The artificial intelligence (AI) revolution is charging ahead, and stocks like NVIDIA Co. (NASDAQ: NVDA) are leading the charge with triple-digit revenue and stock performance gains. The impact of the AI boom has been evident in their top and bottom lines as NVIDIA maintains over a 90% market share of AI chips. However, many AI-related stocks in the computer and technology sector have had their booms and sold off, and many haven't seen AI impact their business as anticipated. These three stocks are late bloomers, and the impact of the AI revolution is starting to shape as business starts to accelerate.
ARM Holdings: ARMv9 Architecture Royalties are Double
Arm Holdings plc (NASDAQ: ARM) is a semiconductor company but not a manufacturer. They don't make chips. Rather, they design the instructions for how the chip processes the data, accesses memory, utilizes the power, and executes instructions, aka the architecture. They license the architecture to other semiconductor companies like NVIDIA Co, Apple Inc. (NASDAQ: AAPL), and QUALCOMM Inc. (NASDAQ: QCOM), to name a few. Their ARMv8 architecture dominates the smartphone industry with a 99%, yes, 99% market share.
Their latest architecture, ARMv9, is starting to pick up steam as licenses are sold and royalties take months, up to two years, to start collecting royalties. The ARMv9 architecture is best suited for AI as it accelerates processing larger datasets and focuses on optimizing power, which is crucial for Edge AI applications. The royalties are starting to accelerate, and they are double those of the legacy ARMv8 royalties. In its fiscal Q1 2025, royalty revenue was up just 17% YoY, but that’s because they are starting to roll in. While license payments are a one-time fee, royalties are the real bread and butter as they are recurring with every chip sold under the ARM licensing agreement. ARMv9 royalties comprised just 25% of total revenue in its fiscal first quarter, and that number is sure to rise as the company's AI boom is just getting started.
Marvell Technology: Custom ASICs Are in High Demand
As AI gets deployed, it becomes evident that there are general-purpose AI and very specific use cases for AI. NVIDIA's GPUs fall into the general-purpose category. However, for the sake of efficiency, there are other workloads required for AI that require processing power to be applied with more precision for specific tasks. This is where application-specific integrated chips (ASICs) come into play.
Marvell Technology Inc. (NASDAQ: MRVL) is a leading provider of custom ASICs. These chips are built to perform specific tasks only. The specialized hardware blocks help accelerate AI applications and workloads, including computer vision, analytics, training, and inferencing. ASICs are common in storage controllers, which speed up data access, retrieval, and storage, which are critical components of AI. ASICs are used to improve power management and optimize chips used for 5G, IoT, and AI. Marvell’s ASICs are used in 14nm, 7nm, 5nm, and cutting edge 3nm wafers, which are Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM).
ASICs are heavily used by data centers as underscored by the 92% surge in Marvell's data center revenue to a record $881 million in its fiscal second quarter of 2025. However, the rest of its business is expected to start recovering, like its enterprise networking segment, which saw a 52% plunge in revenue to $151 million, mostly due to inventory normalization with its clients. Marvell expects single-digit sequential improvement moving forward. The AI boom is helping lift the other parts of Marvell's business back into shape.
Micron Technology: High-Bandwidth Memory (HBM) Chips Demand Surge
When it comes to DRAM and NAND flash chips, Micron Technology Inc. (NASDAQ: MU) may be the first name to come to mind since it is the largest U.S.-based memory chip maker. The inventory glut resulting from the post-pandemic boom has been plaguing Micron for years. While other chip makers surged on AI prospects, Micron's initial surge up to a peak of $157.54 was met with a 44% stock decline heading into its fiscal first quarter of 2025 earnings report. In fact, at least three analysts had cut their price targets to brace investors for what was to come: another quarter of missed AI opportunities.
Micron finally knocked the ball out of the stadium, reporting eye-watering metrics improvements, starting with 93.3% YoY revenue growth to $7.75 billion. Non-GAAP gross margin jumped from 28.1% to 36.5% in the quarter. AI demand finally kicked in as data centers loaded up on its DRAM memory chips, notably its high-bandwidth memory (HBM) chips, which are ideally suited for AI. In fact, demand was so strong that all capacity has been sold out for 2024.
Micron announced it had purchased two chip production facilities in Taiwan to meet the capacity demand for its HBM chips. AI and data centers pulled up the lagging parts of its business as enterprises work through their inventory, recharging the demand for traditional servers. All in all, Micron expects the strongest start in its history for 2025 as the AI boom takes shape for them.
