Day: October 1, 2024

It’s a great time to invest in top semiconductor chip stocks. Powerful trends like artificial intelligence (AI), cloud computing, AI-powered smartphones, and electric vehicles (EVs) are driving more demand for chips than ever before. The PHLX Semiconductor Sector index is up 50% over the last 12 months, beating the S&P 500 return of 34%.

Here are two leading semiconductor companies with shares trading down at least 25% from their recent highs. Investors that add these two stocks to their portfolio today could see excellent returns as each stock rebounds.

1. Micron Technology

Exploding demand for Micron Technology‘s (NASDAQ: MU) memory and storage components makes it a great stock to buy on the dip. The company just reported better-than-expected financial results for fiscal Q4 (which ended Aug. 29), with strong data center demand sending revenue up 93% year over year.

Increasing demand for Micron’s memory chips should continue in calendar 2025, driven by AI, automotive, and data centers. Growth in the AI server market is expected to drive demand for Micron’s high-capacity dynamic random access memory (DRAM) modules. Statista projects the AI server market to increase tenfold to $430 billion by 2033, which could fuel strong growth for Micron’s data center business.

Other markets are expected to pick up next year. Micron’s automotive revenue hit a record in fiscal 2024. The increase in infotainment and driver assistance systems is increasing the number of chips per vehicle. This is a long-term growth opportunity that is expected to drive more demand in the second half of fiscal 2025.

PC and mobile are two more opportunities for growth next year, where Micron is a leading supplier of memory and solid-state storage drives. PC unit volumes are anticipated to accelerate in the second half of the year, driven by upgrades to new AI-powered PCs and Microsoft‘s discontinued support for older versions of its Windows OS. The release of more AI-enabled smartphones will drive similar demand trends for Micron’s mobile business.

Analysts expect Micron’s earnings to increase 42% to $12.74 in fiscal 2025. Assuming the stock trades at its historical average price-to-earnings (P/E) ratio of 16, the shares could reach $203 within the next year. Micron investors could potentially almost double their money from the current share price.

2. Advanced Micro Devices

Major data center operators, including Microsoft, Meta Platforms, and Oracle are using Advanced Micro Devices‘ (NASDAQ: AMD) MI300 chip to help handle their AI workloads. Since launching this chip in December, AMD’s data center revenue has skyrocketed, with revenue more than doubling year over year in Q2.

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AMD’s data center business should continue to post strong growth to support enterprise investment in AI. Data centers require powerful graphics processing units (GPUs) to run AI models. While Nvidia is the leading GPU provider, AMD expects to generate $4.5 billion from data center GPUs this year.

AMD is filling out a GPU market that has been supply-constrained, but it’s also positioned to meet demand from customers who may look for alternatives to the high prices that Nvidia’s chips command. AMD estimates the total addressable market for AI accelerators, or GPUs, to reach $400 billion by 2027.

Looking ahead, new AI models will require exponentially higher processing power. In June, AMD unveiled a multiyear roadmap for its AMD Instinct accelerators. It’s planning to launch the MI325X accelerator in Q4, with the MI350 launching in 2025. The MI350 will bring a 35x increase in AI inference performance compared to the MI300 series. The company also said it will release new products annually to meet growing demand, which points to a long runway of growth ahead.

The consensus Wall Street estimate forecasts AMD’s revenue to increase 28% next year, with earnings per share reaching $5.44. If AMD stock is trading at the same forward P/E of 48 a year from now, it could trade at $261, implying an upside of 59%.

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I’m 63 and still working. My wife, who is 64 ½ and retired, spent most of her working life raising our children at home. She qualifies for Social Security at a current rate of $675 and $845 if she waits until FRA. I plan on working for another two or three years. My Social Security at 65 is $2,785 and $3,295 at FRA. Should she start drawing on her Social Security now and invest it, switching to spousal benefits when I retire? Or should she wait until I retire and draw the full 50% spousal benefit?

