Best semiconductor stocks to watch

Semiconductor stocks in brief

Semiconductor stocks are shares in companies involved in the design, manufacturing, and distribution of semiconductors — otherwise known as computer microchips. These chips are essential in every sense of the word, including for all computing, cars, telecommunications, consumer electronics and artificial intelligence.

For perspective, a semiconductor is a material that has electrical conductivity between that of a conductor (like copper) and an insulator (like glass). This unique property allows them to control and regulate electrical currents, making them necessary for electronics. Without semiconductors, harnessing electricity would be almost impossible beyond very basic tasks.

As with all market segments, there are advantages and drawbacks to semiconductor stocks. Perhaps most importantly, because the sector is growing so rapidly, there has been and will continue to be significant volatility. While increasing demand for artificial intelligence solutions, cloud computing and electric vehicles continues to drive share prices up, it’s also true that semiconductors stocks tend to be hit hard during cyclical downturns — largely due to overinvestment and oversupply.

On the plus side, the sector enjoys a wide economic moat with high barriers to entry as the industry requires advanced technology and massive capital investments, making it difficult for new competitors to enter. And because of maintaining a competitive edge is widely viewed as strategically important, the governments of most developed countries tend to back the industry’s development — both through investment and regulation.

Beyond this, semiconductor development is at the bleeding edge of technological innovation and at the heart of quantum computing and AI. Many investors draw parallels between today’s semiconductor stocks and the dot-com winners which later became the Magnificent Seven.

Conversely, semiconductors are at the heart of Sino-US geopolitical tensions — and are arguably overly reliant on Taiwan. Given the design and manufacturing complexity, they’re also at risk from any supply chain disruptions, and semiconductor companies are also liable for extremely high research and development costs.

Fabrication plants are also very expensive, and even though barriers to entry are high, there is steep competition for market share among the titans. This is compounded by the reality that each major tech breakthrough can render former chips obsolete.

This all makes semiconductor stocks very exciting growth opportunities, but with correspondingly magnified risks — so many investors seek to invest in the sector within a diversified and balanced portfolio.

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Investors look to grow their capital through share price returns and dividends - if paid.

But the value of investments can fall as well as rise, past performance is no indicator of future returns, and you could get back less than your original investment.

We also offer many emerging markets-focused ETFs, including the popular iShares MSCI Global Semiconductors UCITS ETF, which seeks to track 23 Developed Markets and 24 Emerging Markets that are active in the semiconductor industry. The stocks included are filtered according to ESG criteria. The ETF’s total expense ratio stands at a moderate 0.35%, with top holdings including Broadcom and ASML.

Top Semiconductor stocks to watch

The following are the largest semiconductor stocks in the world by market capitalisation as of March 2025 — though please be aware that there is some subjectivity to what constitutes a ‘semiconductor’ stock.

1. Nvidia (NASDAQ: NVDA)
2. TSMC (NYSE: TSM)
3. Broadcom (NASDAQ: AVGO)
4. ASML (NASDAQ: ASML)
5. Samsung (KRX: 005930.KS)
6. Qualcomm (NASDAQ: QCOM)
7. Texas Instruments (NASDAQ: TXN)
8. AMD (NASDAQ: AMD)
9. Arm Holdings (NASDAQ: ARM)
10. Applied Materials (NASDAQ: AMAT)

Nvidia (NASDAQ: NVDA)

Nvidia is the global market leader in graphics processing units (GPUs), with an overwhelmingly dominant position in gaming, artificial intelligence, machine learning and data centres. At times, it’s the most valuable company in the world, with its cutting-edge H100 and A100 GPUs giving it a strategic advantage in the AI boom.

The business continues to innovate in the semiconductor space and is arguably leaps and bounds ahead of its nearest competition — with a reputation as the ‘picks and shovels’ choice for the AI age.

However, the company relies heavily on TSMC for manufacturing, making it vulnerable to supply chain disruptions and Sino-US geopolitical tensions. Additionally, the stock trades at a premium valuation, which tends to be come hand in hand with volatility.

TSMC (NYSE: TSM)

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest contract chip manufacturer, producing advanced semiconductors for titans including Apple, Nvidia, AMD, and Qualcomm. As a pure-play foundry, TSMC does not design its own chips but focuses exclusively on manufacturing using its state-of-the-art process technologies. It leads the industry in 5nm and 3nm production, with plans for even smaller nodes.

TSMC's invests heavily in research and development to maintain its position as the most advanced chip manufacturer. Combined with high-volume production capabilities and its strong relationships with top tech firms, it enjoys stable revenue base — but faces increasingly significant geopolitical risks due to its location in Taiwan.

Broadcom (NASDAQ: AVGO)

Broadcom is both a semiconductor and an infrastructure software company, providing chips for networking, broadband, data centres, wireless communication, and AI applications. It specialises in custom chips for large companies, including cloud service providers and telecom companies.

