With over $600 billion (around £475 billion) in yearly revenue, the semiconductor industry is a cornerstone of our technology-driven world, with its components essential in everything from smartphones to electric vehicles (EVs) and artificial intelligence (AI).
While Nvidia has become a household name, it’s not the only game in town. There are other major players and lesser-known stocks in the semiconductor sector that could seriously energise your investment portfolio.
Finding the best semiconductor stocks is a challenge because it’s a quickly evolving space, with companies all jostling for position. To give you some starting inspiration, these are the top semiconductor stocks in the S&P Global Semiconductor Index.
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Semiconductor stocks represent companies involved in the production and innovation of the nifty materials that make our gadgets tick. Semiconductors are made out of materials that both conduct electricity and block it, depending on the need.
These components are the unsung heroes in everything electronic, from your smartphone to your car. Investing in semiconductor stocks means you’re backing the brains behind our tech-savvy world.
Recently, there’s been a buzz in the industry with government investments like the US’s “CHIPS Act” injecting billions of dollars into semiconductor research, manufacturing and workforce development. This move is a game-changer, making semiconductor stocks not just a part of the tech conversation, but a crucial piece of geopolitical strategy.
Here are some of the benefits and reasons why people are interested in finding the best semiconductor stocks for their portfolios:
You could say semiconductor stocks are an investment in a digitalised, greener, and geopolitically secure future. But hang on, it’s not all rainbows and sunshine. Keep reading to learn about the risks.
If you’re thinking about investing in the best semiconductor stocks you can find, keep in mind the potential risks:
With hundreds of billions of dollars swishing around, the semiconductor industry is an ocean that sustains more than just the sharks like Nvidia, Intel, and AMD.
Take Huntsman Corporation, for instance, a chemicals firm which has expanded its offerings in Texas to include specialty amines used to make semiconductors.
Then there’s Merk, best known as a pharma company, pouring about $1 billion into research and development for electronic materials used in semiconductor manufacturing.
And let’s not forget Entegris, which made waves by acquiring CMC Materials for $6.5 billion, a firm which specialises in polishing slurries critical for semiconductor production.
If all this semiconductor stock picking sounds like a high-tech headache, it’s well worth exploring the possibility of investing in ETFs that cover the global semiconductor industry or a region-specific ETF that concentrates on somewhere like the US, for example.
"Nvidia (NVDA) has undoubtedly been the star of the show in the semiconductor scene throughout 2023, with the share price and market cap skyrocketing. Plenty of investors still think this is the stock with the legs to continue to outperform as it appears head and shoulders above most competitors.
However, Nvidia’s explosion in popularity now means that the stock is trading at extremely high growth multiples. In order to justify its current valuation, it can’t miss a step and needs to remain highly profitable. There may be better semiconductor stocks if you’re looking for short-term growth potential, but if you want the current industry flagship stock, Nvidia is worth a look."
Semiconductor stocks are a way to invest in the building blocks of all things futuristic like AI, cryptocurrency, and EVs. You have big names like Nvidia, a host of other major players and hidden gems – all contributing to a sector that’s being buoyed by billions of dollars’ worth of government subsidies.
But, just like a delicate electronic circuit, these investments require careful handling. Historically, the prices of semiconductor shares have seen explosive jumps followed by catastrophic collapses. Investors who buy shares in a well-diversified semiconductor ETF, as opposed to picking individual companies, are likely to enjoy a smoother ride.
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