Semiconductor Secrets: 7 Chip Stocks to Buy Instead of Nvidia

Stocks to buy

Though the dominance of Nvidia (NASDAQ:NVDA) is unquestioned – especially with the rising prominence of generative artificial intelligence – it’s also worth pointing out that other chip stocks exist. Now, they might not offer the radical paradigm shift that NVDA sparked last year. Frankly, it’s difficult to make lightning strike twice. However, from a value proposition, other compelling semiconductor stocks might make more sense.

For example, Nvidia continues to rise higher on the burgeoning AI ecosystem, which its graphics processing units (GPUs) undergird. Since the start of the year, NVDA gained almost 19% of equity value. And in the past 52 weeks, it’s up nearly 241%. However, in the trailing six months, shares have only moved up 18%. What does that tell us? Basically, like a fine-tuned athlete, incremental gains in performance are difficult to extract.

On the other hand, less-fancied chip stocks are like amateur athletes. That’s not to cast aspersions but rather to point out that when you’re less trained, you can extract massive performance gains. Put another way, it’s the last few pounds that are the most difficult to lose.

So, Nvidia may have a “last-mile problem” while these semiconductor stocks might not – enjoy!

Advanced Micro Devices (AMD)

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If you want the closest thing to an Nvidia without buying NVDA stock, you’ll need to look at Advanced Micro Devices (NASDAQ:AMD). To be sure, the semiconductor specialist has printed a powerful performance in its own right. In the trailing one-year period, AMD gained 140% of equity value. It’s awesome – just not 241% awesome. That could make Advanced Micro an intriguing idea for chip stocks to buy.

For one thing, the underlying generative AI market relevance has already been established. Plus, Advanced Micro has a knack for offering top-tier products at a discount to its rivals. Moving forward, a report by Bloomberg notes that the underlying sector could become a $1.3 trillion market by 2032. If so, that would translate to a compound annual growth rate (CAGR) of 42%.

In the spirit of full disclosure, AMD isn’t the cheapest of semiconductor stocks. With a forward earnings multiple of almost 43X, investors must think carefully. Nevertheless, as stated above, the relevance has been proven. Thus, the most bullish analyst anticipates a target of $200.

Qualcomm (QCOM)

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An enticing and relevant example of chip stocks to buy for the long haul, Qualcomm (NASDAQ:QCOM) deserves consideration for its wide pertinence, particularly in the realm of connectivity. It’s a leading provider of smartphone processors globally, with its Snapdragon series of chipsets powering the most high-end Android phones on the market. Analysts peg shares as a consensus moderate buy.

Part of what makes QCOM one of the compelling semiconductor stocks to buy is the total addressable market. Per Grand View Research, the global 5G services market reached a valuation of $60.61 billion in 2022. By 2030, experts project that the segment may hit a value of over $2.2 trillion. If so, that would translate to a CAGR of 59.4%.

Another factor to consider is the company’s value proposition relative to the competition. Specifically, QCOM trades at a forward earnings multiple of 15.23X, favorably below 72.39% of its peers. On average, analysts anticipate QCOM reaching $149.39 per share, with the high-side target possibly hitting $173.

Marvell Technology (MRVL)

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Headquartered in Wilmington, Delaware, Marvell Technology (NASDAQ:MRVL) develops and produces semiconductors and related technology. In particular, Marvell is a leader in high-performance networking and storage solutions. As a result, it’s one of the chip stocks poised to benefit from burgeoning arenas such as 5G networks. Analysts unsurprisingly rate shares a consensus strong buy (just one voice short of unanimous).

In addition, Marvell also provides solutions for data centers and cloud computing. Just regarding the former category, the global underlying sector reached a valuation of $192.63 billion in 2021. Experts believe that by 2030, the segment could see a value of $554.4 billion, representing a double-digit CAGR. As for the latter, cloud computing could be worth $1.44 trillion by 2029.

To be fair, MRVL trades at a rather hot forward multiple of 32.48X. That said, the company enjoys a robust three-year revenue growth rate of 20.3%. Also, the most bullish analyst anticipates MRVL reaching $100 per share. Therefore, it’s a worthy inclusion among semiconductor stocks to consider.

