Top Semiconductor Stocks to Watch in July

After a downturn in 2023, semiconductor stocks have been on the up in 2024, largely thanks to optimism around artificial intelligence (AI) and an improving outlook for consumer electronics.

Specialist chips are needed to handle the huge amount of data required to develop and train large language models, which are now running on next-generation smartphones and PCs.

The demand for applications and devices with AI capabilities is such that Gartner expects sales from AI semiconductors globally to jump to $71.3bn over the course of this year, up 32.8% from $53.7bn in 2023. Total revenue could reach $92bn by 2028, according to data released by the research firm at the end of May.

To ensure that supply can keep pace with demand, chipmakers are ramping up production and investing heavily in AI, as well as in new fabs and facilities.

While it is Nvidia [NVDA], the world’s most valuable chipmaker, that gets most of the attention, other semiconductor stocks are playing a critical role.

Download the OPTO app and find out about semiconductor stocks beyond Nvidia that are powering the AI revolution. Here are five such stocks to consider.

H2: Five Top Semiconductor Stocks to Watch in July

*as of 8 July

ASML [ASML]

ASML is set to expand its presence in the Netherlands.

Why invest in ASML?

A court ruled last week that the Dutch chipmaking equipment maker can expand its manufacturing base in Eindhoven. The Dutch government will be breathing a sigh of relief, as it threw €2.5bn at ASML earlier this year in a bid to stop the company from looking to move its operations overseas. CEO Peter Wennink has previously expressed concerns about the Netherlands tightening its immigration policy because of how this could limit the available talent pool, which would potentially impact ASML’s ability to innovate.

Broadcom [AVGO]

Broadcom’s AI chip clients include Alphabet, ByteDance and Meta.

Why invest in AVGO?

The US chip designer has agreed to develop an AI processor with TikTok parent ByteDance. The 5nm high-performance chip, which will be manufactured by TSMC, will be compliant with US export regulations and should provide ByteDance with a steady supply of chips, reducing the chance of the Chinese company getting caught in the crossfire between Beijing and Washington, Reuters reported on 24 June. Existing customers of Broadcom include Alphabet [GOOGL] and Meta [META]. To capitalise on the AI frenzy, the company is making its shares more affordable by following Nvidia in carrying out a 10-for-1 stock split on 15 July.

Micron Technology [MU]

Micron is to expand chipmaking capacity with US government support.

Why invest in MU?

The US chipmaker swung to a profit in the last quarter as revenue jumped 82% year-over-year. CEO Sanjay Mehrotra has put the outperformance down to “improving market conditions and strong price and cost execution” — AI demand has led to higher prices for DRAM and NAND chips, and they’re set to continue to rise in the second half of the year and 2025. Back in April, President Joe Biden gave the green light for Micron to receive $6.1bn through the CHIPS Act to construct three memory fabs in New York and Idaho.

SK Hynix [000660:KS]

SK Hynix has big plans for its AI chip business.

Why invest in SK Hynix?

SK Hynix, one of Nvidia’s key suppliers, plans to spend ₩103trn ($74.6bn) between now and 2028 to ramp up its chip operations. According to a Reuters report from 30 June, parent SK Group hopes the funding of high-bandwidth memory chips, AI data centres and AI services will enhance its competitiveness and position in the AI value chain. The strategic move follows a two-day meeting during which SK Group hashed out major restructuring plans to streamline the South Korean giant and stem losses. SK Hynix made an operating loss of ₩7.7trn in 2023, a huge swing from an operating profit of ₩6.8trn in 2022.

Taiwan Semiconductor Manufacturing Co [TSM]

TSMC’s 3nm capacity is fully booked by Apple, AMD and Qualcomm until 2026.

Why invest in TSM?

Apple [AAPL] has reportedly selected Taiwan’s TSMC to help develop its upcoming M5 chip, which is likely to enter production next year. As first reported by Chinese newspaper Economic Daily News, the Cupertino company wants to integrate TSMC’s system integration technology to improve the performance of Apple’s products. Apple, AMD [AMD] and Qualcomm [QCOM] have reportedly booked out TSMC’s 3nm advanced packaging capacity for the next two years.

Download the OPTO app today to invest in ASML, Broadcom, Micron, SK Hynix and TSMC.

How to Invest in Semiconductor Stocks

The cyclical nature of the chip industry means semiconductor stocks can experience peaks and troughs. Right now, the chip industry is in a period of high demand. 

One way to invest in semiconductor stocks is through thematic ETFs focused on AI. For example, the Roundhill Generative AI and Technology ETF [CHAT] holds ASML, Broadcom, Micron, SK Hynix and TSMC as of 7 July.

While AI can be a rewarding way to invest in semiconductors, other thematic ETFs to consider are the Invesco Next Gen Connectivity ETF [KNCT], which holds Broadcom, Micron, SK Hynix and TSMC as of 5 July, and the Defiance Next Gen Connectivity ETF [FIVG], which holds Broadcom as of 8 July. Chips are a crucial component in the 5G ecosystem.

There are also passively managed funds to consider. The Invesco PHLX Semiconductor ETF [SOXQ] tracks the PHLX Semiconductor Sector Index, which is composed of the 30 largest US-listed semiconductor stocks, including ASML, Broadcom, Micron and TSMC as of 5 July.

Conclusion

Semiconductor stocks have found themselves in a bull cycle that could continue for some time yet. Some in the industry, including Advanced Micro Devices [AMD] CEO Lisa Su, believe the AI revolution is only in its early innings.

Even if the AI bubble were to suddenly burst, however, there would still be plenty of opportunities for chipmakers, including the powering of devices used in the medtech, construction and manufacturing industries, to name a few. To discover more opportunities, download the OPTO app today and explore the universe of semiconductor stocks and ETFs on offer.