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

Bernstein analysts are optimistic about continued gains in select chip stocks, particularly Nvidia and Broadcom, citing strong AI demand and substantial data-center opportunities. Nvidia's Blackwell platform has alleviated investor concerns, and the company's AI chip sales are robust enough to offset most of the impact from China export bans, while Broadcom's AI prospects look strong into 2026 due to hyperscalers focusing on AI inferencing. Though AMD is making strides in AI, its efforts are perceived as lagging behind Nvidia, with the MI450 series being crucial for future competition.

Analysis

Bernstein Research highlights the continued outperformance of the PHLX Semiconductor Index, which has risen approximately 6% year-to-date, doubling the S&P 500's gains, driven primarily by sustained artificial intelligence (AI) demand. Despite concerns over potential U.S. tariffs, analysts note that large tech companies' commitment to high capital expenditures and growing interest in sovereign AI development underpin the sector's strength. Nvidia Corp. (NVDA) is particularly well-positioned, with its Blackwell AI platform alleviating previous investor concerns about AI hardware demand. Bernstein observes that customer spending on Nvidia's AI chips is robust enough to absorb the bulk of the impact from U.S. export controls on sales to China, which are projected to cause an $8 billion revenue loss for Nvidia in the current quarter; these losses are now viewed as potential upside if restrictions ease or workarounds are found. The data-center opportunity for Nvidia is described as "enormous" and still in its early stages. Broadcom Inc. (AVGO), whose shares are up over 8% year-to-date, also presents a strong AI opportunity extending into 2026, particularly as hyperscalers increase focus on AI inferencing. Broadcom's trajectory is further supported by its software business, cash deployment strategy, and strong margins and free cash flow, although its core non-AI chip business remains weak. Bernstein expresses a preference for Nvidia over Broadcom, citing valuation. Conversely, while Advanced Micro Devices Inc. (AMD) is showing signs of progress in closing the performance gap with Nvidia, notably with its upcoming Instinct MI350, MI400, and MI450 series, Bernstein remains "modestly encouraged." The MI355 chips are considered solid but may struggle against Nvidia's rack-scale offerings, and the MI450, at least a year away, is seen as a critical test. AMD's AI efforts have reportedly lagged expectations, and its near-term customer strength may be unsustainable. The MI350 series is expected to match Nvidia's Blackwell on raw GPU performance but is a year behind, while the MI450 will compete with Nvidia's next-generation Vera Rubin platform, contingent on AMD's execution.

Key Decisions for Investors

• Investors should consider maintaining or increasing exposure to Nvidia, given Bernstein's positive outlook on its AI leadership, robust demand mitigating China sales impact, and significant data-center growth potential, especially considering its current valuation preference by the analysts.
• For Broadcom, while its AI segment and financial strengths are attractive, investors should monitor the persistent weakness in its core non-AI chip business as a potential drag on overall performance.
• Exercise caution with Advanced Micro Devices; while acknowledging its recent product announcements and stock momentum, recognize that Bernstein views its AI efforts as lagging Nvidia and faces significant execution risks with its future MI450 platform to effectively compete.