Supported by artificial intelligence (AI), the semiconductor industry is thriving. It has immense growth potential, and investors seeking long-term value creation should be looking for semiconductor stocks to buy and hold. This article contains the top contenders in this space. These companies have positioned themselves strategically to capitalize on key growth drivers, including the logic market, data center demand and more.
These companies are positioned for growth in different sectors, such as logic market and innovation, high-performance and energy-efficient computing and data center market and having a strong product portfolio. All three have promising prospects for significant growth.
ASML (ASML)
ASML (NASDAQ:ASML) shows particular promise in sectors such as automotive and industrial. The company anticipates a substantial 25% growth in overall annual revenue, primarily driven by solid demand from China.
ASML currently projects 40% annual growth for extreme ultraviolet lithography (EUV) technology and 30% growth for non-EUV technology. The company’s Installed Base Management segment is expected to grow by approximately 5%, ensuring ongoing service and upgrades for its customer base.
Also, ASML maintains an optimistic outlook with a EUV bookings backlog of €39 billion, twice the planned shipments for this year. The backlog and the expectation of rebounding bookings in the coming quarters suggest a strong recovery for ASML as the supply chain improves.
Much of ASML’s growth is driven by trends like distributed computing and the increasing adoption of electric vehicles. The company also recognizes the fact that AI will be a long-term tool to utilize and intends on using that to further bolster its market position.
Additionally, ASML is strategically targeting the Chinese market, recognizing it as a crucial region for growth. With China’s focus on things such as power devices, analog devices and microcontrollers, ASML anticipates solid growth in collaboration with Europe and the US.
Finally, ASML can address inflation-related cost increases and improve average selling prices. Consequently, it is well-positioned to mitigate the impact of inflation on its margins. These factors make ASML one of the semiconductor stocks to buy and hold forever.
Taiwan Semiconductor (TSMC)
Taiwan Semiconductor (NYSE:TSM), or TSMC, has the fundamental strength to overcome near-term challenges. It can position itself for a bullish future in the semiconductor industry. Despite the inventory adjustment and declining market forecast, TSMC’s strategic initiatives and technological advancements are expected to drive growth.
Additionally, TSMC’s 3-nanometer technology (N3) is already in high-volume production, contributing significantly to total revenue. It can meet the demands of high-performance computing and smartphone applications. The company is also focused on innovation, as seen by TSMC’s 2-nanometer technology (N2) development being on track.
TSMC has global expansion plans, including the construction of fabs in Arizona, Japan and the potential specialty fab in Europe. It demonstrates its leadership in meeting customer demands and solidifying its presence in key markets.
While TSMC maintains confidence in its advanced technology processes, it expects its market share to remain high. The company’s engagement in AI-related demand and its emphasis on AI and high-performance computing as future megatrends indicate further growth opportunities.
Further, TSMC’s dedication to its shareholders can be seen through sustainable dividends and the potential for increased dividend payouts. The company’s capital expenditure plans align with future opportunities, allowing TSMC to invest in long-term growth. This is one of the semiconductor stocks to buy and hold forever.
TSMC is positioned for a bullish future. The company may thrive with its advanced processes, engagement in emerging trends and focus on meeting customer demands in the ever-evolving semiconductor landscape.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is capitalizing on key growth drivers and solidifying its position in the data center market. AMD’s focus on being the strategic supplier to the largest data centers worldwide is paying off, with increasing interest and evaluation of its Genoa CPUs in the enterprise sector. Milan, AMD’s previous offering, continues to gain traction, particularly for cost-conscious workloads.
AMD’s product portfolio has gotten positive customer feedback, positioning it for a steep growth ramp in the year’s second half. The Instinct product line with MI300 may progress significantly, targeting supercomputing and AI applications. AMD’s strategy of delivering integrated AI capabilities across its product range and its focus on software development and optimization positions the company well in the expanding AI market. Additionally, the acquisition of Pensando has bolstered AMD’s data center offerings, enabling complete solutions that accelerate network, security and storage.
AMD also has resource allocations focusing on specific workloads and customer needs. The company strongly emphasizes advancing process nodes and maintaining roadmap momentum through design innovation and partnerships. While the potential improvement in average selling prices depends on performance per dollar and workload dependencies, AMD aims to deliver total cost of ownership advantages to customers in each generation.
Moreover, the integration of Xilinx has unlocked synergies and cross-selling opportunities. This further expands AMD’s market reach in embedded, automotive, telco and edge applications. AMD is gaining traction in the enterprise market. Lastly, the company’s growth is fueled by the success of Milan and Genoa CPUs and its close collaboration with original equipment manufacturers and end customers, which positions AMD for continued growth in this segment.
As of this writing, Yiannis Zourmpanos was long ASML and TSM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
