Semiconductors continue to have outsized importance in the modern world. Microchips and processors power everything from our refrigerators and cars to our smartphones and computers. Increasingly important, they power artificial intelligence (AI) applications and models. Semiconductors have become so vital that they are often referred to as the “oil of the 21st Century.”
According to Fortune Business Insights, the global semiconductor market was worth $611.35 billion in 2023 and is projected to grow to $2.06 trillion by 2032, for a compound annual growth rate (CAGR) of nearly 15%. While there’s been a downturn in semiconductor stocks recently, the pullback is not likely to last long given how important the technology is in the world today.
Here are three semiconductor stocks that could grow your wealth.
Taiwan Semiconductor Manufacturing Co. (TSM)
Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has just reported financial results for this year’s second quarter and they were very good. In fact, the company reported a 40% year-over-year increase in its revenue due to rising demand for the AI microchips that it manufactures at its foundries. TSMC, as the company is known, makes the majority of the world’s microchips and processors.
TSMC reported revenue of 673.51 billion New Taiwan dollars ($20.82 billion U.S.), which beat forecasts of NT$657.58 billion. Net income was NT$247.85 billion compared to NT$238.8 billion that had been expected among analysts. The company’s revenue in Q2 rose 40.1% from a year earlier, while its profit increased 36.3%. CEO C.C. Wei said that he continues to expect 2024 to be “a strong growth year for TSMC.”
TSMC held a 62% share of the global foundry market in this year’s first quarter, up from 59% in the same period a year earlier, according to Counterpoint Research. While its pulled back recently amid broad sector rotation, TSM stock is still up 65% this year.
ASML Holding (ASML)
To Europe now. Dutch semiconductor giant ASML Holding (NASDAQ:ASML) also just reported its latest financial results and they were equally encouraging. ASML announced that its orders increased 24% year-over-year in Q2 as global demand for AI processors strengthens. ASML is one of the world’s leading semiconductor companies as it makes extreme ultraviolet lithography machines that are needed to produce the most advanced microchips.
For Q2, ASML reported revenue of 6.24 billion euros ($6.80 billion U.S.), which beat analyst expectations for 6.03 billion euros. The company’s net profit totaled 1.58 billion euros versus 1.43 billion euros that was forecast on Wall Street. While its latest results showed strength, ASML’s revenue was down nearly 10% from a year earlier and its profit declined by 18.7% year-over-year. The company has been hurt by export restrictions to China, which the Dutch government implemented at the urging of the U.S.
Even with the export controls, China remains a huge market for ASML, accounting for 49% of its Q2 sales. Uncertainty around China has weighed on ASML stock lately. However, the company’s share price is still up nearly 30% on the year.
Broadcom (AVGO)
U.S. chipmaker Broadcom (NASDAQ:AVGO) looks like an enticing semiconductor stock after its just completed 10-for-1 stock split. AVGO stock began trading on a split-adjusted basis July 15. The company’s share price was lowered from $1,700 a share to $170, making the stock much more affordable, especially for retail investors. A 10% decline in Broadcom’s stock since the split now has shares trading around $155 each.
As with the other semiconductor stocks on this list, the current pullback in Broadcom is due to sector rotation and doesn’t reflect the strength of the company. Along with its stock split, Broadcom reported financial results that beat Wall Street estimates across the board. For Q1, Broadcom posted EPS of $10.96 versus $10.84 that was expected. Revenue totaled $12.49 billion compared to $12.03 billion forecast on Wall Street.
Broadcom is benefiting from the current boom in AI with its microchips in high demand. The company is also getting a boost from VMware, the enterprise software company it acquired for $69 billion last year. Year-to-date, Broadcom stock is up 43%.
On the date of publication, Joel Baglole did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
