Semiconductors are the bedrock for many devices and resources that we use every day. They power our computers, TVs, automobiles and other everyday items. For years, semiconductor stocks have been outperforming the stock market. But, the recent artificial intelligence (AI) boom has resulted in even more growth for the industry.
Some semiconductor stocks have amassed trillion-dollar valuations while others are on their way. However, investors should be more focused on which semiconductor stocks are poised to deliver positive future results. Consider some of the top picks to buy now.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) has been a top beneficiary of the AI boom. And, it appears it can realistically reach a $1 trillion market cap. Long-term investors have plenty of reasons to be happy as the stock gets closer to that milestone. Shares are up by 28% year-to-date (YTD) and have surged by 444% over the past five years! Despite those impressive gains, Broadcom still manages to offer a 1.51% yield for investors. Broadcom has maintained a 17.49% annualized dividend growth rate over the past five years.
In addition, the semiconductor giant’s latest earnings report indicated that dividend growth and stock appreciation should continue. Revenue increased by 34% year-over-year (YOY) as Broadcom integrates VMware into its core business. Also, the firm repurchased $8.29 billion worth of shares to increase shareholder value. Currently, the quarterly dividend stands at $5.25 per share.
Moreover, analysts are bullish on Broadcom. It’s rated as a strong buy with a projected 13% upside. The highest price target of $1,720 per share suggests that the stock can rally by an additional 23%.
Synopsys (SNPS)
Investors are monitoring Synopsys (NASDAQ:SNPS) since its market cap is just shy of $100 billion.
The stock trades at a 65 P/E ratio and has rising profit margins. Shares are up by 18% YTD and have soared by more than 400% over the past five years. Wall Street analysts have rated the stock as a strong buy and are giving it a projected 11% upside. The highest price target of $675 per share implies a 15% gain is on the way.
Recently, the semiconductor firm reported 15% YOY revenue growth in Q2 of fiscal year 2024 and 26% YOY growth in GAAP EPS. The company’s revenue was at the high end of guidance while its GAAP EPS exceeded guidance.
Moreover, Synopsys should gain additional ground in the semiconductor industry, since it’s become a long-term winner thanks to its planned acquisition of Ansys (NASDAQ:ANSS). In fact, Ansys shareholders recently approved of the acquisition which clears another hurdle for Synopsys.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) continues to lead the stock market higher with incredible earnings. Revenue increased by 262% YOY in Q1 of fiscal year 2025 while net income soared by 628% YOY!
Sequential revenue growth has been slowing down as Nvidia’s revenue only increased by 18% quarter-over-quarter (QOQ). However, the corporation should continue to report exceptional YOY results throughout fiscal 2025.
Additionally, net profit margins remain impressive and exceeded 50% in the quarter. High net profits prompted the company to raise its dividend by 150% this year. However, the dividend yield isn’t much. It’s easy to forget that Nvidia even gives out a dividend since its yield stands at 0.015%. Elevated profitability suggests that Nvidia can hold onto its valuation, even when growth inevitably slows down.
For now, the stock doesn’t show any signs of slowing down. It’s up by 116% YTD and has gained more than 2,700% over the past five years. With a $2.5 trillion market cap, Nvidia has a real shot at surpassing Microsoft (NASDAQ:MSFT) as the world’s most valuable publicly traded company.
On this date of publication, Marc Guberti held long positions in AVGO, SNPS, and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
