We recently compiled a list of the 10 AI Stocks That Will Skyrocket. In this article, we are going to take a look at where Semtech Corporation (NASDAQ:SMTC) stands against the other AI stocks.
DWS, an expert in active, passive, and alternative asset management, believes that expectations around the usage of Artificial Intelligence (AI) across industries acted as one of the critical stock market drivers over the previous 2 years. In 2025, AI developments are expected to make significant strides throughout various domains. The firm anticipates a shift from generalized applications to industry-specific solutions. Notably, companies are expected to refine their strategies to target specific use cases providing measurable results.
Generative AI CapEx Will Continue to Increase, Says DWS
DWS, while quoting Bloomberg estimates, highlighted that some of the big technology firms can collectively increase capex to ~$200 billion in 2025. More than $90 billion in incremental capital spending in 2024-25 vs. 2023 is projected to be earmarked mainly for expanding Gen AI infrastructure. On a related note, Goldman Sachs Asset Management believes that the AI capex from well-established hyperscalers is projected to surpass $250 billion in 2025. This hints at optimism that hyperscalers remain confident in the ROI (Return on Investment) they will witness from such significant investments.
DWS sees the de-globalization movement spreading to data and AI, with countries spending a significant amount to subsidize “sovereign AI.” To provide a brief overview, it refers to a nation’s capabilities to establish, control, and deploy its own AI technologies. It spans both physical and data infrastructures. Notably, in the past year, the governments of the US and China have pledged $40 billion – $50 billion each dedicated towards AI investments.
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Key AI Trends to Watch Out
Appinventiv believes that conversational AI, Predictive Analytics, AI Democratization, Agentic AI, and Generative AI, among others, are some of the key trends to watch out for. While conversational AI focuses on streamlining customer interactions, generative AI has been revolutionizing content creation across fields including healthcare. Additionally, multi-modal Al remains one of the most popular AI trends in business. It focuses on leveraging machine learning trained on multiple modalities, including speech, images, and traditional numerical data sets. As a result, there will be a more holistic and human-like cognitive experience.
Appinventiv opines that companies can capitalize on multi-modal Al and develop intelligent systems analyzing diverse data streams, which can help improve natural language understanding and voice recognition for better user experiences.
Our Methodology
To list the 10 AI Stocks That Will Skyrocket, we sifted through several online rankings and shortlisted the companies catering to the broader AI sector. Next, we chose the ones that analysts see significant upside to. Finally, the stocks are arranged in ascending order of their average upside potential, as of February 24. We also mentioned hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A technician looking at a circuit board of analog semiconductor products.
Semtech Corporation (NASDAQ:SMTC)
Average Upside Potential: 82.9%
Number of Hedge Fund Holders: 57
Semtech Corporation (NASDAQ:SMTC) is engaged in providing key semiconductor solutions that enable the infrastructure needs for AI applications. UBS initiated coverage of the company’s stock with a “Buy” rating and a price objective of $85. As per the analyst, it happens to be an analog company making inroads into AI data center networking due to a key content win for its CopperEdge product in Nvidia’s Blackwell platform. Semtech Corporation (NASDAQ:SMTC)’s CopperEdge product provides a cost-effective solution for reducing noise in AI data center networking, believes the analyst.
In Q3 2025, the company witnessed broad-based growth throughout each of its end markets, and mainly in a data center, where Semtech Corporation (NASDAQ:SMTC) expects AI-driven product demand to be a long-term and a transformational growth engine. As AI expands throughout different industries, the company’s role in offering key connectivity and power solutions has placed Semtech Corporation (NASDAQ:SMTC) well from increased demand for scalable and efficient AI infrastructure. Notably, AI models need specialized hardware which are required to be energy efficient and high-performance.
Heartland Advisors, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Technology. Semtech Corporation (NASDAQ:SMTC), which manufactures optical components and technology solutions used in data centers and IoT (Internet of Things) systems, is a position we initiated in the third quarter and increased our exposure to in the fourth.
Semtech, one of our Strategy’s best performers in the past quarter, is an example of a stock we’ve owned in the past and recently returned to as circumstances improved. We last held SMTC a few years ago, before it announced its acquisition of Sierra Wireless. The company levered up in late 2022 to make the purchase. Soon after the deal was completed, the stock sold off and the existing management team was replaced. The new management team is now seeking to divest some of Sierra Wireless’ assets to de-lever and regain focus on Semtech’s core business.
We’ve kept the company on our radar since the acquisition. Semtech’s signal integrity business, the company’s crown jewel franchise, is a backbone component of many data centers. With growing demand for data centers in the AI boom, we believe this could be a real opportunity for the company. New management has been clear they intend to divest non-core business lines to reduce leverage, which should unlock additional value. Yet the stock currently trades at a 20-25% discount to its peers based on EBITDA.”
Overall SMTC ranks 1st on our list of the AI stocks that will skyrocket. While we acknowledge the potential of SMTC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SMTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.