Investing in semiconductor stocks is an ideal way to take advantage of the backbone of the computer industry. These companies make and design the chips that make significant contributions to the global economy.
While these companies suffered more than they deserved in 2022, this year seems to be much better. The recent advances have well-positioned them to benefit from the AI boom. As a result, the long-term outlook is extremely positive and some of the top companies will deliver impressive returns. While Nvidia (NASDAQ:NVDA) is already up 196% year to date, many other semiconductor stocks could rally.
With that in mind, let’s take a look at the three semiconductor stocks to buy before they skyrocket by 2025.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) stands out as one of the best semiconductor stocks to buy. It is a strong competitor of Nvidia and has been taking solid strides to become an industry leader. The company reported quarterly revenue of $5.4 billion, a 16% year-over-year rise.
The numbers are proof that the company is moving in the right direction. AMD stock is exchanging hands at $111 today and is down 13% in the past month. The discount is a good chance to load up on the stock. However, it is up 73% year to date and has generated over 500% returns in the past five years.
AMD has a diversified business model and does not depend on any one product or service for revenue. While the company has seen a drop in PC sales, it has strong margins and a steadily growing revenue in the data center segment. The company also has a stronghold in the gaming industry, and it could use AI to transform the gaming experience. Its chips are used for graphics and processing power for two of the biggest clients in the industry, Sony (NYSE:SONY) and Microsoft (NASDAQ:MSFT). This diversified business gives it a strong outlook for the coming years.
Additionally, AMD’s latest launch of its MI300 accelerator is designed to meet the demands of cloud data centers and aims to help run AI applications. Amazon (NASDAQ:AMZN) has taken a keen interest in it and could use it for Amazon Web Services.
The stock has already enjoyed an impressive rally since the beginning of the year, and I believe there is more upside ahead. The company is highly reliable, and AMD is one of the high growth semiconductor stocks right now.
Taiwan Semiconductor Manufacturing (TSM)
TSMC (NYSE:TSM) brings over a decade of experience, and it is one of the largest chipmakers in the world today. The company has recently announced a new packaging facility to meet the rising demand for its chips. TSM stock beat the market even amidst inflation, and is trading at $101 today. The stock is up 36% year to date and over 150% in the past five years.
The company has a well-known customer in Apple (NASDAQ:AAPL), which is supporting its growth. I think the stock has a long run from here. TSMC has seen a drop in revenue growth year-over-year due to the decline in sales of new PCs and smartphones, but this drop could be temporary. The company intends to spend $32 billion to $36 billion on capital expenditure this year and to maintain its lead in the industry. They also plan to grow the annual revenue at a compound annual growth of 15% to 20% between 2021 and 2026.
The company has survived many cyclical ups and downs, and this hasn’t impacted its growth. For a company like TSMC, the AI hype could mean solid business potential and lead to growth in the future. The near-term slowdown isn’t something that should worry investors. With its head start at world-class technology, proven ability to scale, and solid support from Apple, TSMC is the one to own and hold for the long term.
Intel (INTC)
Growing as a strong competitor for some of the top players in the industry, Intel (NASDAQ:INTC) is here to claim its market share. The company is set to reveal the Gaudi3 chip and grow its client base.
Already an established player in the industry, Intel might be taking it slow but it is not the one to sit back and watch. Investing in Intel could help you capitalize on the rising demand for AI chips. In order to cut costs and expand production, the company has announced a new foundry in Ohio and has invested $100 billion in it. It is also building two new chip fabrication plants in Germany for $33 billion.
The company has the experience, tech, and leadership, but it hasn’t had good years in the recent past. Now is an opportunity for it to turn around and grow. INTC stock looks undervalued to me at $33 today and it may not soar immediately but it has the potential to grow in the long term.Additionally, the company has partnered with Nvidia to advance “confidentiality-preserving” AI solutions. This could be huge for the future of Intel.
Besides the AI hype and semiconductor chips, let’s not forget that Intel’s processors are still high in demand and the first choice for single-core performance. Intel is one of the high potential semiconductor stocks to buy now.
On the date of publication, Vandita Jadeja did not hold (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.
