The AI and semiconductor trade found itself under a great deal of pressure this summer. And though some of the names that felt the cooldown have since recovered ground, others are still off double-digit percentage points away from their prior peaks. With every big leg lower, it seems doubtful that such harder-hit names will return to new heights in the near future.

In this piece, we’ll check out two very different stocks that have since taken different trajectories going into the autumn season.

Key Points About This Article

• AVGO and SMCI are two different AI stocks that growth investors should be keeping tabs on this October.
• It’s hard to imagine the AI boom slowing down anytime soon. Recent AI stock volatility could produce great entry points for investors.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Broadcom

Broadcom (NASDAQ:AVGO) is a semiconductor that stands that some may view as the potential next big AI play, given what it stands to gain from the extension of the AI boom, not to mention it’s also been a top performer in recent years, with shares up more than double (107%) in just this past year.

With AVGO shares just 4% away from revisiting new all-time highs, it’s not hard to imagine investors feeling much better about the $806 billion semi giant as it eyes the $1 trillion market cap club. If the AI trade looks to make up lost time and heat up following a rather chilly summer, Broadcom may very well find itself valued at north of $1 trillion by year’s end.

However, numerous players within the industry will need to confirm that the world still has its foot on the AI gas. There’s no guarantee that the companies designing and manufacturing AI chips will guide higher come their turn to report quarterly earnings. If demand stays hot but the guide going into next year is anything but blistering, the semi stock volatility that first began back in July could easily rock the industry, the tech sector, or perhaps the entire stock market.

Either way, Broadcom stands out as a company that can move the ball forward even as the industry rolls back in a potential sell-off. In the most recent quarter, Broadcom’s guidance disappointed many, with AI-related sales coming in at around $12 billion for the fiscal year, up just over 9% from last year. Arguably, it’s better to sandbag now and impress later than guide up and disappoint when the stakes are even higher.

After memory chip maker Micron (NASDAQ:MU) delivered its robust outlook, Broadcom seemed conservative with its guide, perhaps too conservative. Either way, AVGO stock has been heating up again. As we exit September, a breakout almost feels palpable.

Super Micro Computer

Fast-rising data server firm Super Micro Computer (NASDAQ:SMCI) was one of the hottest stocks in the market in the first quarter of 2024. However, after crashing more than 64% from its peak, it’s now at risk of wiping out all of the year’s gains. Indeed, there’s a lot of baggage, and it’s about more than just valuation and the state of the AI trade. Undoubtedly, the elephant in the room has to be the allegations made by short-seller Hindenburg Research.

With the Department of Justice (DoJ) launching an investigation into the company this week, SMCI stock has added to its losses in a big way. The negative momentum is enough to frighten even the boldest falling knife catcher as it looks to split its stock by 10-for-1 to kick off the month of October. If the pace of the sell-off continues, there may be no need for such a big stock split.

Either way, SMCI buyers should brace for more turbulence as analysts slash their price targets. Loop Capital is one of the latest firms to trim away at SMCI’s target, cutting it to $1,000 from $1,500 over margin concerns.

Short allegations and DoJ probe aside, Super Micro still stands out as an AI winner as data center demand surges. If allegations against the firm are just a bit overdone, I think there’s room for SMCI stock to bounce. For such massive AI tailwinds, a 12.25 times forward price-to-earnings (P/E) multiple seems unsustainably depressed.

In any case, I’d wait to see how Super Micro can respond to margin pressures and allegations. If it can turn margins and beef up internal controls, the stock could easily ride higher again. I’d much rather buy the name on strength than weakness.  Broadcom seems like the far better AI stock to buy right now.

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