The semiconductor industry last year saw annual revenues exceed $600 billion for the first time, as businesses and governments around the world line up to buy chips to build artificial intelligence (AI) infrastructure. It is set to continue from 2025 onwards.
Semiconductors are considered to be the new gold, allowing disruptive innovation in several areas, ranging from AI to self-driving cars, smartphones and computers. Furthermore, from manufacturing equipment to chip design and manufacturing, the global semiconductor supply chain is dominated by a select group of companies.
As the global semiconductor industry has more than tripled in revenues of over $2 trillion by 2032, let’s take a look at two key names in this sector.
Of course, it’s not wise to buy just two shares and hope to offer life-changing returns. However, buying the two companies discussed in this article could be a wise move considering your prospects if you purchase them as part of a diversified portfolio.
1. nvidia
nvidia (NVDA) 0.63%)) At the time of writing, it is the world’s largest semiconductor company with a market capitalization of $3.4 trillion. Chip designers have reached this position thanks to their incredible technology leads and ability to capitalize on disruptive trends.
It reportedly controls 85% of the rapidly growing AI chip market, with little remaining among rivals like AMD and Intel. There is a similar story in the market for discrete graphics cards, which are also used by personal computers, as Nvidia holds a 90% command share. Nvidia’s great hold on these markets, especially AI chips, has led to rapid growth in the company’s revenue and revenue.
NVDA Revenue (TTM) data by YCHARTS
Nvidia should be able to maintain this remarkable momentum thanks to the immeasurable opportunities that exist in these markets. According to one estimate, the overall size of the Graphics Processing Unit (GPU) market could jump 12 times by 2033, generating nearly $950 billion in revenue. This suggests that Nvidia still has a lot of room for growth.
At the same time, Nvidia is looking to diversify into additional areas such as enterprise software. More importantly, it has achieved success in this area. During the November 2024 revenue conference call, CFO Colette M. Kress said:
NVIDIA AI Enterprise full-year revenues are expected to rise more than doubled from last year, and the pipeline continues to be built. Overall, our software, services and support revenues are $1.5 billion a year, with the expected year to end over $2 billion this year.
So, Nvidia could be more than just a semiconductor company in the long run. The large size of the GPU market and the additional catalysts that Nvidia is trying to make money by buying this stock easily. After all, Nvidia is trading on an attractive 32x advance revenue estimate, even after notable growth that is clocked.
2. ASML Holding
The chips designed by Nvidia would not have entered production without the help of advanced chip-making equipment for ASML-retaining (ASML) -0.23%)) Manufactured. ASML has a monopoly in the market for extreme ultraviolet lithography (EUV) machines used to create chips based on advanced process nodes.
These advanced chips pack more transistors into smaller surface areas, leading to higher computing performance and lower power consumption. Naturally, these advanced nodes are used to create chips that can tackle AI workloads in both cloud and consumer devices. As a result, demand for ASML machines is increasing.
The Dutch semiconductor giant received reservations worth 7.1 billion euros in the fourth quarter of 2024, twice as much as analysts had hoped. EUV machines accounted for 43% of these orders. Trends such as accelerated computing could lead to an increase in global demand for sophisticated chips.
This explains why the EUV lithography market is expected to jump four times between 2023 and 2030, according to third-party estimates. This could set a stage of outstanding growth in ASML. The company reported revenue of 28.3 billion euros last year. Its topline is expected to jump from 44 billion euros to 60 billion euros by 2030, with a big jump in its margin.
All this explains why ASML revenue is expected to grow at a healthy pace over the next few years. This is a trend that can be maintained for a long period of time due to the secular growth of the semiconductor market.
YCHARTS estimates for ASMLEPS for current fiscal year data
Additionally, investors are currently trading on 31x advance revenue estimates, which means they are earning substantial trades in ASML stocks. Buying ASML at this level seems wise considering the important role it plays in the semiconductor industry.
The harsh Chauhan has no position in any of the stock mentioned. Motley Fool has ASML, Advanced Micro Devices, Intel and Nvidia locations and is recommended. Motley Fool recommends the following options: A short $27 phone with Intel in February 2025. Motley Fools have a disclosure policy.
