Investing in the stock market can be quite risky, especially if the decisions are made based on emotions and market hype. Stock market investing can also be highly rewarding if it involves proper research and strategy and is aligned with long-term trends. And then there are the no-brainer situations where it becomes obvious that a stock is a great addition to an investment portfolio.
When it comes to those no-brainer options, investors might want to consider establishing small stakes in stocks such as Palantir (PLTR +0.52%), Micron Technology (MU +15.40%), and Taiwan Semiconductor Manufacturing (TSM 0.84%). Here's why these three stocks can prove to be impressive no-brainer picks in the coming years.
1. Palantir
Data analytics specialist Palantir gained a reputation for its impressive ability to uncover insights from complex data sets, which can then aid clients in informed decision-making. The company started its growth journey with the Gotham platform which primarily serves government clients. More recently, it has expanded into the commercial sector with its Foundry platform.
NASDAQ: PLTR
Key Data Points
A bearish report from William Blair analyst Louie DiPalma in early December 2023 does question the lower value and tenure of Palantir's renewed contract with the U.S. Army. But Palantir's government business is still quite sticky and strong. In the current era of geopolitical turmoil, Palantir's data intelligence and analytics platforms are being increasingly used by military and intelligence agencies worldwide. The company recently launched Palantir Government Web Services (GWS), which provides software to defense industrial companies to operationalize and scale their mission-critical capabilities rapidly.
Palantir's commercial business is also growing at a healthy clip and reached the $1 billion annualized run rate at the end of the third quarter. The company has been rapidly expanding its commercial customer base and securing large deals. That expansion is evident from its third quarter 12% year-over-year jump in the U.S. commercial customer count and the 55% year-over-year rise in U.S. commercial total contract value (TCV). Palantir is also seeing robust growth in international commercial business, especially in Asia and the Middle East.
Finally, the recently launched Artificial Intelligence Platform (AIP, a platform that allows clients to use large language models on their proprietary data) is also seeing solid adoption trends. At the end of the third quarter, 300 distinct organizations had already started using AIP. AIP is also helping drive Palantir's U.S. commercial business, resulting in further expansion of contracts with existing clients.
Considering these tailwinds, Palantir stock seems well-positioned to surge in 2024.
2. Micron Technology
Leading memory and storage player Micron Technology offers a range of high-performance DRAM, NAND, and NOR memory chips for various applications in areas such as automotive, enterprise, cloud server, industrial, and graphics.
NASDAQ: MU
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The cyclical stock suffered in early 2023 over concerns about the economy and a slowdown in PC sales which led to an oversupply of memory chips in the market. The company expects a healthy supply-demand environment to drive its recovery in 2024. Memory chip inventory is now at or near normal levels in several end markets, such as mobile, auto, industrial, and PC.
Micron is also well positioned to leverage the multiyear opportunity created by the rapid adoption of generative AI worldwide. Data centers being asked to handle AI workloads are showing an increased preference for Micron's high-memory bandwidth technology, HBM3E, the latest DRAM generation D5, and other high-capacity server memory modules. These trends should lead to higher pricing for Micron's memory technologies in 2024 and a boost in Micron's margins.
Micron's recent financial performance has also significantly improved from the previous quarters. In the first quarter of fiscal 2024 (ending Nov. 30, 2023), the company's revenue, gross margin, and earnings per share (EPS) all surpassed company guidance.
Micro did report an operating loss of $955 million in the first quarter, but it is projecting a gradual shift toward profitability with reduced operating loss in the second quarter and a return to operating profit by the third quarter of fiscal 2024. Micron also guided for a dramatic increase in its target addressable market in 2025. All these tailwinds make Micron a compelling buy now.
3. Taiwan Semiconductor Manufacturing
Chip manufacturing giant Taiwan Semiconductor Manufacturing, also known as TSMC, is also expecting demand stabilization in PC and smartphone end markets it serves. Company management said the chip inventory levels with fabless semiconductor players have leveled off and it should see healthy growth in 2024.
NYSE: TSM
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Being the largest third-party semiconductor manufacturer in the world, with a 58% market share, TSMC stands to benefit from the ongoing supply-demand mismatch in AI chips. The company also stands to be a beneficiary of the rising chip demand in rapidly growing end markets, such as cloud computing, autonomous driving, the Internet of Things, and edge computing.
TSMC is already witnessing a solid demand for its 3-nanometer process technology (N3, the most advanced semiconductor technology) from high-performance computing (HPC) and smartphone applications. The company's N3 process technology is expected to be a multiyear growth catalyst. TSMC is also gearing up for volume production of 2nm process technology in 2025 to meet increased demand for energy-efficient computing in AI applications.
It is no secret that TSMC has been grappling with geopolitical tensions stemming from China's stance on Taiwan's sovereignty. Despite these risks, and considering the company's technology leadership in the AI space, broad customer base, recovering end markets, and focus on cost-efficiencies and optimal utilization of manufacturing facilities, TSMC's stock can grow significantly in 2024.
