This year’s price action in the markets has been dominated by the performance of a handful of stocks including Nvidia (NASDAQ: NVDA). Notably, the company has provided significant gains for index investors with their stock absolutely skyrocketing higher on the back of surging interest in artificial intelligence and the company’s high-performance chips that power the sector.
However, Nvidia doesn’t operate in a vacuum. There are other chip companies worth considering that are vital to this sector’s growth. As the use of chips expands across various industries, these companies have become increasingly significant to daily life worldwide.
Here are three semiconductor stocks to consider as long-term investments, ranging from chip designers to fabs and fab equipment developers. These are potential windfall stocks for investors looking to play this trend beyond Nvidia stock.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is a strong contender to rival Nvidia as it expands its presence in the AI market. The chipmaker is focusing on growing its market share and catering to the increasing demand for AI in cloud computing.
With its recent unveiling of the MI300X AI chip, designed for large language models, AMD is positioning itself to compete with Nvidia’s offerings. The MI300X’s 192 GB of memory provides an advantage over Nvidia’s chips which have a limit of 120 GB, making it an attractive option for handling larger AI models.
AMD is gaining momentum in the AI market. Its chips power leading supercomputers, and its shown a growing focus on AI servers and data centers. As demand for GPUs and AI technology rises, AMD’s stock performance is garnering increased attention and outpacing Nvidia in daily returns.
AMD has seen significant gains including a nearly 43% increase in its stock this past year. The company’s focus on AI-optimized semiconductor and data center products has garnered positive sentiment and resulted in a recent 8% gain over the last five sessions. While not a conventional choice for retirement portfolios, AMD’s growth potential makes it an appealing addition to a diversified portfolio.
Taiwan Semiconductor (TSM)
Despite the geopolitical risks surrounding Taiwan, investing in Taiwan Semiconductor (NYSE:TSM) is a compelling opportunity. The threat of a Chinese invasion, while significant, may actually deter disruption in the semiconductor industry, benefiting the company. Taiwan Semiconductor has consistently outperformed its competitors as a leading foundry, with a strong competitive advantage in chip manufacturing, particularly in cutting-edge node chips.
Taiwan Semiconductor is making strategic moves to meet the increasing demand for its chips, including the announcement of a new packaging facility. This development has led to a surge in TSM stock. The facility, capable of supporting 1 million 12-inch wafers per year, has the potential to significantly expand the company’s capacity.
With major customers like Apple and Nvidia relying on its chips, Taiwan Semiconductor is well-positioned for consistent revenue and long-term growth. The company’s strong chip demand and limited advanced packaging capacity for AI chipsets further enhance its prospects in the AI race, making it an attractive stock to consider.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON), a chip-manufacturing specialist, has shown strong performance this year with over 30% gains. Analysts predict further growth for ON stock driven by chip demand for electric vehicles and the company’s increasing market share in the silicon carbide industry. Falling bond yields and renewed investor interest in the technology sector also contribute to the positive outlook.
ON Semiconductor’s chips and components cater to various aspects of autonomous driving including parking assistance, lane departure warnings, collision avoidance, and more. Their memory chips, analog switches, microcontrollers, and sensors are in high demand among automakers. Additionally, the company benefits from automotive trends such as infotainment, power management, and in-vehicle networking.
The company has managed to outperform the declining global chip sales, growing by 1% in the first quarter and exceeding internal expectations. Its success is attributed to its strong presence in the automotive sector, with a 38% increase in automotive sector revenues in the recent quarter. This alignment with growth industries positions ON Semiconductor as a winner even with flat growth projected for the rest of 2023.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.