These 2 Nvidia and Intel Suppliers May Surge on AI

Applied Materials, Inc. (AMAT) and Taiwan Semiconductor Manufacturing (TSM), whose stocks have both surged so far this year, could potentially enjoy further gains as computer chip technology enters the next phase of its evolution, according to Barron's. Companies that are looking to make newer and better chips need to develop innovative strategies, as the rising use of artificial intelligence changes chip making. (For more, see also: Intel Dethroned by Samsung as No. 1 Chipmaker.)

Rising Capital Spend

As this industry shifts, a prediction that companies like Intel Corporation (INTC) will boost the capital they spend on equipment has drawn the interest of Wall Street analysts, Barron's reported. These businesses will put an average of $45 billion per year toward this end between 2017 and 2020, sharply higher than the annual average of $32 billion that existed during the seven years prior. 

Applied Materials

Applied Materials, which has a price-earnings ratio of 18.33, has climbed roughly 60% year-to-date (YTD), according to Google Finance data. This company, which is a major supplier of tools to businesses such as Intel, has done well for most of this year and could generate strong performance next year as well, Barron's reported. As companies bolster their spending on equipment, Applied Materials expects that its earnings per share will rise notably. 

Taiwan Semiconductor

Taiwan Semiconductor Manufacturing, a contract manufacturer that provides circuits to firms like NVIDIA Corp. (NVDA), has been becoming increasingly visible as a growing number of companies hire this company to make their chips, according to Barron's. This company's revenue could push higher as more and more businesses seek its services. The chip maker, which has a price-earnings ratio of 17.21, have climbed roughly 33% YTD, according to Google Finance data. (For more, see also: The Industry Handbook: The Semiconductor Industry.)