Shares of these two semiconductor companies are down more than 22%, but could rally in 2025.

This is a great time to invest in top semiconductor chip stocks. Powerful trends such as artificial intelligence (AI), cloud computing, AI-powered smartphones and electric vehicles (EVs) are driving greater demand for chips than ever before. The PHLX semiconductor sector the index is up 50% in the last 12 months, beating the index S&P500 return of 34%.

Here are two leading semiconductor companies whose shares are down at least 25% from recent highs. Investors who add these two stocks to their portfolio today can expect excellent returns as each stock rebounds.

1. Micron technology

Exploding demand for Micron technology‘S (HIM -3.53%) memory and storage components make it a great product to buy immediately. The company just reported better-than-expected financial results for its fiscal fourth quarter (which ended August 29), with strong data center demand driving 93% year-over-year revenue growth.

Growing demand for Micron memory chips is expected to continue into 2025, driven by artificial intelligence, automotive and data centers. The growth of the AI ​​server market is expected to drive demand for Micron’s high-capacity dynamic random access memory (DRAM) modules. Statista predicts the AI ​​server market will grow tenfold to $430 billion by 2033, which could support strong growth for Micron’s data center business.

Other markets are expected to recover next year. Micron’s automotive revenues hit a record high in fiscal 2024. The rise of infotainment and driver assistance systems is driving an increase in the number of chips in a vehicle. This is a long-term growth opportunity that is expected to drive demand in the second half of fiscal 2025.

PCs and mobile devices are two more growth opportunities next year, with Micron being the leading supplier of memory and SSDs. PC sales are expected to increase in the second half of the year as a result of the upgrade of new AI-enabled PCs and Microsofthas discontinued support for older versions of the Windows operating system. The launch of more AI-enabled smartphones will drive similar demand trends in Micron’s mobile industry.

Analysts expect Micron’s earnings to increase 42% to $12.74 in fiscal 2025. Assuming the stock trades at its historical average price-to-earnings (P/E) ratio of 16, the stock could hit $203 within the next year. Mikron Iinvestors could potentially almost double their money on the current share price.

2. Advanced micro devices

Major data center operators, including Microsoft, MetaplatformsAND Oracle they use Advanced micro devices‘ (AMD -0.16%) MI300 chip that will help them cope with AI workloads. AMD’s data center revenue has surged since the chip launched in December, with revenue more than doubling year-over-year in the second quarter.

AMD’s data center business should continue to see strong growth to support enterprise investment in AI. Data centers require powerful graphics processing units (GPUs) to run AI models. One sec Nvidia is a leading GPU supplier, AMD expects to generate $4.5 billion from data center GPUs this year.

AMD fills a graphics processor market that has been tight in terms of supply, but it is also able to meet demand from customers who may be looking for alternatives to the high prices that Nvidia chips offer. AMD estimates that the total addressable market for AI accelerators, or graphics processors, will reach $400 billion by 2027.

Looking ahead, new AI models will require exponentially more computing power. In June, AMD presented a multi-year roadmap for AMD Instinct accelerators. It plans to release the MI325X accelerator in the fourth quarter and MI350 in 2025. MI350 will deliver a 35x increase in AI inference performance compared to the MI300 series. The company also stated that it will launch new products every year to meet the growing demand, indicating a long road of growth ahead.

Wall Street consensus estimates project AMD’s revenue to grow 28% next year and earnings per share to reach $5.44. If AMD stock trades at the same forward P/E ratio of 48 a year from now, it could reach a price of $261, a 59% increase.