3 Semiconductor Stocks with Competitive Advantages
Semiconductors are the silicon backbone of the digital revolution. Compute-intensive AI workloads are also priming them for the next wave of secular growth, so it’s no wonder the industry has outperformed the market over the past six months, delivering returns of 46.2% compared to 12.7% for the S&P 500.
Nevertheless, a cautious approach is imperative because Moore’s Law (a principle stating that computer productivity doubles every two years) will eventually make even the most impactful technologies today obsolete. Keeping that in mind, here are three semiconductor stocks we think can generate sustainable market-beating returns.
AMD (AMD)
Market Cap: $822.1 billion
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
Why Are We Fans of AMD?
- Annual revenue growth of 25.4% over the past five years was outstanding, reflecting market share gains this cycle
- Market share is on track to rise over the next 12 months as its 65.6% projected revenue growth implies demand will accelerate from its two-year trend
- Earnings per share grew by 22.6% annually over the last five years, comfortably beating the peer group average
AMD is trading at $502.04 per share, or 47.1x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Broadcom (AVGO)
Market Cap: $1.72 trillion
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
What Makes AVGO Stand Out?
- Market share has increased this cycle as its 38% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 29.8% annually over the last five years, massively outpacing its peers
- Robust free cash flow margin of 43.2% gives it many options for capital deployment
At $359.44 per share, Broadcom trades at 21x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Lam Research (LRCX)
Market Cap: $372.9 billion
Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ:LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.
Why Should You Buy LRCX?
- Annual revenue growth of 24.8% over the past two years was outstanding, reflecting market share gains this cycle
- Highly efficient business model is illustrated by its impressive 33.8% operating margin, and its operating leverage amplified its profits over the last five years
- Industry-leading 64.2% return on capital demonstrates management’s skill in finding high-return investments, and its returns are growing as it capitalizes on even better market opportunities
Lam Research’s stock price of $297.23 implies a valuation ratio of 33.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.