In today's technology-driven age, semiconductors are a key part of everyday life - from mobile phones to complex artificial intelligence (AI) systems that are changing the face of industry. It is AI, which spans from automation to digital connectivity, that is significantly increasing the demand for these essential chips. According to analysts at Piper Sandler, semiconductor stocks are expected to experience growth in the coming quarters due to this trend, although growth in the analog and mobile segments is expected to be rather restrained. However, there is definite optimism in the AI space.

Analysts have selected three major players in the semiconductor market that they believe are poised for success: Advanced Micro Devices, Inc. (AMD), Microchip Technology Incorporated (MCHP) a ON Semiconductor Corporation (ON). These companies focus on various areas of the semiconductor market, from AI to analog applications, and show growth potential despite market challenges.

Advanced Micro Devices $AMD

AMD, based in Santa Clara, California, is one of the giants in the semiconductor field and is known for its powerful and adaptive processors. AMD was originally founded as a small startup in 1969, but today is a global leader in the development of high-end CPUs, GPUs, FPGAs and adaptive SoCs. Thanks to growing demand for AI and data center focused products, the company has seen its share value increase by more than 25% over the past year.

In the third quarter of 2024, AMD reported revenue of $6.8 billion, up 18% year-over-year. Meanwhile, the data center segment achieved record revenue of $3.5 billion, up a staggering 122% year-over-year. AMD CEO Dr. Lisa Su said she expects significant growth opportunities in data centers and other areas. Analysts estimate that the company could achieve earnings of up to $4.37 per share in 2025, a 70% year-over-year increase.

Microchip Technology $MCHP

Microchip Technology focuses on intelligent, connected, and secure embedded system solutions and offers products to approximately 120,000 customers worldwide. Its key focus areas include automotive, industrial applications, aerospace and defense, communications and more. Microchip is characterized by a reliable supply chain, high quality and technical support, making it a strong player in the analog segment.

Although the company's stock is down 13% year-to-date, Microchip continues to pay an attractive dividend with an annual yield of 2.4%. In addition, the company plans to return 100% of adjusted free cash flow to shareholders by the end of the first quarter of 2025. Analysts have rated MCHP stock a "strong buy" with an average target price of $93.77 per share, representing a potential upside of another $20.

ON Semiconductor $ON

ON Semiconductor, also based in Arizona, specializes in a wide range of semiconductor products that are critical to electric mobility and sustainable energy sources. With its innovative solutions, ON is a major player in the automotive and industrial energy sectors, as well as in AI data centers.

Despite the challenges in the market, the company reported revenue of $1.8 billion for the third quarter of 2024, beating analysts' expectations. The company's management emphasizes that despite the current challenges, it continues to invest in growth, particularly in the areas of energy and efficient power management, which should yield benefits going forward. Analysts rate ON stock as a "moderate buy" with upside potential of up to 29%.

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