Taiwan Semiconductor (TSM)

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Easily one of the most relevant chip stocks you can buy, Taiwan Semiconductor (NYSE:TSM) is a multinational contract manufacturing and design company. Per its public profile, TSMC as it’s known is the world’s largest dedicated independent semiconductor foundry. Simply stated, a foundry means that the business makes chips for other companies. Analysts peg shares as a consensus strong buy.

According to Allied Market Research, the global semiconductor foundry sector reached a value of $106.9 billion in 2022. Experts anticipate that by 2032, the ecosystem could be worth $231.5 billion. If so, that would come out to a CAGR of 8.1% from 2023. Even better for TSM, the underlying company dominates the space. In the third quarter of 2023, TSMC secured a 57.9% foundry revenue market share.

Enticingly, TSM is much more attractive than many other semiconductor stocks. While printing a three-year EBITDA growth rate of 32.8%, it also offers a trailing-year earnings multiple of 18.47X. That’s below 66.4% of its peers. The most bullish analyst sees shares hitting $125.

Analog Devices (ADI)

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Based in Wilmington, Massachusetts, Analog Devices (NASDAQ:ADI) is a multinational semiconductor firm specializing in data conversion, signal processing, and power management technologies. Per its public profile, it manufactures analog, mixed-signal, and digital signal-processing integrated circuits (ICs) used in electronic equipment. As a quietly relevant idea among chip stocks, ADI deserves consideration for those seeking a long-term investment.

Basically, Analog Devices can address multiple in-demand sectors. For example, the company is a key player in the industrial automation ecosystem. According to MarketsandMarkets, the global industrial control and automation sector reached a valuation of $147.9 billion in 2022. By 2027, the segment could hit $218.8 billion, implying a CAGR of 8.2%. Combine this with other covered industries and ADI makes a great play for semiconductor stocks.

On the financial side, Analog prints a three-year revenue growth rate of 17.3%, beating out 62.1% of its rivals. Unsurprisingly, the company has been consistently profitable over the past 10 years. Analysts rate shares as a consensus moderate buy with a $206.06 price target.

Silicon Motion (SIMO)

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An American-Taiwanese enterprise involved in developing NAND flash controller integrated circuits (ICs) for solid-state storage devices, Silicon Motion (NASDAQ:SIMO) is a major player in storage-related solutions. These include commercial, enterprise and industrial applications ranging from solid-state drives (SSDs), embedded MultiMediaCards (eMMCs), memory cards and USB flash drives. In the past 52 weeks, SIMO slipped more than 2%. Still, it could be an opportunity among underappreciated chip stocks.

According to Straits Research, the global NAND flash memory market reached a valuation of $67 billion in 2021. Further, experts project that the segment could hit $117 billion by 2030. If so, that would translate to a CAGR of 6.39% from 2022. Notably, Silicon Motion currently carries a market capitalization of $2.12 billion. In other words, SIMO could soar by biting an appropriately sized chunk of the NAND market.

Per the numbers, Silicon Motion is a growth machine. Specifically, its three-year sales expansion rate clocks in at 29.8%, above 83.2% of its rivals. Also, it’s consistently profitable thanks to its core specialty. Analysts peg shares as a strong buy with an average target of $74.20.

ON Semiconductor (ON)

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Based in Arizona, ON Semiconductor (NASDAQ:ON) represents a chip supplier. Per its public profile, ON’s products include power and signal management, logic, discrete, and custom devices for multiple applications. These include automotive, communications, computing, consumer, industrial, lighting, and medical, among others. In the past 52 weeks, ON gained more than 15% of equity value. With strong relevancies on tap, it could be one of the top chip stocks to buy.

As mentioned earlier, one of the key areas that ON serves is the automotive sector. According to MarketsandMarkets, the auto semiconductor market reached a valuation of $42.9 billion in 2022. By 2027, this space could see a value of $70 billion. If so, this would translate to a CAGR of 10.1% from 2022. Combine this narrative with other compelling stories and ON could easily be one of the winning semiconductor stocks for the long haul.

Moving to the financials, the company prints an above-average three-year EBITDA growth rate of 40%. It’s also consistently profitable, making its forward earnings multiple of 14.37X quite credible. Finally, analysts rate shares a moderate buy with an $89.74 price target, implying almost 23% upside.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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