U.S. equities seem to be back in rally territory, despite interest rate concerns, and investors who desire to take this opportunity should look into the three semiconductor names below.
Nvidia (NVDA)
Graphics card behemoth Nvidia (NASDAQ:NVDA), of course, has to make the list. When we’re talking about powering the tech boom in 2024, it’s difficult to say Nvidia is not instrumental to that. The “AI craze” of 2023, which was precipitated after OpenAI launched their generative AI chatbot ChatGPT, created a boon for tech stocks. Nvidia, due to the semiconductor firm’s key role in supplying the advanced GPUs that help develop advanced artificial intelligence, has seen its share price more than triple over the past 12 months.
This year’s announcement of a new lineup of “Blackwell” server GPUs will not just usher in a new era of advanced computing but will allow Nvidia to extend its lead in the burgeoning AI market. Key competitor Advanced Micro Devices (NASDAQ:AMD) is just entering the AI race this year, but the company will have much ground to cover.
With that in mind, Nvidia is a clear example of a semiconductor stock to hold for the long run.
Broadcom (AVGO)
Another semiconductor company receiving much attention these days is Broadcom (NASDAQ:AVGO). Broadcom specializes in designing and selling networking chips that help to process large amounts of data needed for artificial intelligence computing. Specifically, Broadcom’s “optics” technology helps to facilitate high-speed connections across a network, enabling the computational power needed to build large-language models.
In March, the semiconductor giant announced that it expects to generate $10 billion of revenue from chip sales related to AI. Investors have certainly taken notice. Broadcom shares have more than doubled over the past twelve months and could increase even further. Despite a surge in share price, Broadcom boasts a reasonable valuation. These days, Broadcom’s stock trades with a valuation multiple of 26x forward earnings. This is cheaper than Nvidia at 35.4x.
Ultimately, the demand for AI technologies and Broadcom’s crucial role in enabling them, makes the company instrumental to powering the tech boom this year and perhaps for many years to come.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) is the last entry on this list due to the manufacturer’s role in creating most of the world’s advanced chips. Nvidia, Apple (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM), AMD and many other companies utilize TSMC’s manufacturing expertise and technology to build successive waves of advanced silicon. The contract chip manufacturer’s 3-nanometer process, which will help squeeze more transistors on semiconductor wafers, is the most recent step in the company’s achievements. TSMC is also working to build out a 2-nanometer fabrication process for 2025 that will power the next generation of chips.
Unfettered demand for AI chips has led to another earnings beat for TSMC. First quarter revenue and earnings for fiscal year 2024 came in above analyst expectations. The company’s management expect the AI tailwind to spur strong revenue and earnings growth in the subsequent quarters.
TSM shares have risen more than 68% on a year-to-date basis, and the company’s valuation remains a reasonable 19.5x forward earnings.
On the date of publication, Tyrik Torres 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.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.