In the first quarter, it had a whopping 92% market share in the GPU space. These companies demonstrate strong growth, profitability, and proven innovation leadership in key segments. High profitability also points to a company’s ability to withstand economic downturns and provide consistent earnings growth for its shareholders.
With a market capitalization of $3.7 trillion as of January 2025 and a growth of 2,277.34% over the previous five years, NVDA is one of the world’s largest companies, making it attractive to investors worldwide. Notably, the NVDA shares are included in the Dow Jones US Semiconductors Index. With a market capitalization of $178 billion as of January 2025 and a stock price growth of 82% over the past five years, Qualcomm is a true heavyweight in the semiconductor industry.
VanEck Semiconductor ETF (SMH)
ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. A life-long gamer and 10 day trading strategies for beginners tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. Recently, Broadcom announced the delivery of its revolutionary Jericho3-AI, touting the highest-performance fabric for AI networks in the sector.
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But there is always the possibility they’ll trail the market at points, too. If you’re interested in investing in semiconductor stocks, you’ll need to open brokerage account first if you don’t already have one. Semiconductor stocks such as NVDA and TSM play a major role in the AI industry. The demand for high-performance, AI-ready chips is rising fast – driven by cloud providers, enterprises, government technology initiatives, and the broader push toward smarter, more autonomous systems. However, what makes UMC worth considering is its huge income potential, with an annual dividend that is approximately five times the S&P 500 right now.
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Statistics or past performance is not a guarantee of the future performance of the particular product you are considering. The profitability of a company shows how efficiently it uses its resources to generate profits. A high profitability means that a company can generate significant profits at minimal cost, making it attractive to investors.
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Investing in chip stocks is one of the most effective ways to profit from technological advances. In 2025, the tech sector continues to be a key driver of innovation, including artificial intelligence, cloud computing, and data centers. Top global semiconductor companies such as Nvidia and TSMC set the benchmark for the entire industry by offering high-quality microprocessors and adopting cutting-edge technologies across the board. FormFactor reported revenues of $171.4 million, up 1.6% year on year, outperforming analysts’ expectations by 0.9%. The business had a strong quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ adjusted operating income estimates. Marvell Technology reported revenues of $1.90 billion, up 63.3% year on year.
High gross profit, operating profit, and free cash flow generation are also positive indicators that the company is operating efficiently. The VanEck Semiconductor ETF (SMH 1.35%) tracks 25 market cap-weighted, U.S.-listed semiconductor stocks via the MVIS US Listed Semiconductor 25 Index. It currently has more than $24 billion in assets and charges a 0.25% expense ratio. Just as there are many different types of semiconductors, there are many types of semiconductor stocks. These include fabrication equipment manufacturers, integrated device manufacturers, fabless designers, foundries, assembly and testing firms and distributors.
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With a 158% growth rate over the previous five years, Lam Research stock is a Hold or Buy recommendation. ARM is committed to broadening the application of AI technologies and strengthening its market position. The company is strategically investing in the development of neural network processors and specialized machine learning chips, enabling it to maintain its position as a leader in the semiconductor industry. Arm Holdings collaborates with prominent universities and research institutes to develop innovative solutions that enhance the energy efficiency of chips used in mobile devices.
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As AI adoption surges, so does the demand for semiconductors, making this ETF an appealing option for those looking to ride the secular tailwinds in the sector. Moreover, the ETF has an expense ratio of 0.35%, roughly 25% lower than the sector median. On top of that, it’s been a tremendous wealth compounder, generating more than 154% return in the past five years. Companies that gradually increase their sales over time are the best investments, but overall revenue growth matters even more for semiconductor stocks. TSM specializes in fabrication operations rather than the research and design of new and innovative chips, meaning it commands lower margins than some of the flashier semiconductor stocks out there.
Currently trading near its all-time high, ASE Tech Holding is another income-oriented chipmaker that pays a generous distribution on an annual cycle. It’s also one of the better performers on this list, in part because this Taiwanese chipmaker is also one of the smallest. You might think it’s counterintuitive that a firm with “analog” in its name would be a leader in the digital age. Taiwan Semiconductor, as the name implies, is located in the Asia-Pacific region. That proximity to big APAC technology firms has provided it with deep relationships as a key supplier for the region. Privacy Policy | No cost, no obligation to buy anything ever.Past performance is no guarantee of future results.
Plenty of cash relative to debt means that a company is well positioned to pay interest and principal payments, even in a pinch. It also can mean return of excess cash in the form of dividends and stock repurchases. For example, take chip manufacturers such as the world’s largest, Taiwan Semiconductor Manufacturing (TSM 0.14%). For a chip business, the company has above-average debt compared to its revenue. However, it also has more cash and investments than it does debt, which signifies a healthy and profitable business that has no problems getting funding.
- We use data-driven methodologies to evaluate financial products and companies, so all are measured equally.
- Alphawave’s expertise in serializer/deserializer (SerDes) technology, chiplet subsystems, and interconnect technology fits neatly with Qualcomm’s Oryon CPUs and Hexagon NPUs.
- Shares slightly topped the performance of the S&P 500 across all of 2023, but more importantly they are up significantly from their 52-week low in October 2023.
- They are part of the technology sector but are also manufacturing businesses, which means their businesses are cyclical, like any industrial business.
- Companies with high profit margins usually have competitive advantages such as efficient cost management, innovative products and services, and strong market positions.
Compared to slower-growing tech peers with similar valuations, Nvidia still looks like a standout in the AI gold rush. In its latest quarter, Nvidia posted $44.1 billion in revenue, representing a 69% year-over-year jump. At the core are its high-performance GPUs, the proprietary CUDA software stack, and seamless integration with major AI frameworks. The company sits at the center of the AI boom, thanks to a well-rounded ecosystem that’s tough to match. Microchip Technology is a great example of a stock that has been very volatile over the last few years but is decidedly looking up in 2024. There’s risk in this model, though, as the loss of a big contract with a firm like Apple could result in a significant reduction of its footprint.
- ARM is committed to broadening the application of AI technologies and strengthening its market position.
- Liabilities encompass financial obligations, including loans and debts.
- The industry offers strong revenue growth and promising future prospects.
- A high ROIC means the company is likely innovating strategically, improving operations to increase efficiency, and targeting secular growth trends with new chip designs.
- That said, while its networking portfolio is currently the main driver of its growth, custom AI chips are its biggest opportunity.
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy. Both a designer and manufacturer of its products, IPG Photonics IPGP is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Lam Research Corporation (LRCX) is a leading supplier of semiconductor wafer fabrication equipment, performing semiconductor assembly and testing. Lam Research collaborates with prominent chip manufacturers such as TSMC, Samsung, Intel, and Micron. While acknowledging these challenges, most analysts recommend holding INTC shares due to the potential for market fluctuations and ongoing uncertainty within the sector. Investors who prioritize long-term prospects and are willing to tolerate increased volatility may consider Intel as a promising avenue to help diversify their portfolios.
According to Bank of America, TSM is poised to ride the generative AI trend and could gain 25% from its current price. Therefore, with TSM stock in your portfolios, you can rest easy knowing you’re hitching a ride with the industry’s best. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Arrow Electronics (ARW) and Avnet (AVT) are examples of semiconductor distributor stocks.