3 Up-and-Coming AI Chip Stocks to Put on Your Must-Buy List

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Are you searching for a list of top AI chip companies? AI chip companies are set to soar in the coming decade, with the undeniable disruption of technology sweeping through society.

Although cynics point toward the overbought nature of AI and even suggest its gains have already been realized, this argument is speculative at best. Calling a top or bottom of the market is notoriously difficult. Changing one’s investment thesis or strategy based on these speculative predictions may also be problematic. Missing out on future growth by doing so is a strong possibility.

So if you are bullish on the future of AI, here are the top AI chip companies to buy.

ON Semiconductor (ON)

ON Semiconductor (NASDAQ:ON) is a rising star in the semiconductor space with a diversified portfolio across high-growth sectors like AI, 5G, and vehicle electrification.

Several reasons make ON stock one of the top AI chip companies. The company exhibits strong financial health, with a cash-to-debt ratio of 0.75 and an operating margin of 32.66%. Its 3-year average EBITDA growth rate ranks better than 72.4% of companies in the same industry.

Another reason to consider buying ON is that it may be undervalued based on its technicals. It trades significantly above its 200-day moving average, which signals that the market is bullish on this one. Not all of an investor’s plays need to be contrarian in nature, and buying popular stocks may be less risky than one that is in a downtrend. This helps make it one of those top AI chip companies to buy.

C3.ai (AI)

C3.ai (NYSE:AI) offers custom enterprise AI applications and has already attracted major clients like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG/ NASDAQ:GOOGL). With its specialization in pattern recognition and predictive monitoring, it offers investors segmented exposure to a specific niche in the AI supercycle.

The company reported a mixed financial performance for FY 2023, with a modest 5.6% year-over-year (YOY) revenue growth to $266.8 million but a GAAP net loss per share of $2.45. Subscription revenue, making up 86% of total revenue, grew by 11.4%. The company remains cash-rich with $812.4 million in cash and cash equivalents.

C3.ai is therefore well-funded and supported by major brands in the FAANG acronym. Its extensive war chest means it has a longer runway than other companies. This is a crucial factor for tech stocks as they need time to build up their network effects and economies of scale. The liquidity also means it may take bigger risks than other companies that don’t have the same financial backing, which could lead to competitive advantages later on. These factors all make C3 one part of the top AI chip companies.

Baidu (BAIDU)

Baidu (NASDAQ:BAIDU) dominates over 75% of China’s search market and has invested heavily in AI-based autonomous driving research. Despite initial setbacks with its new chatbot service, Ernie, the company announced that 30,000 businesses had already signed up for trials. It’s developments like these that show that the commercialization of generative AI is well underway.

Baidu reported a 15% YOY revenue increase in Q2 2023, beating expectations and marking its fastest growth in two years. The growth was driven by a 15% rise in online marketing revenue. Regulatory changes in China also appear favorable, and its robotaxi service continues to scale.

The company is well-loved even by Western investors. Not only is it one of the most important Chinese internet stocks, it also gives investors exposure to emerging markets. This should help solidify this pick in your portfolio.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.

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