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By Terel Miles, InvestorPlace
Semiconductor stocks fell from grace in the month of July. After a strong start to 2024, Wall Street began to reprice earnings multiples which have expanded significantly in recent months.
Semiconductor companies, including the likes of Nvidia (NASDAQ:NVDA) saw its market capitalization swell to a $3 trillion valuation. This unprecedented surge is supported by the company’s more than 80% market share in AI graphic processing units (GPUs). Additionally, this innovation and leadership in one of the fastest growing industries has contributed to the company’s record revenue and earnings results.
However, the company has since taken a breather, along with its other semiconductor counterparts. While earnings multiples have room to contract much further, there are emerging players that can become the trillion-dollar companies. For investors who remain bullish on the growth of AI and the semiconductor industry, these three companies should certainly be kept on your radar.
Now, let’s unpack the three best semiconductor stocks to become the next trillion-dollar companies by 2030!
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) is one of the top semiconductor stocks that investors should not take their eyes off in 2024. Despite its 17% fall in the past month, the company’s long term growth outlook remains strong.
Taiwan Semiconductor is arguably one of the most important companies in the world. The company holds more than 50% market share in semiconductor foundry services, an industry that deals in the fabrication of advanced chips. Its services are becoming even more integral in the era of AI, and companies are fighting to gain share in the AI GPU market.
Moreover, the demand for advanced AI chips is extremely high and has been a strong tailwind for the business in 2024. Since the start of the year, TSMC has reported double digit sales growth each month with the exception of January. The latest June revenue report saw a 33% bump in its year over year sales. With Intel foundry woes set to continue, TSM stock will undoubtedly capitalize on this demand and thrive in the years ahead.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is another stock with enormous potential to join the elite group of trillion-dollar companies. While its valuation is still rich at the current levels, investors can find more certainty buying the stock under $105 per share.
Broadcom is currently at the forefront of the burgeoning AI revolution. With advanced AI infrastructure products from storage solutions, adapters, to integrated circuits, the company is integral to the industry’s growth. The past year has truly been transformative for the company, with increased demand for AI networking solutions driving record revenue, earnings, and free cash flow.
In addition, revenue growth is accelerating in 2024 with the contribution of the VMware acquisition. It is expected to contribute to consolidated revenue of $50 billion and adjusted Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) of $30 billion in 2024. These numbers suggest that adjusted EBITDA will be 30% higher than 2023. Moreover, VMware is on track to be cash flow accretive in 2024. For investors eyeing long term growth, buying shares on a dip could be an extremely prudent strategy build wealth.
Has Jeff Bezos Found the Next Nvidia?
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Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is the final semiconductor giant with the potential to become the next trillion-dollar titan. The company’s AI-powered Snapdragon processors are extremely promising and have a variety of applications for smartphones, PCs, gaming, and the automotive sectors.
Qualcomm’s stock plummeted over 20% in July, continuing its downward trend with the rest of the semiconductor industry. Mounting concerns over the U.S. economy and the continued sluggish growth in the handset market had investors on edge. While these concerns are reasonable, they may very well be overblown. Qualcomm has continued to see a rebound in handset segment sales, with continued strength in automotive.
Furthermore, its revenue and earnings have rebounded after an extremely tough operational year in fiscal 2023. Despite this backdrop and notable headwinds in the broader economy, Qualcomm will still look a lot more attractive than many of its peers. Ultimately, this can be a great value play for long term investors looking to snag up shares on the cheaper side later this year.
On the date of publication, Terel Miles 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Terel Miles is a contributing writer at InvestorPlace.com, with more than seven years of experience investing in the financial markets.
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