6 Best Semiconductor Stocks and Chip Shortage Opportunity
As more devices come online, the best semiconductor stocks should benefit. On top of that, we’re in the midst of a global chip shortage. Demand is high and will only continue to grow. This is creating a great opportunity for investors.
The semiconductor companies below are some of the best in the world. They help power PCs, cars, phones and many other machines. Going forward, more of these devices will be connected, and their computing power will increase.
The semiconductor industry is advancing exponentially. And this trend doesn’t apply only to technology. We see it with investing as well. To see how your portfolio can grow, check out our free investment calculator.
Some of the stocks below might help with increasing returns. So without further ado…
Top Chipmaker Stocks
- Intel (Nasdaq: INTC)
- Taiwan Semiconductor Manufacturing (NYSE: TSM)
- ASML Holding (Nasdaq: ASML)
- Qualcomm (Nasdaq: QCOM)
- Nvidia (Nasdaq: NVDA)
- Applied Materials (Nasdaq: AMAT)
Why These Semiconductor Stocks?
These are some of the top chip stocks based on innovation and size. They’ve scaled up and have created economies of scale.
Competition is fierce, but the semiconductor industry has high barriers to entry. These businesses spend billions every year on research and production. Let’s look at a few highlights from each company…
Intel is still a leading semiconductor stock with lots of irons in the fire. It has lost some ground and some big partners, like Apple (Nasdaq: AAPL). But for those of us who’ve been watching closely, this didn’t come as a surprise.
Apple has been working on its own chips for a while and is phasing out Intel. That was a big partnership, but Intel still has a huge customer base. In recent years, Dell has been one of its largest customers.
Intel is also expanding its manufacturing in the U.S. It recently announced roughly a $20 billion investment to build two new factories in Arizona. Intel has also jumped into autonomous driving with its Mobileye acquisition. On top of that, it’s solving challenges across the cloud, the Internet of Things, artificial intelligence (AI) and 5G.
TSM is easily one of the best semiconductor stocks. Investing in this company gives you ownership in the world’s largest semiconductor foundry. Last year, it produced well more than 10,000 different products to serve hundreds of customers.
TSM has more than 50% of the total foundry market share. It’s also pushed forward with 7- and 5-nanometer foundry technologies. It’s the first foundry to provide these capabilities. Some of TSM’s top customers include Apple, Broadcom (Nasdaq: AVGO), Nvidia and Qualcomm.
ASML Holding is one of the top suppliers for the semiconductor industry. It provides hardware, software and services to mass produce patterns on silicon through lithography. So as chip demand climbs, this semiconductor stock should as well.
ASML won the Preferred Quality Supplier award from Intel in 2020. And the company continues to be a reliable source. As a result, it maintains an ecosystem of nearly 5,000 partners and suppliers.
Qualcomm is a leading wireless semiconductor company. It owns vital patents for 5G, 4G and many other communications standards. One of Qualcomm’s largest customers is Apple, and there have been some legal concerns between the two companies. They were able to reach an agreement in 2019, though. They’ve ceased litigation and signed a six-year licensing agreement.
To expand Qualcomm’s business, it also acquired NXP Semiconductors for $47 billion in 2016. The next year, it received antitrust regulatory approval. And Qualcomm continues to grow through acquisitions and organic efforts.
Nvidia has been giving Intel a run for its money. It’s now a leader in discrete graphics processing units (GPUs) and the company has also surpassed Intel’s market cap. Investors have bid up the company’s value as it has advanced some of its technologies.
One area with a lot of potential for Nvidia is AI. Nvidia GPUs are 20 to 25 times more efficient than CPU servers for AI workloads. AI is starting to impact every industry and the growth potential is huge. This makes Nvidia one of the top semiconductor stocks going forward.
Applied Materials comes in last on our list of semiconductor stocks. It’s definitely not least, though. The company helps to produce virtually every new chip and advanced display in the world.
Applied Materials has more than 14,000 patents and is a leader in materials engineering for the semiconductor industry. Similar to all the companies on this list, Applied Materials is benefiting from the growth of the Internet of Things, big data and artificial intelligence. The company is accelerating the delivery of improved chips for the AI era.
Investing Beyond the Semiconductor Industry
The global chip shortage is delaying production in many industries. With these big supply constraints for vital technologies, the U.S. government has stepped in. The shortage will persist for a while but the governments support should help.
This is great for investors in the industry. Even with the shortage, semiconductor demand continues to climb. Some analysts project the semiconductor equipment industry will grow at a compound annual growth rate of 9% until 2025. And it should continue growing at a decent rate for many years after that.
To profit on these trends, the semiconductor stocks above are some of the top in the industry. The technology sector is vast and ever-expanding, though. To find even better investing opportunities, consider signing up for our Investment U e-letter. It’s packed with research and investing ideas.
Also, here are six quantum computing stocks to invest in this decade. Quantum research is still in its early stages, but for early investors, it presents a huge opportunity. If you find my research useful, please share it with others as well.
About Brian Kehm
Brian Kehm double majored in finance and accounting at Iowa State University. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the U.S., he started working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.