In the company’s third quarter, revenue grew at a slower-than-expected rate, of just 20%, and that, along with some other disappointing numbers, sent shares down — to an enticing level. While the coming year may not feature robust growth, ASML looks like a winner over the long term. Its stock recently sported a forward-looking price-to-earnings (P/E) ratio of 28, below the five-year average of 35. It pays a dividend, too, recently yielding 1%.

You might not realize it, but many semiconductor companies simply design chips and then have them manufactured by others. Relatively few actually make chips, and among those, Taiwan Semiconductor (TSMC) is the world’s largest, with revenue market share topping 60%.

Recently valued at nearly $1 trillion, its growth prospects are good, in part because of its size and economies of scale. A particularly promising growth driver for TSMC and other chip specialists is the proliferation and growth of artificial intelligence (AI) technologies, which require more and more semiconductors. Another appealing aspect of TSMC is that it’s grown big enough and stable enough to pay a dividend, which recently yielded 1.3%. That may not seem like a lot, but TSMC’s payout has nearly doubled over the past five years.

One caution is that the company is based in Taiwan, so it’s vulnerable to interference from China. That’s tempered by a newly opened TSMC fabrication plant in Arizona, which is performing even better than plants in Taiwan.

Broadcom specializes not only in semiconductor chips but also software, and its operations are very diversified, including wireless and wired technology, optical products, mainframe software, cybersecurity, and storage, among many others. Its offerings are needed for AI operations, among other things, and business has been good lately, with third-quarter revenue jumping 47% year over year.

Broadcom is another dividend payer, with a recent yield of 1.2% and a payout that has also roughly doubled over the past five years. With a recent forward P/E of 20, a bit above the five-year average of 14, the stock isn’t a screaming bargain. It might still perform well for long-term investors — or if you want to play it safer, you might just add it to your watch list or buy into it incrementally over time.

Here’s one last investment to consider: the VanEck Semiconductor ETF. (ETFs are funds that trade like stocks.) If you can’t decide which semiconductor stocks to buy, this exchange-traded fund (ETF) will have you instantly invested in about 25 of them, including all three above — plus Nvidia, its largest holding. Its expense ratio (annual fee) is a reasonable 0.35%. And it happens to be the best-performing ETF over the past decade.

Take a closer look at any of these portfolio candidates that interest you.

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*Stock Advisor returns as of November 4, 2024

Selena Maranjian has positions in ASML, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

3 Semiconductor Stocks (and 1 ETF) That Could Make You a Millionaire was originally published by The Motley Fool