– Two Air Force Vets

I suggest waiting in most cases, but that doesn’t mean it’s always the best approach. Depending on your situation, risk tolerance and goals, your wife may want to file for Social Security now. However, there may also be a blended third option depending on when you file that I think you should consider. I’ll explain the tradeoffs and reasons why you might choose one option or the other so you and your wife can decide which route is best for you.

If you have retirement planning questions or need help with another area of your finances, consider connecting with a financial advisor.

Early Filing Reduction

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As you’ve pointed out, your wife will receive a reduced benefit if she files for Social Security before reaching her full retirement age (FRA). That is true of both her own benefit and her spousal benefit. However, those reductions are different so let’s start by clarifying how early filing impacts both types of benefits:

• Primary benefits are reduced by 5/9 of 1% per month for up to 36 months and then by 5/12 of 1% for each additional month

• Spousal benefits are reduced by 25/36 of 1% per month for up to 36 and then by 5/12 of 1% for each additional month

Based on your wife’s current age, I’m assuming she was born in 1960. As a result, she’ll reach FRA at age 67. So, if she is exactly 30 months shy of her FRA:

Keep in mind that she can’t claim her spousal benefit until you file for Social Security. But since her spousal benefit will be higher than her own primary benefit, she would end up switching later, at which point this reduction would apply. (And if you need additional help deciding when to claim Social Security or how to plan for spousal benefits, speak with a financial advisor.)

Filing Now and Investing

If your wife files for benefits now and invests the money, here’s approximately what she might have when she turns 67 based on the following rates of return:

• 2% = $20,781

• 4% = $21,331

• 6% = $21,898

• 8% = $22,484

• 10% = $23,089

However, if she waits until age 67 to file for Social Security, she’ll receive $845 per month – $170 more than what she would collect if she starts now. Then again, if she starts collecting Social Security now and invests those payments, she could have upwards of $23,000 in savings by age 67.

So how do you compare the two options? You can start by thinking about it in terms of a withdrawal rate. How much would you need in savings to generate an additional $170 per month?

If we use the 4% rule as a guide, your wife would need $51,000 to support a monthly withdrawal of $170. Clearly, none of the investment return assumptions above get close to that.

(Calculating potential investment returns can be complicated, but financial advisors often have the tools and expertise to run complex calculations to help you make important decisions.)

Filing Early vs. Waiting

However, there are still a number of scenarios in which your wife may still decide to file for her benefits early, including:

• She has a short life expectancy due to a medical condition or family history

• You absolutely need the money now

• You already have sufficient guaranteed income such as military retired pay, pensions or annuities, and want more immediate cash flow

• You are very aggressive investors and prefer the chance of a higher return even if it means taking on more risk

Then again, waiting until FRA may be more appropriate if:

• You and your wife are risk averse or financially conservative and prefer security

• She expects to live to at least an average age

• You do not have adequate guaranteed income

• You don’t need the money right now

Which Benefit to Choose?

As of right now the only benefit your wife can receive is her own. She won’t be able to claim her spousal benefit until you file, which you clearly understand.

However, filing now results in a steep reduction in benefits. Unless other considerations weigh heavily for you, this may not the best choice. So, she could wait until you file and claim the full spousal benefit, which would be worth $1,647.50 (50% of your full retirement benefit).

But here’s where a blended third option comes in. Let’s lay out the relevant details:

• Her spousal benefit is based on 50% of your FRA benefit regardless of when you file

• She receives that full 50% as long as she files at her own FRA

• If she files early, her spousal benefit is reduced as explained above. The spousal benefit does not earn delayed filing credits, so there’s no benefit for her to wait past her FRA

• She is a few years older than you

The third option is for your wife to file for her own benefit once she reaches her FRA and then switch to her spousal benefit after you file. If she does this, she will not be subject to any reductions.

However, when you file is another point of discussion. You imply that you intend to file when you retire in a few years. You may want to evaluate the benefit of waiting until age 70 to take advantage of delayed retirement credits. Likely, this will maximize Social Security benefits for the two of you, making it an option I’d strongly consider.

(And if you have additional questions related to Social Security and retirement income planning, reach out to a financial advisor and see how they can help.)

