Semiconductors remain a red hot field of technology. Market analyst Charlie Bilello pointed out in a recent blog post that the iShares Semiconductor ETF (NASDAQ: SOXX) has outperformed every other industry group over the last decade, rising 10x. The Invesco QQQ ETF (NASDAQ:QQQ) that tracks the Nasdaq 100 index is up 4.3x in the last 10 years, while leading gold and energy ETFs have each increased 1.5x. Bilello calls the move higher in semiconductors relative to the broader market “parabolic.”
Clearly, semiconductors are a good place to invest and an area of the market where investors are likely to find multibagger stocks, defined as securities that provide a return of 100% or more. Also known as stocks that double their share price on multiple occasions. So, which are the best semiconductor stocks to buy now? What companies are red hot and likely to double their share price? Here are three multibagger semiconductor stocks in the making.
Advanced Micro Devices (AMD)
There’s a buying opportunity in Advanced Micro Devices (NASDAQ:AMD) right now after the leading semiconductor’s share price has pulled back 15% in the past month. It’s a rare drawdown that investors should take advantage of, especially as the company pushes further into artificial intelligence (AI) with new chip models. At the end of last year, the company launched a new series of microchips called the “Ryzen 8040” that are aimed at boosting AI applications by more than 50%.
Earlier last fall, AMD’s new MI300X accelerator microchip went on sale. That chip is used in data centers and servers and is meant to compete with rival Nvidia’s (NASDAQ:NVDA) AI data center chips. Sales of both the Ryzen 8040 and MI300X are only now showing up in AMD’s earnings reports, the next of which is scheduled for April 30. Last autumn, AMD said it expected $2 billion in AI chip sales in 2024. The company more recently revised that figure up to $3.5 billion of AI chip sales this year.
Despite the recent drawdown, AMD’s share price has risen 445% over the last five years, making it a potential multibagger semiconductor stock.
Broadcom (AVGO)
Wall Street analysts are extremely bullish on shares of Broadcom (NASDAQ:AVGO) right now. AVGO stock currently has a strong buy rating with an average price per share that is 26% higher than current levels. In fact, the lowest price target on Broadcom’s stock is 15% higher than where the shares currently trade. There are no sell ratings on the stock. Analysts expect that Broadcom will benefit in coming months and years as the AI revolution goes into overdrive.
Another strength of Broadcom’s is diversification. The company is more than an AI play. Its semiconductors are used in sectors ranging from networking and broadband to wireless communications and industrial applications. The diversification helps to insulate Broadcom from economic cycles. AVGO stock has dipped 8% in the last month after the company issued forward guidance that failed to impress Wall Street. However, the company conservatively guides its operations. Over five years, the stock is up 300%.
Astera Labs (ALAB)
It’s still early, but Astera Labs (NASDAQ:ALAB) has potential to become a multibagger semiconductor stock. The company held its initial public offering (IPO) on March 20 and it has been a resounding success. Since its market debut a month ago, ALAB stock has gained 16% and shares have not pulled back or fallen below their IPO price. Initial analyst coverage of Astera Labs has been bullish. The company makes semiconductor-based connectivity products and operates at the center of AI infrastructure.
Analysts also like that Astera Labs counts both Nvidia and AMD among its customers. While the company remains unprofitable, its finances are moving in the right direction. Astera Labs reported a net loss of $26.3 million in 2023, an improvement over a $58.3 million loss in 2022. Sales are growing rapidly too, rising 45% year-over-year in 2023 to $115.8 million. The company now has 10 analysts following it who have given ALAB stock a consensus rating of strong buy and a price target that’s 18% above current levels.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
