoubtedly presents a promising long-term investment opportunity in the transformative AI technology space, the potential of Generative AI technology extends beyond one company. It holds vast growth possibilities across various industries, indicating that there are other potential winners in the AI sector apart from NVDA. If you missed out on the remarkable NVDA rally, fret not; consider exploring the potential of ASML Holding (ASML) and Synopsys (NASDAQ:SNPS) stocks, which offer a piece of the AI opportunity. Let’s delve into the reasons why ASML and SNPS stocks should be on your radar right now.
ASML Holding
ASML Holding is a leading manufacturer of lithography systems essential for producing cutting-edge chips used in AI, automotive, and big data applications. As the adoption of AI reaches an inflection point, the long-term demand for ASML’s lithography systems remains robust, which bodes well for the upside potential in ASML stock.
Despite facing near-term macro uncertainties, ASML is optimistic about the semiconductor end-markets, especially data centers, automotive, and consumer electronics, which are witnessing significant investment in wafer capacity and increased lithography spending. These factors are expected to support ASML’s financial performance and stock price.
With AI applications driving substantial demand for advanced chips and opening up diverse growth opportunities, ASML is actively investing in next-generation technologies and ramping up capacity to meet medium to long-term demands.
While ASML continues to benefit from strong demand in the Logic market, the industry faces headwinds from high inventory levels, leading to a lower litho tool utilization rate. However, as AI-led demand gains momentum, and the utilization rate recovers to higher levels, this will become a significant driver for additional shipments, ultimately reflecting in ASML’s business performance and stock price. Considering this scenario, the current moment presents a favorable opportunity to invest in ASML stock and capitalize on the AI-led rally expected in the coming years.
Over the past year, ASML stock has gained approximately 36%. The company also ensures shareholders’ returns through share buybacks and regular dividend payments. Trading at a trailing twelve-month price-to-earnings multiple of 34.32, ASML stock appears justified given the strong future earnings growth potential driven by AI.
Among the 12 analysts covering ASML stock, 9 recommend a “strong buy,” while 3 maintain a “Hold” rating. The average price target for ASML stock stands at $778.20, representing a more than 12% increase from its current trading price of $693.36.
Synopsys
Synopsys specializes in providing Electronic Design Automation (EDA) software, used for designing and testing integrated circuits or chips. Additionally, the company offers semiconductor Intellectual Property (IP) products, crucial components of larger chip designs. As its products and services play a pivotal role in the semiconductor value chain, Synopsys stands to benefit significantly from the surging adoption and demand for AI and cloud computing applications.
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Author Faith Yakubu 
