Semiconductors are a huge part of our lives and integral to all the devices we use daily. There will always be a demand for semiconductors, which will continue to rise as long as technological advancements exist. As per the Semiconductor Industry Association, the global sales of semiconductors in 2022 reached $573.5 billion, the highest-ever annual total. Now is the time to put your money to work and own the best semiconductor stock for long-term gains.
Despite being affected by the market turmoil, China lockdowns, and the transition to work from home, the semiconductor industry is reporting strong growth in terms of sales. With inflation cooling, we can soon see a rise in the demand for semiconductors, which will come from smartphones and electric vehicles. The CHIPS Act has also brought a lot of enthusiasm to the industry, and it could benefit several chipmakers in the near term.
The industry is expected to reach $1 trillion by the end of 2030, which means now is a good time to load up on semiconductor stocks and enjoy an early-mover advantage. Here are the three best semiconductor stocks to buy.
At the top of my list is Nvidia (NASDAQ:NVDA). I have always been a fan of this company and believe in its long-term growth potential. Based on my recommendation on February 5, you would already be sitting on gains of 10% if you had bought the stock. The company has been a hot topic recently, but it did suffer more than it should have in the past year. NVDA stock is trading at $232 today, up 47% over the past six months. This is a must-have and the best semiconductor stock to own right now.
The chipmaker has gained massive popularity and momentum for artificial intelligence (AI). In June 2021, I wrote about how AI will drive growth for Nvidia, and here we are! Nvidia already set a gold standard in its chips and now provides the processing power which helps run AI applications. It could become the key player in AI adoption across different industries. That said, the company already has a diversified revenue stream which secures it from market turmoil.
Nvidia announced the fourth quarter results recently and reported a revenue of $6.05 billion, a 21% drop from the previous year, and a profit of $1.4 billion, down 53%. However, the results got the stock moving, going from $206 to $238 after the results. The company might have seen a drop in PC demand, but it is making money from the data center business. It reported an 11% growth in the segment with a revenue of $3.62 billion. The company could win big from ChatGPT. Whether it is a success or not, companies will work towards developing similar tools and technology, leading to higher demand for Nvidia applications. C.J.Muse, an Evercore ISI analyst, has an Outperform rating with a price target of $300. The analyst expects the data center revenue to grow throughout 2023.
Taiwan Semiconductor (TSM)
Another company on the list of the best semiconductor stocks is Taiwan Semiconductor (NYSE:TSM) The Taiwanese multinational company is a major player in the semiconductor industry and is expanding rapidly despite the overall market uncertainty. TSM stock is trading at $88 today, much lower than the 52-week high of $113. But this is an opportunity to grab the stock at a discount. It is the best semiconductor stock to own this year.
In the recent quarter, it reported sales of $19.93 billion and earned $1.82 per share. The company has $43.7 billion in cash and liabilities worth only $30.8 billion. The stock looks highly undervalued if you look at the company’s potential and ability to invest. It has excellent revenue growth and financial stability. One of the top reasons to invest in the company is that almost all semiconductor companies source their chips from them. This means whether the stock market is up or down, Taiwan Semiconductor is expected to report strong revenue numbers.
The company has announced an investment of $40 billion in a U.S. plant, and it plans to build a second chipmaking plant in Japan which could cost more than $7.4 billion. The plant is expected to be completed by the end of this decade. TSM has investments across different advanced technologies, including AI, 5G, and IoT, which makes it one of the most coveted tech companies in the market today. With higher production capacity and a recovery in consumer demand, TSM stock could hit new highs. When it comes to the company’s financials, you have nothing to worry about. It has high growth and margins, which will keep the company up and running for many years to come.
While many of you may frown at reading Intel (NASDAQ:INTC) as a semiconductor stock to own, I believe the company is a long-time player in the industry with the potential to grow. The company has been in trouble lately and is doing everything to cut costs, including dividend cuts, but it is not slowing down when it comes to producing semiconductors. Intel is ready to give it all to make the most of AI. It is currently working on the new Gaudi AI chip, Gaudi3, with more memory than its previous chips.
INTC stock hasn’t had a good 2022, and the selloffs have made it possible for investors to own the tech stock at a discounted rate. INTC stock is trading at $25.14 today, almost half its 52-week high of $54. It has dropped 23% in the past six months and might pick up from here. The last two times it dropped to $25, it soared again; I am not saying $25 is the baseline, but there are chances. I think the stock has bottomed out, and the worse is over.
INTC stock dropped to $25 in October 2022 and then picked pace to hit $30 in November. Soon after, it again hit $25 in December 2022 and $30 in January 2023. INTC stock hasn’t gone below $25 in the past five years, which means you could get the stock at the most lucrative price today. Artificial intelligence could drive growth for Intel in the near future, and we could see the company bounce back soon.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.