That bodes well not just for shares but also for the potential of greater dividends supported by this stronger stream of profits going forward. What’s more, QCOM has more than enough capital to ensure those dividends keep going strong. As of the end of its fiscal year in September 2023, it boasted $11.3 billion in cash and equivalents on its balance sheet—a huge war chest to fuel growth, support its dividends and weather any potential storms on the horizon. The best stock depends on your investment objectives and risk tolerance, but Nvidia was one of the best-performing and largest semiconductor stocks in mid-2024.
- The semiconductor sector is back, and it’s hotter than ever—at least as measured by the VanEck Semiconductor ETF (SMH), the largest semiconductor ETF out there with over $18 billion in assets.
- Here are some suggestions for semiconductor stocks and exchange-traded funds (ETFs) that might be worth your investment.
- The company’s product lineup extends beyond CPUs, including chipsets, integrated graphics, memory and networking hardware, catering to various computing needs from consumer electronics to enterprise servers.
AMD’s product portfolio includes x86 microprocessors for desktop, laptop and server markets and semiconductor products for gaming consoles and home media platforms. The company has made significant strides in capturing market share within the PC and server processor markets, particularly with its Ryzen and EPYC series processors, which are praised for their performance, energy efficiency and value. Advanced Micro Devices is a global semiconductor company known for its pioneering work in the fields of microprocessors, graphics processors and related technologies. Except for 2020, revenue and net income growth in recent years have been largely strong. With a current ratio running 4 to 8 times over the last few years, return on capital of 13.6% to 22.9%, return on equity of 26% to 49.3% and gross margins of 59.9% to 64.9%, NVDA is a strong performer.
Another important area for Nvidia is artificial intelligence, including such uses as uniquely identifying users and machines in a network to detect cyberthreats and building automated services like audio transcription or virtual assistants. In terms of valuation, TSM’s stock offers an attractive investment opportunity despite its premium valuation that reflects its superior growth prospects, operational efficiencies and strategic industry position. The company’s pivotal role in the future of technology and the high barriers to entry for its level of advanced manufacturing justify the stock’s long-term value potential. AMD’s strategic alignment with significant industry growth drivers, robust financial performance and competitive product offerings underscore its status as a top semiconductor stock for 2024. The company’s valuation captures its recent successes and potential for continued innovation and market expansion in the rapidly evolving tech landscape. Looking ahead at 2024, the semiconductor sector presents a cautiously optimistic investment landscape.
Nvidia
Finally, and notably, Taiwan Semiconductor has, on a relative basis, very little debt. The $30 billion of bonds on its books could be easily covered by the $48 billion in the bank as cash and cash equivalents. Earnings per ADR share are forecast to arrive at $6.29 versus the $5.36 per share TSM reported for fiscal 2023. Micron announced in April that it received $6.1 billion under the 10 great ways to learn stock trading CHIPS and Science Act. In addition to questions about how Micron will finance these capital expenditures, this federal commitment also sheds light on the much-ballyhooed CHIPS and Science Act.
top semiconductor stocks by one-year performance
As a key player in the memory market, Micron has been instrumental in driving technological advancements that enhance the performance and efficiency of electronic devices. The company’s focus on innovation is evident in its contributions to developing next-generation memory technologies, including 3D XPoint, which significantly improves speed and endurance over traditional NAND. With a strategic focus on cloud computing, the Internet of Things and the proliferation of smart devices, Intel is diversifying its portfolio to address emerging technology trends.
However, it is prudent to consider semiconductor companies in terms of their financial strength. Technology matters a great deal, but so too does the financial resources to keep up with Nvidia, or best it for that matter. Fabless semiconductor designers are firms that only invent new types of semiconductors, and outsource the actual manufacturing to foundries. ASML is a Netherlands-based firm whose machines use ultraviolet lasers to mastering private equity set etch circuitry into semiconductors. This process, which is called extreme-ultraviolet (EUV) photolithography, relies on incredibly complex physics. ASML invented it, and is the only company that understands it well enough to provide it commercially.
