Semiconductors have long been indispensable to our daily lives. They power not only our computers, but also, these days, our cars, smartphones, and even our smart refrigerators and washing machines. It’s no surprise, then, that many semiconductor stocks have performed phenomenally well, enriching their shareholders.
With the recent proliferation of artificial intelligence (AI) applications, semiconductors have become even more essential. Here’s a look at seven semiconductor companies that appear to have a promising future—as well as a different way to invest in semiconductors—via exchange-traded funds (ETFs). Note that they also have different goals and valuations.
1. Nvidia
Nvidia (NASDAQ: NVDA) has been growing at a breakneck pace in recent years, and many expect it to continue that momentum. (Others say it needs a breather.) The company made its name with its gaming chips, but it’s now a leader not just in graphics processing units (GPUs) for gaming, but also in chips for data centers. And data centers are booming because so much of our AI activity is happening in them.
The stock’s valuation is high, but if it continues to grow at a breakneck pace, it may be justified. Proceed with caution if you are not risk averse.
2. Taiwan Semiconductors
Taiwan Semiconductors (NYSE:TSM) is the world’s largest contract chipmaker, which makes chips designed by others. Recently valued at nearly $1 trillion, its growth prospects are good because it is a leader in its field and can take advantage of economies of scale. On the other hand, because it is based in Taiwan, it is vulnerable to China – and the United States and other countries are working to develop more competition for the company.
3. Intel
Intel (NASDAQ:INTC) is one of the best-known chip makers, with a market capitalization of $145 billion. The stock appears to be reasonably valued recently, after a significant decline due to fierce competition, heavy investment in future growth, and loss of market share. The company is aiming to expand into the field of laptop chips, and is integrating an integrated artificial intelligence processor into it.
4. Broadcom
Broadcom (NASDAQ: AVGO) has a strong following because it specializes not only in chips, but also in software. Its businesses are also very diversified, including wireless and wireline technologies, optical products, mainframe software, cybersecurity and storage, among others. Its customers include Apple, Microsoft, AT&TIntel and many other big names. Broadcom will have a 10-for-1 stock split on July 12.
5. Qualcomm
Qualcomm (NASDAQ: QCOM) has been designing mobile chips for a long time, and those chips have probably been in most of the iPhones you own. Apple, however, is considering making its own chips in the coming years, which could challenge Qualcomm. But the company has been busy making chips for vehicles and smart devices, among other things, as it diversifies its business. Its foray into laptop chips is another promising move.
6. Monolithic power
Monolithic power (NASDAQ: MPWR) isn’t as well-known as other semiconductor companies, nor as big, with a recent market capitalization of around $41 billion. But it’s growing at a breakneck pace, taking market share from rivals with its data center chips.
Its valuation looks high, with a recent forward price-to-earnings (PE) ratio of 63, well above its five-year average of 43. So perhaps you should wait and hope for a pullback, buy in chunks over time, or just take the plunge if you expect its incredible run to continue.
7. Micron Technology
Micron Technology (NASDAQ: MU) is another semiconductor giant, recently valued at nearly $145 billion, and specializes in memory and storage chips. Its supporters like its strong balance sheet and strong performance typical of when the cyclical memory market is booming. Its detractors are wary of memory market downturns and consider it overvalued, with a recent forward price-to-earnings (PE) ratio of 15, higher than its five-year average of 12.
Bonus idea: Semiconductor ETFs
These are all fascinating companies, and many, but perhaps not all, will perform exceptionally well in the years and decades to come. (The price at which you invest in these companies will also be a factor, if you do at all. So try to buy when they appear undervalued or at least reasonably valued.)
One way to play it safe, while still aiming for exceptional returns, is to invest in semiconductors through ETFs that focus on the sector. Check out these proven ones:
-
iShares Semiconductor Exchange Traded Fund (ETF) (NASDAQ: SOXX)
-
VanEck Semiconductor Exchange Traded Fund (ETF) (NASDAQ: SMH)
-
SPDR S&P Semiconductor Exchange Traded Fund (NYSE:XSD)
-
Invesco Semiconductors Exchange Traded Fund (ETF) (NYSEMKT:PSI)
Consider keeping some of your assets in semiconductors, whether through individual stocks or ETFs. Or both!
Should You Invest $1,000 in Nvidia Right Now?
Before you buy Nvidia stock, consider this:
THE Motley Fool, Securities Advisor The team of analysts has just identified what they believe to be the 10 best stocks Investors need to buy now…and Nvidia isn’t one of them. These 10 stocks could deliver monstrous returns in the years to come.
Consider when Nvidia I made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $791,929!*
Securities Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building advice, regular analyst updates and two new stock picks each month. Securities Advisor The service has more than quadrupled the performance of the S&P 500 since 2002*.
See all 10 actions »
*Stock Advisor returns as of July 8, 2024
Selena Maranjian has positions in AT&T, Apple, Micron Technology, Microsoft, Nvidia, Qualcomm, SPDR Series Trust-SPDR S&P Semiconductor ETF, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in Apple, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, and iShares Trust-iShares Semiconductor ETF. disclosure policy.
7 Semiconductor Stocks That Could Make You a Millionaire was originally published by The Motley Fool