Nvidia stock has enjoyed a strong market performance in recent years thanks to the proliferation of artificial intelligence (AI), as strong demand for the company’s graphics cards deployed in data centers has led to significant revenue growth. is. And income.
Nvidia’s dominant position in the AI chip market explains why the company’s stock price has soared 1,000% over the past two years. The good news is that Nvidia appears to be in a solid position to maintain its AI-powered growth, driven by the arrival of a new generation of chips that are likely to help extend its technological lead over rivals.
But at the same time, investors should also be aware that there are other AI chip stocks that are taking advantage of growing AI adoption in other areas. Cirrus Logic (NASDAQ:Cruise) is one such company. Known for supplying smartphone chips to Apple (NASDAQ:AAPL)Cirrus stock is up an impressive 43% so far in 2024.
The company is scheduled to announce its fiscal year 2025 second quarter results on November 4th, and there is a good chance that the stock price will receive a big boost. Let’s see why.
Apple has significant influence over Cirrus Logic’s business. That’s because the tech giant accounts for 88% of Cirrus’ sales. More specifically, Apple uses Cirrus for its audio and power amplifier chips. For example, Apple’s latest iPhone 16 lineup is loaded with chips from Cirrus Logic.
A teardown of the iPhone 16 Pro suggests that Cirrus supplies three audio chips and one power management module to Apple. Meanwhile, the plain model of iPhone 16 is equipped with at least three Cirrus Logic audio chips. Relying on a single customer for the majority of your business isn’t ideal these days. If Apple decides to make its own chips or moves to another supplier, Cirrus’ business could collapse.
However, the two companies have had a close relationship for a very long time. More importantly, Cirrus, previously known for exclusively supplying audio chips to iPhone makers, is getting more business from Apple. By diversifying beyond its core audio market into high-performance mixed-signal products such as camera controllers, haptics, and power management tools, Cirrus has been able to win its largest clients and more business.
Analysts at KeyBanc believe Cirrus may also supply camera parts for Apple’s latest generation of iPhones, but the addition of a new camera control button could see the chipmaker supply haptic drivers to its largest customer. The possibility of doing so has also been suggested. The good news for Cirrus Logic investors is that Apple’s iPhone 16 lineup appears to be off to a strong start in terms of sales.
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Market research firm Counterpoint Research notes that Apple’s new smartphones saw a 20% increase in sales in the first three weeks compared to last year’s iPhone 15 lineup. Meanwhile, Canalys estimates that Apple’s sales for the third quarter of calendar 2024 hit a record high, with the iPhone maker reaching the top spot in global smartphone market share.
More importantly, with a large installed base of users using older iPhones, Apple’s lineup of generative AI-enabled smartphones should ideally provide the company with tremendous long-term growth opportunities. As a result, Cirrus appears on track to benefit from a combination of higher unit sales and more revenue from each iPhone manufactured.
These are why it’s no surprise that Cirrus beats Wall Street’s expectations when it releases its next set of results.
Cirrus Logic’s fiscal year 2025 got off to a strong start, with the company reporting first-quarter sales of $374 million, an 18% year-over-year increase. The bottom line growth was even more impressive as Cirrus’ earnings increased to $1.12 per share from $0.67 in the year-ago period.
Cirrus expected second-quarter sales of $520 million, the midpoint of its guidance range of $490 million to $550 million. At the midpoint, the year-over-year increase is only 8%. But I wouldn’t be surprised if Cirrus easily beats its own guidance range, especially considering Apple’s other major supplier recently reported impressive results that beat Wall Street expectations and also raised its full-year outlook. Please.
That’s why investors looking to buy semiconductor stocks now can consider doing so before Cirrus Logic releases its earnings report on November 4th. That’s because Cirrus Logic currently trades at just 23 times earnings. This is quite cheap considering the company’s outstanding earnings growth. Earnings reports were released last time and are likely to be released in the coming weeks.
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Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.
1 Incredibly Cheap Semiconductor Stocks That Could Start Soaring After November 4th (Hint: It’s Not Nvidia) Originally posted by The Motley Fool.
