Semiconductor stocks are in a great position as artificial intelligence increases the demand for their products. While artificial intelligence tools need AI chips to run, there are many other industries that rely on these chips.
You’ll find semiconductors in smartphones, cars, refrigerators, video game consoles, and essential appliances. Large-cap semiconductor stocks resemble blue-chip investments even though they still have respectable growth potential.
Investors looking for long-term returns in the semiconductor industry may want to consider these stocks.
Semiconductor Stocks: Synopsys (SNPS)
Synopsys (NASDAQ:SNPS) has its semiconductors integrated into innovative technology like machine learning, self-driving cars, and devices. The company is at the forefront of chip design, software security, quality testing, and other verticals.
The stock has attractive profit margins and closed out fiscal 2023 with another successful quarter. During the final quarter of the year, Synopsys reported 25% year-over-year revenue growth, which was an acceleration from the company’s 15% year-over-year revenue growth for all of fiscal 2023.
GAAP EPS came in at $2.26, which is a big jump from $0.99 GAAP EPS in the same period last year. Net income more than doubled year-over-year to reach $349.2 million in the quarter.
Synopsys has comfortably outperformed the market for several years. The stock is up by 55% over the past year and has gained 433% over the past five years. The stock currently trades at a 70 P/E ratio.
Long-term investors can get an additional boost from the company’s acquisition of engineering software firm Ansys. It’s a $35 billion deal that will help Synopsys expand its market share and generate more financial growth.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) continues to inch closer to a $1 trillion valuation. The company’s market cap is currently over $570 billion, and shares trade at a 37 P/E ratio. Investors also get to enjoy a 1.70% dividend yield due to the company’s efforts to raise its dividend. The firm regularly maintains a double-digit dividend growth rate each year.
Broadcom is at the center of the artificial intelligence boom. The company’s Trident 5-X12 chip is a valuable resource for artificial intelligence tools and general resources. Broadcom also recently announced that it will host an investor meeting about enabling AI in infrastructure.
The company’s efforts in artificial intelligence can lead to more gains as the multi-year tailwind continues. Broadcom has regularly outperformed the market, with shares more than doubling over the past year. The semiconductor giant has also increased by 343% over the past five years. Broadcom regularly posts profit margins above 35% and has plenty of upside left.
Semiconductor Stocks: Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been thrust into the spotlight through a series of incredible financial reports and a parabolic rise that saw its market cap exceed most of big tech. Shares have more than tripled over the past year and are up by 1,623% over the past five years.
Nvidia has experienced multiple quarters where its revenue growth has either doubled or tripled year-over-year. Net profit margins have expanded dramatically and recently jumped above 50%.
Despite a massive rally, Nvidia shares still look reasonably priced. That’s because the stock has a 36-forward P/E ratio and a 0.70 PEG ratio. These ratios suggest the stock has more room to run.
Nvidia is the leader of the artificial intelligence industry. Many businesses are turning to the company for its semiconductors. One of the great things about Nvidia is that artificial intelligence isn’t the company’s only business segment. The Gaming and Professional Visualization segments have also generated meaningful revenue growth for the company.
On this date of publication, Marc Guberti held long positions in AVGO and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