Bottom Line

Filing early to invest the money is not likely to provide the same level of income as waiting to maximize your Social Security benefits, and it’s riskier. If financial security in retirement is your goal, I’d give serious thought to having your wife claim at her FRA and delaying your own benefit.

Social Security Planning Tips

• Up to 85% of your Social Security benefits may be taxable depending on your total income. Advanced tax planning strategies, such as adjusting withdrawals from retirement accounts or Roth conversions, can help manage your taxable income in retirement and reduce the tax burden on Social Security benefits.

• A financial advisor with retirement planning expertise can help you plan for Social Security benefits and integrate them with your other income sources. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.

Photo credit: ©iStock.com/LaylaBird, ©iStock.com/JLco – Julia Amaral

The post Ask an Advisor: Should My Wife Wait to File for Spousal Benefits or Claim Her Benefit Now? appeared first on SmartReads by SmartAsset.

When a stock pulls back, it is best not to panic. Check its recent action and chart patterns to see if it is anything to worry about.

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How Nvidia Is Injecting AI Into The Health Care Industry

Nvidia (NVDA) fell 2% on Friday and was unchanged on Monday after reports from Barron’s that China was trying to boost local AI chip makers and urging local companies to avoid Nvidia chipes. China accounted for 11% of Nvidia sales in the first half the fiscal year ending in January.

Nvidia stock cleared multiple trendline entries last week. The stock is 5% above its 50-day moving average. Shares are 14% below their split-adjusted all-time high of 140.76 after rising more than 4.6% last week. But should you be buying Nvidia stock now?

Timing your stock purchases can surely improve gains. Yet even with an obvious market leader like Nvidia, it’s not easy to tell whether you should buy or sell the stock now. Chart signals and checking technical measures can help investors assess whether Nvidia stock is a buy now.

On Tuesday, AI server provider Super Micro Computer (SMCI) started trading on a split-adjusted basis. The company announced the 10-for-1 stock split in its fourth-quarter earnings report in August. Stock splits increase the number of shares outstanding but do not change the market capitalization of the stock.

AI’s Total Addressable Market

On Wednesday, shares rose after consulting firm Bain said the total addressable market for artificial intelligence hardware and software will grow 40% to 55% for at least next three years. Demand for Nvidia’s next generation graphic processing units GB200 is expected to reach 3 million in 2026 vs. 1.5 million for its H100 units in 2023.

According to Barron’s, Nvidia last week lost its place as the best performing S&P 500 stock so far this year. Vistra (VST) had gained 190% year to date as of Monday’s closing price last week, whereas Nvidia was up 135%.

But Nvidia stock rose last Monday after news that China e-commerce behemoth Alibaba (BABA) will collaborate with Nvidia to improve autonomous driving technology for Chinese EV manufacturers, several of which are rivals to Tesla (TSLA). Alibaba’s portfolio of large-language models are now integrated with Nvidia’s drive platform for autonomous vehicles.

On Monday last week, analysts at Melius Research gave the stock a price target of 165 with a buy rating as the company ramps up its Blackwell chip production in the fourth quarter.

White House Meeting

In September, shares climbed above the 50-day moving average amid news that Nvidia and OpenAI chief executive officers, Jensen Huang and Sam Altman, met officials at the White House to discuss AI infrastructure spending. According to reports, Alphabet (GOOGL), Amazon.com (AMZN) and Microsoft (MSFT) executives were also present. The White House announced an interagency task force to accelerate permissions for setting up data centers.

However, news that companies may be diversifying and looking for other chips besides Nvidia’s likely weighed on Nvidia stock. According to Barron’s, Saudi oil behemoth Aramco is planning on using chips made by a startup Groq to offer “AI computing power to local companies.”

The news followed Huang remarks that the return on investment for artificial intelligence infrastructure plays like Nvidia remained strong since “infrastructure players like ourselves and all the cloud service providers put the infrastructure in the cloud, so that developers could use these machines to train the models, fine-tune the models, guardrail the models, and so forth.”

Analysts at Bernstein said that after its phenomenal growth, sustainability is the main question Nvidia faces, but the “time to worry is clearly not now.”

