Chip Industry Set for Long-Term Growth
The semiconductor industry has experienced remarkable growth over the decades, driven by increasing demand for chips in consumer devices, cars, and data centers. With artificial intelligence (AI) technology on the rise, this trend is expected to continue, making the industry an attractive investment opportunity. According to Statista, the industry is projected to grow 10% per year through 2029, reaching a staggering $980 billion.
Taiwan Semiconductor Manufacturing: A Leader in the Industry
Taiwan Semiconductor Manufacturing (NYSE: TSM) is one of the outstanding chip companies poised to benefit from this growth. With a market capitalization of approximately $971 billion, TSMC is close to joining the exclusive $1 trillion club. As the leading semiconductor foundry, the company manufactures chips for other prominent companies, including Nvidia, Broadcom, Advanced Micro Devices, and Intel.
TSMC’s strong growth prospects are backed by its impressive track record of delivering market-beating returns. Analysts expect revenue to increase by 26% this year, followed by a 24% growth in 2025, as reported by YCharts. Investing in TSMC represents a bet on the long-term advances in chip technology and increasing chip quantities in smartphones, data centers, and cars.
Arm Holdings: A Company with Enormous Upside Potential
Arm Holdings (NASDAQ: ARM) is another chip company with significant growth potential. With a market capitalization of approximately $159 billion, Arm could potentially join the $1 trillion club in the future. The company is gaining share in various markets, including cloud computing, networking equipment, consumer electronics, automotive, and the Internet of Things.
Arm’s revenue grew 39% year over year in the most recent quarter, driven by its unique business model, which focuses on chip design and licensing. This approach allows Arm to earn high margins, as it collects royalties on nearly all processors shipped using its products. Arm-based processors are in high demand due to their exceptional performance and lower energy consumption.
Investment Opportunities
Both TSMC and Arm Holdings offer attractive investment opportunities. TSMC’s strong growth prospects, combined with its relatively safe position in the industry, make it an excellent choice for investors. Arm Holdings, on the other hand, offers enormous upside potential, driven by its innovative business model and growing demand for its products.
Before investing in these companies, it’s essential to consider your individual financial goals and risk tolerance. However, for those looking to capitalize on the long-term growth of the chip industry, TSMC and Arm Holdings are surefire stocks to buy and hold for the next decade.
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