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Demand for semiconductor companies is getting stronger alongside rising fascination with artificial intelligence (AI) and data center technologies. Aside from the major players in the space, like Nvidia (NVDA) and Intel (INTC), many smaller and lesser-known companies are preparing to capitalize on these trends.
Semiconductor Stock #1: Arm Holdings
The first company on my list is Arm Holdings (ARM), a British semiconductor and software design company that has seen significant growth since Nvidia invested in it. As of Nvidia’s most recent 13F filings, the company holds around $135.8 million in Arm’s shares. Arm announced a record-breaking third quarter for fiscal 2025, driven by strong demand for AI solutions and widespread adoption of its computing platform.
Valued at $113.3 billion, Arm Holding’s stock is down 19.7% year-to-date.
Arm is expanding its influence in AI-driven computing with significant developments across multiple industries. Third quarter total revenue of $983 million increased by 19% year-over-year, owing to an increase in royalty and licensing revenue. Royalty revenue increased 23%, driven by increased adoption of the Arm v9 architecture and Compute Subsystems. Licensing revenue increased by 14% due to increased partner investment in Arm’s advanced technologies.
During the quarter, remaining performance obligations (RPO) totaled $2.3 billion, down 3% year-over-year. In the next 12 months, the company expects to generate 28% of its revenue from RPO. Adjusted earnings per share increased 34.5% to $0.39 during the quarter.
Arm has been actively expanding its presence in the AI and data center markets. According to Reuters, the company has ambitious plans to increase its presence in the data center CPU market. The company plans to grow its global market share in this sector from 15% in 2024 to 50% by the end of 2025. This strategic move positions Arm to capitalize on the growing demand for data center solutions, especially as AI and cloud computing advance. Additionally, Arm is reportedly considering a strategic shift that would involve designing and selling its own chips, rather than continuing with its traditional licensing model. The first customer for this new chip is expected to be Meta Platforms (META), indicating strong industry interest.
The company expects a 24% increase in revenue to $4 billion for the full fiscal year 2025, which is consistent with analyst estimates. Management expects earnings to be between $1.56 and $1.64. Similarly, analysts predict a 26.6% increase in earnings in fiscal 2025, followed by another 25.5% in fiscal 2026. Arm stock’s premium valuation of 67x forward earnings reflects investor confidence in the company's growth prospects. However, risk-averse investors may want to wait for a more favorable entry point.
On Wall Street, ARM stock holds an overall rating of “Moderate Buy.” Among the 29 analysts covering the stock, 18 rate it as a “Strong Buy,” one as a “Moderate Buy,” nine recommend a “Hold,” while one rates it a “Strong Sell.” The stock’s average target price of $163.04 suggests a potential upside of 68% from current levels, while the highest price estimate of $225 indicates a possible 131% rally over the next 12 months.
Semiconductor #2: Marvell Technology
Valued at $54.8 billion, Marvell Technology (MRVL) has been a major player in the semiconductor industry. The company specializes in data infrastructure solutions, which include chips for data centers, cloud computing, 5G networks, enterprise networking, automotive, and AI-driven applications.
The stock is down 48% so far this year, making it an excellent time to buy this outstanding semiconductor stock on the dip.
In the fourth quarter of fiscal year 2025, Marvell reported net revenue of $1.8 billion, marking a 27% increase year-over-year. Adjusted earnings rose 30.4% to $0.60 per share. Marvell’s data center business was the primary driver of its revenue growth, increasing by 78% and accounting for more than 70% of Q4 revenue. The company exceeded its $1.5 billion AI revenue target in April 2024 and is on track to meet its $2.5 billion target in fiscal 2026. According to the management, the rapid adoption of custom silicon programs and electro-optics products contributed significantly to this expansion.
The company showcased disciplined financial execution, achieving an adjusted gross margin of 60.1% in the quarter. It ended the quarter with cash and equivalents totaling $948 million and total debt of $4.06 billion. It also returned $52 million to shareholders in dividends and repurchased $200 million in shares. Beyond AI and data centers, Marvell saw a steady recovery in its enterprise networking, carrier infrastructure, automotive, and industrial markets. For the full fiscal year 2025, Marvell’s net revenue reached $5.7 billion, a 4.8% increase from fiscal 2024 with a 3.9% increase in earnings.
Looking ahead, Marvell expects revenue growth of more than 60% year-over-year in the first quarter of its fiscal 2026, with data center demand continuing to drive momentum.
Looking ahead, Marvell’s emphasis on AI and data center solutions, combined with recent technological advancements, positions the company to capitalize on the growing demand for advanced semiconductor solutions. Analysts covering the stock predict exceptional growth over the next two years. Revenue and earnings are expected to rise 42.7% and 79%, respectively, in fiscal 2026. In addition, revenue and earnings could increase by 21.3% and 31%, respectively, in fiscal 2027. Marvell, trading at 22 times forward earnings, is a cheap semiconductor stock to buy right now.
On Wall Street, Marvell stock holds an overall rating of “Strong Buy.” Among the 32 analysts covering the stock, 28 rate it as a "Strong Buy," two as a "Moderate Buy," and two recommend a “Hold.” The stock’s average target price of $121.07 suggests potential upside of 116% from current levels, while the highest price estimate of $188 indicates a possible 235% rally over the next 12 months.