Taiwan Semiconductor Manufacturing, founded in 1987 and headquartered in Hsinchu, Taiwan, is the world’s leading independent semiconductor foundry. As a pioneer of the dedicated semiconductor foundry industry, TSMC manufactures various integrated circuits (ICs) for customers globally, serving major sectors, including computing, consumer electronics, automotive and telecommunications. Intel’s innovations have powered decades of computing advancements, significantly contributing to developing desktop, laptop and server markets. Despite increasing competition in recent years, Intel continues to invest heavily in research and development, aiming to maintain its leadership in process technology and manufacturing capabilities.
Analog Devices, Inc. (ADI)
However, challenges such as supply chain disruptions and geopolitical tensions have introduced a degree of volatility, with the U.S.-China tech rivalry impacting global supply chains and investment patterns. Further, the capital expenditures last fiscal year of $18.2 billion could have been handily covered by $28 billion in cash flow from operations. The company repurchases shares, $9.5 billion in 2023, which is a large commitment in absolute terms, but when compared to a market cap of $3 trillion, a drop in the bucket. 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.
Intel’s ongoing efforts to improve its manufacturing capabilities and expand its product offerings in high-growth areas further solidify its market position. A key factor in AMD’s resurgence in recent my 4 best intraday trading techniques years has been its strategic focus on high-performance and adaptive computing solutions. This approach has allowed AMD to capitalize on the growing demand for data center and cloud computing technologies and the sustained interest in PC gaming and content creation.
But since many leading firms are fundamentally “fabless,” meaning they have no manufacturing capacity of their own, there is built-in business for TSM every year as it is contracted to turn designs into real hardware. Intel’s competitive advantage is multifaceted, stemming from its integrated design and manufacturing model, which allows for a rapid response to market changes and customer needs. This vertical integration, combined with Intel’s global brand recognition and market penetration, provides a significant edge over competitors.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
The legislation was designed to significantly bolster domestic semiconductor manufacturing and research via billions in funding and significant tax credits. Emerging semiconductor companies focusing on IoT will need to innovate to create smaller, more efficient, and more powerful chips to meet the evolving needs of this market. As IoT applications expand, the demand for advanced, energy-efficient chips that can handle the diverse and high-volume data processing requirements will surge. “Lattice benefits from its solutions for new PC designs, which run on low-power FPGAs and provide customers with accelerated AI experiences, extended battery life and collaborative conferencing experiences,” Boughedda adds. The increase in the earnings per share would and should have been higher, but income tax swung from an addition to income of $187 million in fiscal 2023 to a $4.1 billion expense in fiscal 2024.
Are semiconductors a good investment?
Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Huang believes AI is increasingly becoming a commodity, and these AI factories are pivotal in accelerating demand for generative AI training and inference. They are essential for consumer internet companies, automotive industries, healthcare sectors, and many other fields that require complex infrastructure to run their models on. Semiconductors are crucial in IoT devices since they provide the processing power and connectivity needed for these devices to function.
Below is a list of the top six ETFs that have substantial exposure to semiconductor stocks like NVIDIA, ordered by one-year performance. SMCI financed the deficit by issuing more stock and selling bonds that will be converted to stock. This seems somewhat clunky since issuing equity is generally considered the most expensive form of financing. Further one of the effects of this is it increases the number of shares outstanding and reduces the earnings per share. However, this may have been a bid by SMCI to grow the number of shares in its public float and attract larger shareholders who need more stock in the market to build a position that is material to the portfolio. One noteworthy item on the income statement is the decrease in research and development, from 6.3% of sales in fiscal 2021 to 4.3% in fiscal 2023.
The company spent $2.6 billion building inventory and increased accounts receivable by another half a billion dollars. These items when netted against sources of cash resulted in negative cash flow from operations of $1.8 billion. While negative cash flow from operations is a rarity, it should be noted that this is a happy problem to have when it’s brought on by revenue acceleration.
