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The Semiconductor Rush: Three Companies to Watch The Semiconductor Rush: Three Companies to Watch

Nvidia (NASDAQ:NVDA) surprised many investors in 2023 with exceptional gains and financial reports to back them up. The company became a frontrunner in the artificial intelligence (AI) industry and still has plenty of runway left.

NVDA’s success brought more attention to other semiconductor stocks and firms that specialize in AI. Any hint of a tailwind in this industry can send a stock soaring. So, many corporations are getting into AI, but some are clearly better than others. These three semiconductor stocks look like promising long-term buying opportunities.

Broadcom Shines (AVGO)

broadcom (AVGO) logo outside office building

Broadcom (NASDAQ:AVGO) is a top dividend growth stock on its way to a $1 trillion market cap. The firm regularly grows its dividend by 10% or higher each year and offers a 1.65% dividend yield. Shares trade at a 39 P/E ratio after a significant 116% run-up over the past year. The stock has rallied by 355% over the past five years.

Healthy profit margins are a staple for this equity with the firm delivering a 37.2% net profit margin in its most recent quarter. Revenue increased by 5% year over year (YOY) while net income jumped by 7.4% YOY.

AVGO initiated many share buybacks to help elevate the stock price. The firm purchased 2.9 million shares during the third quarter for a grand total of $2.17 billion.

Broadcom is one of the top dividend growth stocks due to its appreciation, high dividend growth rate, and respectable yield even after all of the gains. Recently, the equity surpassed a $600 billion market cap and is moving fast toward the $1 trillion milestone.

Taking the Lead: Advanced Micro Devices (AMD)

In this photo illustration, the AMD logo is shown on a smartphone screen.

Advanced Micro Devices (NASDAQ:AMD) is another semiconductor stock that has received plenty of attention. Shares are up by 107% over the past year and have soared by 628% over the past five years.

Further, the semiconductor giant dominated on multiple fronts as it expanded its market share in server, desktop, and mobile. Also, the firm’s line-up of AI products is appealing. The company’s AI chips can lead to meaningful long-term gains.

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Advanced Micro Devices is coming out of a bearish cycle and reported 10% YOY revenue growth in Q4 2023. That’s a big improvement from the 4% YOY revenue decline from all of 2023 compared to all of 2022.

Also, it wasn’t too long ago when the company was regularly reporting YOY revenue growth above 20%. The corporation seems to be heading back in that direction which can reward long-term investors. The stock trades at an enticing 0.70 PEG ratio. Therefore, demand for the company’s AI chips can strengthen the valuation.

Rising Star: Taiwan Semiconductor Manufacturing (TSM)

image of TSM semiconductor office building

Unlike many of its peers, Taiwan Semiconductor Manufacturing (NYSE:TSM) largely missed out on the AI rally. Shares are only up by 39% over the past year due to a strong surge that started in November.

Since the firm’s equity missed out on the rally, it trades at only a 26 P/E ratio while offering a 1.50% dividend yield. Also, TSM has endured economic headwinds similar to AMD and reported flat revenue growth in Q4 2023.

Additionally, the corporation’s guidance indicates a return to growth. Revenue is expected to range from $18.0 billion to $18.8 billion in the first quarter. And, the midpoint represents a 10% YOY growth rate from the $16.72 billion in Q1 2023 revenue. Leadership anticipates gross margins will be between 52% and 54%.

Although Taiwan Semiconductor Manufacturing hasn’t been a top performer over the past year, a wider lens demonstrates the firm’s full potential. During the past five years, TSM has logged a 250% gain for investors.

On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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