Nvidia (NVDA) has been a strong front-runner in the semiconductor industry, but could there be a new wave of chip makers? Ruben Roy, Stifel Applied Technology Analyst, joins Yahoo Finance Live to weigh in on the semiconductor market outlook for 2024.

Roy sees many possibilities for semiconductor companies—predicting expansion—and notes Nvidia, which has “cracked the code” with movement to software and services as well, could lead the semiconductor market in 2024.

Roy believes that one-way companies can achieve a return on investment will be “software services moving this infrastructure and technology into enterprise.”

Follow along with Yahoo Finance's 2024 Investor Guide for more expert insight, or click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JOSH LIPTON: Ruben, it is great to see you. Let me ask you this, Ruben, so you're looking at the SMH here, so the ETF that tracks the chips, it's up about 70% as we round up 2023. Ruben, when you look ahead now to 2024 for chip investors who are listening, Ruben, what are the big-- the big bogeys, the big lessons you want to see in 2024? What's going to be the one big thing that's going to move this sector? And I don't mean to pigeonhole you, maybe there's-- maybe there's a couple, Ruben.

RUBEN ROY: Yeah. Hey, nice to see you here, Josh, on Yahoo. And thanks for having me. Yeah, it's a broad question right semiconductor industry has a lot of moving parts and a lot of different types of companies that do a lot of different things. And you point out SMH. A lot of the SMH move came from a handful of companies this year in 2023. One of the trends that we identified way back in January of this year, we do a trend report, was AI and a couple of the companies that we thought were going to benefit. And certainly, Nvidia came out and starting with their earnings back in the spring, really started to surprise us.

So we've seen that sort of flow through the Nvidia model. We think there's still plenty of room ahead. These semiconductor companies are now transitioning into not just being semiconductor companies. We think Nvidia is one of the first semiconductor companies that's cracked the code on becoming a software and services company. And so I think that's going to start to play in the model as you look out to '24.

And if I had to think about some of these themes and trends that investors should be looking at is just that what's next for AI. We've got these big investments capital investments from all of the big cloud service providers going into building out these massive training clusters. What happens next with the training clusters? How do you make an ROI on those investments?