Exploring Promising Semiconductor Stocks Beyond Nvidia
Investors are keenly watching the semiconductor market, especially after Nvidia (NASDAQ: NVDA) saw a dramatic rise of 226% over the past year, averaging gains of 75% annually for the last decade. But while Nvidia remains a key player, its stock might not be the best value currently.
Image source: Getty Images.
Instead, consider other semiconductor stocks that are currently more attractively priced. Below are three options along with a notable exchange-traded fund (ETF).
Source: Morningstar.com, as of Nov. 1, 2024.
Path to Wealth: The Power of Index Funds
Becoming a millionaire doesn’t always require risky investments in growth stocks. A simple S&P 500 index fund can work wonders, averaging annual gains of around 10% over time, as shown in the table below.
However, if you’re aiming for quicker growth, semiconductor stocks could be your answer. With an average annual growth of 15%, here’s how your investments might grow, illustrated in the table below:
|
$10,000 invested annually and growing for |
Growing at 10% |
Growing at 15% |
|---|---|---|
|
10 years |
$175,312 |
$233,493 |
|
15 years |
$349,497 |
$547,174 |
|
20 years |
$630,025 |
$1,178,101 |
|
25 years |
$1,081,818 |
$2,447,120 |
|
30 years |
$1,809,434 |
$4,999,569 |
|
35 years |
$2,981,268 |
$10,133,457 |
|
40 years |
$4,868,518 |
$20,459,539 |
Source: Calculations by author.
Let’s dive into some highly regarded semiconductor stocks worth considering.
1. ASML
ASML is a leader in the production of lithography equipment necessary for semiconductor manufacturing. It dominates this market with its advanced extreme ultraviolet systems (EUVs), which etch minute circuits on silicon wafers. Though its third-quarter revenue growth slowed to 20%, this drop led to a more attractive share price. With a price-to-earnings (P/E) ratio of 28, below its five-year average of 35, ASML appears promising. It also offers a dividend yield of around 1%.
2. Taiwan Semiconductor Manufacturing
Did you know that most semiconductor companies design chips rather than manufacture them? Taiwan Semiconductor Manufacturing Company (TSMC) is the largest chip maker globally, boasting over 60% of the revenue market share. Recently valued at almost $1 trillion, TSMC’s substantial size allows for great growth potential, particularly in the burgeoning AI sector. TSMC also pays a dividend, yielding about 1.3%, which has nearly doubled over the last five years. However, being based in Taiwan brings geopolitical risks, though a new plant in Arizona may offset that concern.
3. Broadcom
Broadcom stands out with its diverse offerings, covering both semiconductor chips and software. Areas like wireless technology, optical products, and cybersecurity are part of its business portfolio, which is designed to support various modern applications, including AI. Reporting a 47% year-over-year revenue surge for Q3, Broadcom shows strong recent performance. It also pays a dividend of around 1.2%, having significantly increased its payout in the last five years. While its forward P/E of 20 is slightly above the five-year average of 14, it remains a solid option for long-term investors.
4. VanEck Semiconductor ETF
If you’re unsure which semiconductor stocks to invest in, the VanEck Semiconductor ETF might be a wise choice. This fund tracks around 25 semiconductor companies, including Nvidia and the previously mentioned stocks. With an expense ratio of 0.35%, it has been the best-performing ETF in its category for the past decade.
Consider exploring these investment opportunities further.
Thinking of Investing in ASML?
Before deciding to purchase ASML shares, it’s useful to know that the Motley Fool Stock Advisor team has highlighted what they believe are the top 10 stocks to own right now—ASML isn’t among them. The selections made could yield impressive returns in the coming years.
For reference, when Nvidia was recommended on April 15, 2005, a $1,000 investment would have grown to $857,383!
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*Stock Advisor returns as of November 4, 2024.
Selena Maranjian has positions in ASML, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
