Three tech stocks have the potency to become trillion-dollar stocks, representing a significant paradigm shift. Here, three companies lead the majority of the world’s semiconductor markets. They run significant innovations in technology and economic trends.
These businesses are more than just highly valued on the market. They stand for the pinnacle of sound financial management and calculated planning. These companies have demonstrated continuous growth and endurance in various economic situations by reaching trillion-dollar valuations. They are positioned as the pillars of the tech economy because they optimize operational efficiency, tech advancement and navigation of complicated geo dynamics.
The significance of semiconductor stocks has skyrocketed as emerging technologies such as Industry 4.0, Web 3.0 and AI lead us into a new digital era where computing power is paramount. These trillion-dollar stocks are pioneers at the forefront of this semiconductor revolution, driving the advancements that shape our modern world.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM), or TSMC, is the world’s largest semiconductor foundry. The company’s gross margin increased somewhat from Q1 2024 by 53.1%. This is due to adjustments in the company’s product mix, even with the seasonal effects of smartphones. Due to sharp cost management and a greater operational edge, the operating margin rose to 42%. With a Q1 return on equity (ROE) of 25.4% and an EPS of TWD8.7, TSMC holds solid profitability and utilization of equity.
Moreover, TSMC is building three new fabs in Arizona. As of April 2024, the first one is producing engineering wafers. These fabrication facilities will prioritize advanced technology, including 3nm and beyond. The aim is to hit the demand of American clients in AI and high-performance computing. With a focus on industrial and automotive applications, TSMC intends to construct another specialty technology factory in Germany and grow its operations in Japan. Thus, with the help of these measures, TSMC can now produce more chips and better service a more comprehensive range of international markets while maintaining flexibility and lowering the risk of geopolitical unrest.
Overall, TSMC’s strategic expansions into advanced technologies and ability to meet high-demand sectors contribute to its status among trillion-dollar stocks.
AMD (AMD)
AMD (NASDAQ:AMD) designs and produces microprocessors, graphics processing units and related technologies. Solid demand for Ryzen 8000 Series CPUs drove an 85% annual growth in AMD’s client sector sales to $1.4 billion in Q1 2024. With a gross margin of 52%, AMD saw a YOY improvement of 230 basis points, primarily due to more robust revenue contributions from the data center and client sectors. Despite higher research expenditures, operating leverage allowed for a good operating margin of 21%. This was reflected in operating income of $1.1 billion.
Further, AMD improves its hardware and software solutions across cloud, corporate, embedded and PC segments as part of a strategic lead in the AI industry. AMD’s competitiveness in workloads driven by AI solidifies its ongoing development of processors tailored to AI and software enhancements. Hence, AMD’s market reach and adoption are increased through partnerships with top original equipment manufacturers like Lenovo (OTCMKTS:LNVGF), HP (NYSE:HPQ) and technology partners like Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL) to improve solutions for AI and general-purpose computational applications.
In summary, AMD’s focus on AI-driven workloads and high-performance computing with strategic collaborations has propelled its growth and cemented its position among trillion-dollar companies.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) designs, develops and supplies semiconductors and infrastructure software solutions. With VMware’s support, the infrastructure software market witnessed a 175% increase in sales to $5.3 billion in only a single year (Q2 2024). VMware’s spending run rate has decreased from $2.3 billion to an anticipated $1.2 billion post-integration through Broadcom’s restructuring initiatives. These have cost the company around $2 billion a year to date. The quarterly increase in VMware products’ annualized booking value (ABV) from $1.2 billion to $1.9 billion in Q2 indicates robust client uptake and sustained revenue visibility.
Additionally, Broadcom’s semiconductor solutions division, which accounts for 58% of overall sales, brought in $7.2 billion in Q2, 6% more than in Q2 2023. The networking industry experienced solid growth (44% annual boost) despite difficulties in certain industries, such as server storage and wireless. AI networking and specially designed accelerators for hyperscalers fueled this growth. For instance, seven of the eight largest AI clusters today attest to Broadcom’s expertise.
To conclude, Broadcom’s acquisitions, strategic integrations and lead in AI data centers and accelerators solidify its potential among trillion-dollar companies.
As of this writing, Yiannis Zourmpanos held long positions in TSM and AMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.