Many investors are on the hunt for the best semiconductor stocks to buy as the world continues to get a technological glow-up. It’s nearly impossible to get away from electronics these days, and the little chips that power them can be found in everything from your fridge to your phone. As these technologies mature, so do the upgrade cycles. What was once the latest and greatest soon becomes slow and out-of-date. That means although semiconductors are cyclical, there’ll always be some level of demand for their wares.
There are a few industries that are set to supercharge growth in the semiconductor space. AI is one of them. The new technology is expected to disrupt just about every industry on the planet, and its a market that’s expected to grow by just shy of 30% per year over the next 7 years. AI is nowhere without the chips that are behind the machine learning, making it an important growth avenue.
The supply chain issues we saw during covid knocked the semiconductor space. But as sales continue to grow and the kinks are worked out, there are opportunities to be found in solving the problems faced over the past few years. Companies that find ways to improve the semiconductor build process could see them selves capitalising on the gains as the industry grows.
So here are the best semiconductor stocks to buy.
Nvidia (NVDA)
Nvidia’s (NASDAQ:NVDA) chips are the brains behind ChatGPT and the group’s strong position in the AI market makes it one of the best semiconductor stocks to buy. NVIDIA’s data centre products and services support AI and they make up the backbone of the group’s business.
In the most recent results demand for these chips is expected to fuel a significant sales increase over the next quarter. NVIDIA isn’t just offering up the guts of AI, it’s also putting together pre-trained models within its software arm. While this is only a small part of the business right now, it has the potential to grow significantly as the need for AI takes off.
It’s no secret how well-placed NVIDIA is, and that’s led to a pretty lofty valuation. That could set investors up for some turbulence ahead since the market is expecting big things. However it seems NVIDIA is on a lucrative growth runway with a strong position in technology’s next big frontier, so the group’s lofty price tag can certainly be justified.
NXP Semiconductors (NXPI)
While AI may be the latest and greatest, there are plenty of other sectors that semiconductor stocks can thrive in and NXP Semiconductors (NASDAQ:NXPI) is doing just that, making it one of the best semiconductor stocks to buy in August. NXP’s bread and butter is the automotive industry and the Internet of Things, which describes connectivity between appliances like fridges and clocks as well as wider infrastructure.
NXP’s most exciting segment is automotive chips, which it’s developing to support autonomous driving. While there are plenty of regulatory and safety hurdles to clear before self-driving cars become a reality, that type of technology does seem to be the direction of travel NXP is closely tied to many of the world’s largest autonomous driving companies, putting it in a strong spot for growth ahead.
The Internet of Things might seem like last year’s news, but developments there are having a positive impact on NXP as well. The group’s chips are used in communications infrastructure, so the 5G rollout has been good news for sales.
Intel (INTC)
Intel (NASDAQ:INTC) isn’t the sexiest semiconductor company, but it could be the one with most potential, making it a strong pick among the best semiconductor stocks. The group’s been a sleeping giant for some time, having been around decades and gone through several major tech revolutions, Intel was seemingly falling behind. But now Intel is in a strong position to challenge NVIDIA as top-dog in the AI market.
But what makes Intel a strong pick in the semiconductor space is it’s position as an all-American brand that can support the US semiconductor industry through the ongoing tension with China and Taiwan. As political tensions rise, so do the risks of tighter restrictions and ultimately, supply chain fumbles. Intel’s stepping in to fill that void by creating a robust manufacturing arm. It’s currently building America’s largest semiconductor manufacturing facility where it will build other companies’ chips. This is likely an enticing proposition for chipmakers worried about escalating tension with Beijing. It puts Intel in a strong spot to grow even if it isn’t a market leader.
On the date of publication, Marie Brodbeck did not hold (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.