With the recent market sell-off, there are a number of attractive tech stocks that investors can look to add to their portfolios. For investors with some cash on the sidelines, here are three top tech stocks to consider.
Nvidia
If there is one stock the market revolves around at the moment, it is Nvidia (NVDA 2.94%). The chipmaker has grown to become one of the largest companies in the world and is a litmus test on market sentiment, especially when it comes to artificial intelligence (AI).
AI is still in its early innings, but it is already starting to reshape the world we live in. Nvidia's graphics processing units (GPUs), meanwhile, are the main source of computing power behind AI model training and inference. At the same time, AI infrastructure spending is continuing to grow. This can be seen in the capital expenditure (capex) budgets of the leading cloud computing companies, as well as those investing in creating foundational AI models.
NASDAQ: NVDA
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For its part, Nvidia sees AI-related data center capex topping $1 trillion in 2028. That would be more than double where it is today. Meanwhile, the company is poised to continue to be the biggest beneficiary of this spending, as it remains at the forefront of both AI hardware and software.
To top it off, the stock is attractively priced, trading at a forward price-to-earnings ratio (P/E) of 26 based on this year's analyst estimates and a price/earnings-to-growth (PEG) ratio below 0.5, with PEGs under 1 usually considered undervalued.
ASML
While Nvidia has a lock on the GPU market, ASML (ASML 5.43%) has a virtual monopoly on the equipment that is used to make advanced chips like GPUs. It is the clear-cut leader in a technology known as extreme ultraviolet (EUV) lithography, which is behind the equipment needed to manufacture these chips.
Meanwhile, the company also already introduced its next-generation technology, high-NA (numerical aperture) EUV technology. This will allow for the printing of smaller features and higher density on chips. ASML's machines are expensive, with EUV machines running around $200 million and its new high-NA EUV machines costing around $370 million.
NASDAQ: ASML
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The company has already sold some of these new machines although the leading foundries (chip manufacturers) are being a bit cautious given the high price tag. As such, the bigger benefit from these newer machines is likely a few years down the line.
However, leading foundries such as Taiwan Semiconductor Manufacturing (TSM 4.37%) and Intel are looking to greatly expand to keep up with rising chip demand. TSMC is building new manufacturing facilities (called fabs) around the globe and has pledged to invest $165 billion in the U.S. over the next few years. Intel, meanwhile, continues to plan to invest $100 billion in new U.S chip manufacturing capacity over the next five years. All of these new facilities will need to be fitted with equipment from ASML.
While trading at a forward P/E of 29.5 based on this year's analyst estimates may not seem like a bargain, it drops to a P/E of 24 based on 2026 estimates given the current outlook for new fab spending, making this industry leader a solid buy at current levels.
Image source: Getty Images.
Taiwan Semiconductor Manufacturing
Another strong company in the semiconductor value chain to buy on the market pullback is Taiwan Semiconductor (or TSMC). It is the leading semiconductor contract manufacturer in the world. It makes chips for leading chip designers such as Nvidia and is a customer of ASML.
While contract manufacturing in many lines of business isn't that exciting, semiconductor manufacturing requires a lot of technological expertise. TSMC has been able to take a wide lead on this front by continually pushing down chip sizes, which allow for more transistors to fit onto chips. This increases processing speeds and lowers power consumption.
This has led TSMC to command a more than two-thirds market share in the pure-play foundry space and be the clear leader in advanced chips. As such, the company has become an integral partner to the world's largest semiconductor designers, such as Nvidia and Apple.
NYSE: TSM
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Its importance in the semiconductor value chain to its partners has also given it strong pricing power. This has also helped the company to expand its gross margin, which is leading profitability to grow faster than revenue.
Like Nvidia, TSMC continues to be a big beneficiary of increasing AI infrastructure spending, as more AI chips are needed to run AI workloads. Increasing capacity, higher prices for its services, and an expanding gross margin all make TSMC an attractive growth stock.
At the same time the stock is cheap, trading at a forward P/E of only 19.5 and a PEG below 0.7.
