Semiconductors have long been vital to our lives, powering not only our computers, but these days, our cars, smartphones, and even smart refrigerators and washing machines. Thus, it's not surprising that lots of semiconductor stocks have been phenomenal performers, making their shareholders wealthier.
With the recent proliferation of artificial intelligence (AI) applications, semiconductors have become even more vital. Here's a look at seven semiconductor companies that seem to have bright futures -- along with a different way to invest in semiconductors -- via exchange-traded funds (ETFs). Note that they have different focuses and different valuations, too.
Image source: Getty Images.
1. Nvidia
Nvidia(NASDAQ: NVDA)has grown at a torrential rate in recent years, with many expecting it to keep doing so. (Others see it as needing to take a breather.) The company made a name for itself with gaming chips, but now it's not only a leader in graphics processing units (GPUs) for games but also in chips for data centers. And data centers are booming, as much of our AI activity runs through them.
The stock's valuation is steep, but if it keeps growing like crazy, it can be warranted. Proceed with caution if you're risk-averse.
2. Taiwan Semiconductor
Taiwan Semiconductor (NYSE: TSM) is the world's largest contract chipmaker, building chips designed by others. Recently valued near $1 trillion, its growth prospects are good, as it's a leader in its field, able to enjoy economies of scale. On the other hand, as it's based in Taiwan, it's vulnerable to China -- and the U.S. and others are working to develop more competition for the company.
3. Intel
Intel(NASDAQ: INTC) is one of the most well-known chipmakers, recently carrying a market capitalization of $145 billion. Shares seem reasonably valued lately, after a sizable decline due to tough competition, heavy investments in future growth, and a loss of some market share. The company is aiming to grow in chips for laptops -- and is including a built-in AI processor in them.
4. Broadcom
Broadcom(NASDAQ: AVGO) has lots of fans because it specializes not only in chips but also software -- and its operations are very diversified, too, including wireless and wired technology, optical products, mainframe software, cybersecurity, and storage, among many others. Its customers include Apple, Microsoft, AT&T, Intel, and many other big names. Broadcom is executing a 10-for-1 stock split on July 12.
5. Qualcomm
Qualcomm(NASDAQ: QCOM) has been designing mobile chips for a long time -- and those chips have probably been in most of the iPhones you've owned. Apple is looking to make its own chips in the coming years, though, which may challenge Qualcomm. But it's been busy making chips for vehicles and smart appliances, among other things, diversifying its operations. Its foray into laptop chips is another promising move.
6. Monolithic Power
Monolithic Power(NASDAQ: MPWR) isn't as well known as some other semiconductor companies, nor is it as big, with a recent market value near $41 billion. But it's been growing like gangbusters, taking market share from rivals with its data-center chips.
Its valuation seems steep, with a recent forward-looking price-to-earnings (P/E) ratio of 63, well above its five-year average of 43. So perhaps wait and hope for a pullback, buy in installments over time, or just jump in if you expect its amazing run to continue.
7. Micron Technology
Micron Technology(NASDAQ: MU) is another semiconductor titan, valued near $145 billion recently, and specializing in memory and storage chips. Its believers like its solid balance sheet and its typical strong performance when the cyclical memory market is booming. Detractors are wary of downturns in the memory market and view it as overvalued, with a recent forward-looking price-to-earnings (P/E) ratio of 15, above its five-year average of 12.
Bonus idea: Semiconductor ETFs
These companies are all intriguing, and many of them, but perhaps not all, will be outstanding performers in the years and decades ahead. (Much will also depend on the price at which you invest in them, if you do, so aim to buy when they appear undervalued or at least reasonably valued.)
One way to play it a bit safe -- while also aiming for outsized returns -- is to invest in semiconductors via ETFs that focus on them. Check out these that have solid track records:
- iShares Semiconductor ETF(NASDAQ: SOXX)
- VanEck Semiconductor ETF(NASDAQ: SMH)
- SPDR S&P Semiconductor ETF(NYSEMKT: XSD)
- Invesco Semiconductors ETF(NYSEMKT: PSI)
Consider keeping some of your assets in semiconductors -- whether via individual stocks or ETFs. Or both!
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Selena Maranjian has positions in AT&T, Apple, Micron Technology, Microsoft, Nvidia, Qualcomm, SPDR Series Trust-SPDR S&P Semiconductor ETF, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
