Semiconductor stocks took a drubbing in 2022. The S&P 400 Semiconductor index lost 27 of its value last year. Although the growth index hasn’t regained the highs it hit, investors welcome the 18% gain the top semiconductor stocks achieved over the first seven months of 2023.

But there are headwinds still for the industry. Personal computing and gaming continue their rough slog forward. Consumer spending in each declined in the first half of the year. 

International Data Corp (IDC) says PC shipments tumbled 13% in the second quarter compared to last year. It’s the sixth straight quarter of contraction for PCs.

Artificial intelligence is certainly one bright spot for chipmakers, but much of the rest of the industry is hit or miss. Competition is also intensifying in each of the segments as companies gravitate towards the money-making centers.

Because the semiconductor industry is cyclical and the end of the down cycle could be approaching. Loading up on chip stocks now could be one of the shrewdest investment decisions you make this year.

Intel (INTC)

One of the biggest names in chips is Intel (NASDAQ:INTC). Its stock was hammered in 2022, losing half its value. It’s doing much better this year with shares up 35% year to date as sales and earnings have been stronger than many expected.

Intel’s outlook for next quarter is also upbeat. Adjusted earnings of $0.20 per share are below last year’s $0.59 per share but represent the chipmaker’s stabilizing situation. Revenue forecasts are also ahead of expectations. There are a few reasons the clouds are parting for Intel. 

The chipmaker’s cost-cutting program is seeing results. It has reduced costs by $3 billion this year. That led Intel’s gross margins to rise to 40% and operating margins jumped to 3.5%.

Intel is also investing heavily in AI. Its Gaudi platform is helping to contribute to a $1 billion pipeline opportunity through 2024.

Intel insists it can complete its turnaround by 2026. It believes it will regain much of the ground lost to rivals like Advanced Micro Devices (NASDAQ:AMD). This makes it one of those top semiconductor stocks.

“Ultimately, we will get back to process parity and leadership,” CFO David Zinsner told analysts.

At 2.5 times sales, Intel is trading at levels not seen in the past decade making it a great time to load up on this semiconductor stock.

Micron Technology (MU)

Memory maker Micron Technology (NYSE:MU) is making up for lost time. As the leading producer of DRAM and NAND flash memory, it also was hit hard by the industry downturn. It lost 46% of its value in 2022. 

This year is much better with shares gains of 36%. Yet it still sits well below the all-time highs it exited 2021 at. Micron, though, is poised to make up that lost ground and more.

Micron is embracing AI in a big way. It also just leapfrogged into the industry forefront.

Last week the chipmaker announced it delivered the first stacked high-bandwidth memory (HBM) that packed 24 GB of memory into eight layers of DRAM, with bandwidth over 1.2 terabytes per second and a pin speed of over 9.2 gigabytes per second.

SK Hynix (OTCMKTS:HXSCL) has long been the leader in stacked HBM memory. Earlier this year it had announced it was able to put 24 GB of memory into 12 layers of DRAM with a speed of 6.4 GB/s. Micron offers the same capacity in a smaller footprint. Moreover, it’s looking to put 36 GB of capacity into a 12-layer stack in the first quarter of 2024.

Because AI is a memory hog, this development puts Micron squarely in the lead. It provides the industry with greater efficiency and lower power consumption.

Mordor Intelligence estimates the HBM market is a $2 billion opportunity today. It will grow at a 25% compounded annual rate through 2028. AI is only one of the forces driving this market higher. Look for Micron to reap the rewards of its investment in the space.

Taiwan Semiconductor Manufacturing (TSM)

Taiwan Semiconductor Manufacturing (NYSE:TSM) went from hero to zero after Warren Buffett dove into the chipmaker head first and then uncharacteristically bailed out on the stock.

Buffett amassed so many shares it catapulted into a top 10 holding at Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B). Yet just as quickly, Buffett sold off the stock. 

Taiwan Semiconductor bounced back this year like the rest of the industry. Shares are up 28% in 2023, but they’re still 20% below their 2022 peak. It is confronting slowing end markets, delays in planned foundry construction, and capital expenditures at the low end of prior forecasts. Despite its gains, Taiwan Semiconductor is cheap. Trading at 15 times trailing earnings, the chipmaker is at levels not seen since 2016. All in all, it’s one of those top semiconductor stocks to buy.

As noted earlier, the semiconductor industry is cyclical. Taiwan Semi is still leaps and bounds ahead of competitors such as Intel. When the industry recovers the company can quickly bounce back to form. For example, its automotive and digital consumer electronics segments grew smartly for the quarter. Auto sales grew 3% to account for 8% of revenue while DCE jumped 25% to account for 3% of the total.

It’s not going to lose customers during the downturn. It’s just a matter of time before business bounces back. Taiwan Semiconductor Manufacturing remains a strong buy semiconductor stock today.

On the date of publication, Rich Duprey 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.