Nvidia (NASDAQ:NVDA) took the market by storm in 2023, impressing many with remarkable gains and solid financial reports that affirmed its position as a trailblazer in the AI industry, with loads of potential for further growth. This spotlight on NVDA has naturally drawn attention to other semiconductor stocks and companies that specialize in AI. The smallest indication of positive momentum in this industry can propel a stock to new heights. As a result, several corporations are staking their claim in AI, but not all are created equal. Here are three semiconductor stocks that appear to be burgeoning long-term investment opportunities.
Broadcom (AVGO)
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Broadcom (NASDAQ:AVGO) stands out as a premier dividend growth stock, inching closer to a remarkable $1 trillion market cap. The company consistently boosts its dividend by 10% or more annually and offers a 1.65% dividend yield. With a 39 P/E ratio following a substantial 116% surge over the past year and a 355% rally over the last five years, the stock is turning heads. A robust net profit margin of 37.2% in its most recent quarter and a 5% year-over-year (YOY) revenue growth, coupled with a 7.4% YOY surge in net income, underscore the company’s strong financial standing. Notably, AVGO has been diligently repurchasing shares to bolster its stock price, having bought 2.9 million shares during the third quarter, amounting to a whopping $2.17 billion. Despite its meteoric rise, Broadcom remains an appealing dividend growth stock, characterized by appreciation, a high dividend growth rate, and a respectable yield. Recently, the company surpassed a $600 billion market cap and is hurtling toward the $1 trillion mark.
Advanced Micro Devices (AMD)
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Advanced Micro Devices (NASDAQ:AMD) is another semiconductor company that has captured significant attention. With shares up by 107% in the past year and a staggering 628% surge over the past five years, the company has asserted its dominance across various segments, including server, desktop, and mobile, and has crafted an enticing array of AI products. The company’s AI chips are poised to drive substantial long-term gains. Advancing from a bearish cycle, Advanced Micro Devices reported a commendable 10% YOY revenue growth in Q4 2023, representing a substantial improvement from the 4% YOY revenue decline observed in the entirety of 2023 compared to 2022. Moreover, the company had been consistently delivering YOY revenue growth exceeding 20% not too long ago, and it seems to be trending back in that direction, potentially rewarding long-term investors. Trading at an enticing 0.70 PEG ratio, the company’s valuation could receive a significant boost from growing demand for its AI chips.
Taiwan Semiconductor Manufacturing (TSM)
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In contrast to many of its counterparts, Taiwan Semiconductor Manufacturing (NYSE:TSM) largely missed out on the AI rally, with shares climbing a modest 39% over the past year primarily due to a strong surge commencing in November. Despite not participating in the robust rally, the stock boasts a relatively modest 26 P/E ratio and offers a 1.50% dividend yield. TSM has weathered economic headwinds akin to AMD and reported stagnant revenue growth in Q4 2023. However, the company’s guidance paints a more optimistic picture, with first-quarter revenue expected to range from $18.0 billion to $18.8 billion, representing a 10% YOY growth rate from the $16.72 billion revenue in Q1 2023. Additionally, leadership anticipates gross margins between 52% and 54%. Despite not being a top performer in the past year, taking a broader perspective reveals the company’s significant potential, having delivered a 250% gain for investors over the past five years.
On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