On Sept. 3, Nvidia fell sharply below the 50-day moving average and saw its largest one-day market cap loss for any U.S. company, according to Dow Jones Markets Data. 

Earnings From AI Giants

Results from other AI leading companies have influenced the stock. Last week, memory chip maker Micron (MU) cited robust AI demand, which gave Nvidia stock a lift.

Oracle (ORCL) results showed strong demand for AI chips. According to the Chairman and Chief Technology Officer Larry Ellison, Oracle is building a data center with “acres of Nvidia GPU clusters for training large language scale AI models.”

Earlier, results from Broadcom (AVGO) weighed on Nvidia stock. Broadcom’s sales and earnings beat estimates but its sales outlook disappointed. Broadcom’s outlook has implications for demand for AI chips.

 Shares also came under pressure amid news that the Department of Justice was investigating antitrust regulations concerning the artificial intelligence chip company. According to reports, the DOJ originally sent questionnaires to the company. But it has now sent subpoenas.

Shares fell 6.4% after earnings on Aug. 28 even though Nvidia beat analyst estimates. 

Nvidia’s Second-Quarter Results

In August, Nvidia reported earnings that beat Wall Street views. Sales of $30.04 billion were higher than $28.7 billion analysts expected and came in 122% ahead of the year-earlier quarter. Earnings also came in above views of 65 cents at 68 cents per share and were 152% higher than the prior year. The artificial intelligence chip leader also guided higher for the current quarter with sales of $32.5 billion vs. views of $31.7 billion. 

Earnings have moved Nvidia stock in 2023 and 2024 and that is shining proof of why fundamental performance is one of the pillars of the Investor’s Business Daily methodology. In 2023, Nvidia had a huge 239% run.

After losing 5.3% in July, the stock gained 2% in August. It gained 1.7% in September and is up over 140% so far this year.

Fundamentals make up just one of four IBD pillars of investing — the others are a stock’s technical strength, which indicates the stock’s performance vs. other stocks, the market direction and risk management.

In early August, the stock dived amid a report that Nvidia will delay its next-generation AI chip by at least three months due to a design flaw. Nvidia’s chart also shows that the stock underperformed the S&P 500 during the sell-off. 

Reuters cited Bernstein analyst Stacy Rasgon’s opinion that the three-month delay would not cause a significant dent on the chip leader’s market share. 

Nvidia Stock: Microsoft Partnership

The AI leader has also teamed up with Microsoft (MSFT) to make the latest AI software available on Nvidia’s graphic processing units.

Nvidia stock holds an Accumulation/Distribution Rating of E on an A+ to E scale. That reflects the heavy institutional selling in recent weeks. 

Huang sold $580 million of Nvidia stock from June 14 through Aug. 9, based on a trading plan.

AI Products Drive Growth

Nvidia’s graphic processing units help accelerate computing in data centers and AI applications. The company was an early pioneer in the graphics processors that many say drastically improved computer gaming. Along with gaming, Nvidia chips now are used in such industries as health care, automobiles and robotics.

In March 2023, generative AI took a leap forward with OpenAI’s ChatGPT. According to Huang, Nvidia’s AI-capable supercomputer paved the way for the “iPhone moment of AI.”

That helped Nvidia turn the tide on its results. It reported three quarters of declining year-over-year sales and four quarters of tapering earnings in late 2022 and early 2023.

But then the company achieved record top- and bottom-line growth in the five most recent quarters.

Top Ratings For Nvidia Stock

Nvidia stock still boasts a strong Relative Strength Rating of 97 from Investor’s Business Daily. Its three-month RS Rating is 59.

Its EPS Rating is an ideal 99, while the stock holds a Composite Rating of 99. The stock is also on IBD Leaderboard, IBD SwingTrader and the growth IBD 50.

Nvidia is one of the Magnificent Seven stocks that led the market in 2023 and much of this year. 

Is Nvidia Stock A Buy?

Nvidia is above its 50-day moving average and has cleared multiple trendline entries as market conditions improve. But  investors may still want to wait till volume picks up. It’s been running below average for a few weeks. Nvidia also offers a proper buy point of 140.76, which is its all-time high. 

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