Investing in cheap semiconductor stocks offers significant potential for growth driven by increasing demand for automotive, energy storage, robotics, artificial intelligence, and machine learning.
The global semiconductor market has seen tremendous growth in recent years, projected to become a trillion-dollar industry by 2030 (McKinsey, 2022). This is a result of high single-digit to low double-digit revenue growth and EBITDA margin expansions.
With Nvidia reaching a trillion-dollar valuation in 2023, these 3 semiconductor stocks have major room for growth over the next decade.
Below are my top three high-potential semiconductor stocks to buy right now!
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) has seen a meteoric rise in its share price in the last few months after reporting its Q2 2023 financial results.
The company saw its net income surge 34% year-over-year, driven by next-generation technologies from hyperscale. Adjusted EBITDA margin increased to 65% while generating $4.4 billion in free cash flow from operations.
EPS (Earnings Per Share) came in at $8.15, up more than 37% year-over-year. Broadcom is currently ramping up its AI strategy and the CEO, Hock E. Tan said he expects growth to continue in Q3 2023.
Furthermore, Broadcom is in the process of acquiring VMware for approximately $61 billion. The acquisition will help them expand their software development capabilities into the cloud computing market. It will also allow them to compete with companies like Amazon, Microsoft, and Oracle.
However, as the deadline was extended again to August 26th, there is a possibility that the deal may fall through. Despite the regulatory scrutiny of the VMware acquisition by Chinese regulators, Broadcom is well-positioned to dominate the semiconductor market over the next decade.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) has largely underperformed in the semiconductor industry despite being the obvious elephant in the room.
They are a leading supplier of critical semiconductor infrastructure for wireless communication ranging from 4-G, 5-G, and CDMA2000. As well as, a leading supplier of chips for Apple smartphones, looking to expand into high-performance chips for the PC and CPU markets.
After posting record earnings results in Q1 2022, the company continued to see a decline in revenue growth and EBITDA margins. Qualcomm was largely affected by the chip shortage, and in Q2 2023 saw their net income and EPS (Earnings Per Share) fall more than 40% year-over-year, respectively.
Despite continuing to operate in a challenging macroeconomic environment, Qualcomm’s P/E of 12.63 is one of the lowest in the industry. This makes it one of the best cheap semiconductor stocks to buy while the handset market recovers from slowing demand and supply chain constraints.
As the company continues to invest in critical 5G infrastructure and expand on its AI strategy, Qualcomm is one of the best cheap semiconductor stocks to buy for 2023.
Applied Materials (AMAT)
Applied Materials (NASDAQ:AMAT) should be on your radar as one of the top semiconductor stocks to buy for 2023.
After rising more than 90% in 2021, the stock is almost back to its all-time high of $167.00 in January of 2022. Applied Materials provides critical software, equipment, and services for the fabrication of semiconductor chips.
Some of their biggest customers include Taiwan Semiconductor and Intel. In Q2 2023, the company saw its revenue up 6.16% year-over-year to $6.63 billion. GAAP EPS (Earnings Per Share) was up 6.9%, driven by strong demand for semiconductor equipment.
On June 22, 2023, Applied Materials announced a $400 million investment to build a new engineering facility in India. The company hopes to recruit India’s top engineers and bring together leading academic researchers and suppliers to accelerate the advancement of the semiconductor industry in India.
While Applied Materials’ growth is not nearly as substantial as Broadcom or Qualcomm, its long-term growth prospects on the back of IoT, automotive, energy storage and 5G should not be ignored.
With the growing demand for advanced semiconductor equipment and software capabilities, Applied Materials is one of the top cheap semiconductor stocks to buy.
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.
