The semiconductor industry remains a bedrock for technological innovation, powering countless devices, and driving advancements in sectors like artificial intelligence (AI). This presents the case for the best semiconductor stocks to buy in May.
Demand for cutting-edge chips, fueled by AI, cloud computing, electric vehicles (EVs) and 5G connectivity presents significant opportunities. Additionally, a rebound in the semiconductor equipment market and easing supply chain constraints is a positive tailwind for 2024. While the semiconductor sector may look overextended, the long-term growth trajectory is undeniable.
Now, let’s discover the top semiconductor stocks to buy in May.
Taiwan Semiconductor (TSM)
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Taiwan Semiconductor (NYSE:TSM) is the backbone of the semiconductor industry. They are set to benefit significantly from AI tailwinds, and management has reiterated top line growth over 20% in the 2024 fiscal year.
Taiwan Semiconductor’s foundry services produce an array of advanced semiconductor chips for technology giants like Apple and Nvidia. Its technological prowess, particularly in cutting-edge manufacturing processes, gives it a unique competitive advantage. They hold more than 50% market share in foundry services, and the continued weakness of competitors like Intel further boosts their appeal. The company expects a large boost in revenue in FY24 due to the strong demand for AI GPUs. Moreover, they’re ramping up their production capacity.
TSMC received a $5 billion grant through the U.S. Chips & Science Act to build a new fabrication plant in Arizona. They’re also building two new fabrication plants in Germany and Japan. As the burgeoning AI market grows rapidly, TSMC stock will be at the forefront of this wave.
Qualcomm (QCOM)
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Qualcomm (NASDAQ:QCOM) should be at the top of the list for consideration of the best semiconductor stocks to buy in May. The company’s expansion and push into AI make it an exciting growth prospect in 2024.
Qualcomm is known for its advanced semiconductor chips for the smartphone, 5G and IoT markets. They have benefitted from the positive growth tailwinds in these markets over the last several years, but the handset market slowdown heavily impacted their top and bottom lines in 2023.
However, things are slowly turning around as the handset market recovers and their Snapdragon platform gains traction. Their Snapdragon X Elite AI CPU is set to revolutionize the PC market, and that is just the start. The Snapdragon platform also targets emerging markets like automotive, 5G, gaming and the cloud. Qualcomm’s recent Q2 FY24 results are promising, enabling on-device AI capabilities across multiple business segments.
Applied Materials (AMAT)
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Applied Materials (NASDAQ:AMAT) is a major player in the semiconductor equipment market, supplying essential tools and machinery for chipmakers. As semiconductor foundries like TSMC invest heavily in scaling their production capacity, the demand for Applied Materials’ equipment will surge.
Applied Materials’ growth in the 2023 fiscal year was nothing phenomenal. Many of its semiconductor counterparts reported stronger growth metrics, even amid ongoing supply chain headwinds. However, that shouldn’t take away from their ability to weather the storm. Although top line revenue increased a modest 3% from the year prior, EPS increased 9% YOY to $9.11 per share.
Moreover, the company achieved a record FCF of $7.6 billion. They have also maintained their streak of bottom line growth in the first quarter, with EPS up 19% YOY to $2.41 per share. As the semiconductor equipment market rebounds and customers ramp up next-generation chips for AI and IoT, AMAT stock is poised to outperform.
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.