One of Broadcom’s major strengths is its diversified revenue base, which spans multiple industries, reducing its dependence on any single market. It also benefits from deep integration with major cloud computing providers and telecom giants, with long-term contracts.

However, its continued reliance on acquisitions for growth can present risk if future integrations do not go smoothly. And the company’s exposure to several cyclical markets means revenue can fluctuate more than others on this list.

ASML (NASDAQ: ASML)

ASML is the only company in the world that manufactures extreme ultraviolet lithography machines, which are required to manufacture the most advanced semiconductor chips sized at either 5nm and 3nm nodes —these allow for higher performance and energy efficiency.

ASML’s monopoly in EUV equipment gives it massive pricing power and ensures strong demand from leading manufacturers like TSMC, Samsung, and Intel.

As no other company can produce EUV machines at the same scale or complexity, the company sports attractive long-term profitability. However, its growth is also tied to the capital expenditure cycles of its major customers, meaning demand can fluctuate based on how much chipmakers are investing in new production facilities. And the machines are themselves extremely expensive to design, build and maintain.

Samsung (KRX: 005930.KS)

Samsung is a global technology giant with a presence in semiconductor manufacturing, consumer electronics, and display technology. It is one of the world’s largest producers of memory chips and competes with TSMC in foundry services. However, unlike TSMC, Samsung designs its own chips, including its Exynos processors for its branded smartphones.

Samsung’s major strength is in its vertical integration. By manufacturing its own chips and using them in its own devices, it reduces dependency on external suppliers. It also has a diversified revenue model, spanning mobile phones, televisions, and semiconductor manufacturing. However, its foundry division lags behind TSMC in advanced chip manufacturing, particularly in producing 3nm and 5nm chips.

Qualcomm (NASDAQ: QCOM)

Qualcomm is a leader in mobile chipset technology, designing processors and modems for smartphones, 5G networks, and IoT devices. Its Snapdragon processors power many of the world's top Android smartphones, and its tech is key to 5G connectivity.

Qualcomm is the market leader in wireless technology, particularly in 5G, where it supplies modems for major smartphone manufacturers, including Apple. And it benefits from a strong patent portfolio, allowing it to generate high-margin licensing revenue. However, Qualcomm also has a near-term challenge as Apple is developing its own in-house modem chips — which means it must either increase R&D spending to stay ahead of the titan, or see revenues fall.

Texas Instruments (NASDAQ: TXN)

Texas Instruments specialises in analogue semiconductors and embedded processors. Unlike the above companies focused on cutting-edge microchips, Texas focuses on essential, low-power semiconductors that serve long product lifecycles.

TI’s strength lies in its stable and diversified customer base, as its chips are used in industries with less volatility than consumer electronics. It also maintains strong pricing power due to the long-term need for analogue components and few competitors in the space. However, it faces slower comparative growth, while its lower-margin business model makes downturns perhaps more dangerous.

AMD (NASDAQ: AMD)

AMD designs processors and graphics chips for gaming, data centres, and enterprise computing. It’s arguably Nvidia’s main competitor in GPUs — and also competes with Intel in CPUs for desktops and servers. AMD’s Ryzen and EPYC processors have gained significant market share in recent years, especially in cloud and AI-related applications.

One of the company’s biggest advantages is its competitive product lineup, which has consistently been gaining market share from Intel. However, like NVIDIA, AMD relies on TSMC for manufacturing, making it susceptible to the same supply chain risks. Additionally, its smaller size compared to Nvidia and Intel means it has fewer resources for R&D investment — which might become a larger problem in the future.

Arm Holdings (NASDAQ: ARM)

ARM Holdings designs energy-efficient microprocessor architectures which are used in nearly all smartphones and IoT devices. Unlike Intel or AMD, Arm does not manufacture chips but licenses its designs to market titans like Apple, Qualcomm, and Samsung.

Arm’s licensing model allows it to generate revenue without the risks associated with manufacturing, which gives it a very stable business model. However, Arm faces increasing competition from companies developing custom chip architectures, such as Apple’s M-series chips. It also relies on maintaining strong licensing partnerships to sustain growth, which could represent a risk if the larger companies decide to start competing in the space.

Applied Materials (NASDAQ: AMAT)

Applied Materials is the market leading supplier of semiconductor manufacturing equipment, providing tools and technologies used in chip fabrication. It serves foundries like TSMC and Samsung by supplying equipment for wafer fabrication, deposition, and lithography.

This role makes it almost irreplaceable in the semiconductor supply chain. However, as its revenue is tied to capital expenditures from semiconductor manufacturers, it’s extremely sensitive to industry downturns. Additionally, export restrictions on chip-making equipment which continue to tighten could impact its ability to do business around the world.

Semiconductor stocks summed up

• Semiconductor stocks are shares in companies involved in the design, manufacturing, and distribution of microchips
• The sector enjoys a wide economic moat with high barriers to entry
• Governments of most developed countries tend to back the industry’s development
• Semiconductors are at the heart of Sino-US geopolitical tensions