Here’s Why Nvidia and AMD Are Set to Skyrocket in 2024

Semiconductor stocks outperformed the broader market by a wide margin in 2023, which is evident from the 66% gain clocked by the PHLX Semiconductor Sector index as compared to the 24% gain of the S&P 500 index as of Dec. 27.

Booming demand for artificial intelligence (AI) chips played a key role in driving the impressive surge in semiconductor stocks this year. Not surprisingly, prominent semiconductor companies such as Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) have delivered healthy gains to shareholders in 2023.

The good part is that these semiconductor giants’ stocks could continue soaring in 2024 thanks to the emergence of a new catalyst.

The PC market is set to rebound in 2024

Sales of personal computers (PCs) have been declining every quarter since the beginning of 2022. That market experienced a sharp surge in demand in 2020 and 2021 thanks to the coronavirus pandemic, which led many consumers to buy new PCs as they shifted to doing more learning, working, and playing at home. However, that demand disappeared in 2022 and the market is estimated to have declined further in 2023.

The good news: 2024 may be the year when PC sales rise again. Market research firm IDC is predicting a 3.4% increase in PC shipments in the new year, while Canalys is forecasting a jump of 8%.

Both firms assert that the growth will be fueled by the advent of AI-enabled PCs, an aging installed base of existing computers, and the looming necessity for users to upgrade to Windows 11 as Microsoft is set to end support for Windows 10 in October 2025. What’s more, IDC is expecting the PC market to clock a compound annual growth rate of 3.1% through 2027.

A turnaround in PC sales would be great news for Nvidia and AMD as both companies supply chips for PCs and rely on this space for significant chunks of their top lines.

Nvidia and AMD would benefit

People install Nvidia’s graphics cards in PCs to power graphics-intensive tasks such as game-playing, 3D rendering, and…