Shares of AMD have cratered over the past year, making it a rare example of a chip stock that has fallen out of favor with investors.

The semiconductor industry has received a major shot in the arm from the rapid advancement of artificial intelligence (AI) technology: The size of the semiconductor market jumped by an estimated 19% last year to $630 billion,

After AI had its "iPhone moment" with the release of ChatGPT in late 2022, leading stocks in the space have seen phenomenal returns. For example, NVIDIA (Nasdaq: NVDA) gained 239% in 2023 and 171% in 2024.

So, how can Nvidia's stock soar 67% in 2025? Simple. It does what it's expected to and gives a solid outlook for next year. Right now, Nvidia trades for 52 times trailing earnings, which is near the cheapest level it has traded at over the past two years.