The chip sector has performed exceptionally well in recent years, and that growth continues to be fueled by massive spending on AI infrastructure, which makes chips a fundamental commodity of the digital era. Chips are essential for everything from data centers and AI accelerators to electric vehicles, industrial equipment, and consumer electronics.
Companies leading in advanced chip manufacturing and AI-specific hardware design are securing wide moats against their competitors. While this sector can be volatile, strong demand provides a solid underlying tailwind and investors with the risk tolerance to put cash into this space could benefit from robust returns over the long run.
On that note, here are two fantastic chip stocks to buy and hold for at least the next decade.
Image source: Getty Images.
1. Advanced Micro Devices
Advanced Micro Devices (AMD 3.14%) is a semiconductor company that designs and develops computer processors and graphics technologies. AMD is a fabless semiconductor company, which means it designs its chips internally but outsources physical manufacturing to third-party foundries like Taiwan Semiconductor Manufacturing.
Its major product lines include central processing units (CPUs) under the Ryzen brand for consumer personal computers and the brand EPYC for enterprise servers, where it has consistently gained market share from key competitors including the likes of Intel. AMD sells graphics processing units (GPUs) under its Radeon line for gaming and professional visualization purposes.
For example, AMD provides custom hardware for major gaming consoles including the Sony PlayStation 5 and Microsoft Xbox Series X/S. Its GPUs are also becoming increasingly important for data center growth.
NASDAQ: AMD
Key Data Points
AMD expects its data center business to grow at a greater than 60% compound annual growth rate (CAGR) over the next few years. Thanks to its 2022 acquisition of Xilinx, AMD is also now a leader in Field-Programmable Gate Arrays (FPGAs). FPGAs enable highly optimized hardware designs for specific AI algorithms and their reconfigurable hardware offers unique flexibility, low latency, and power efficiency.
In terms of AMD's financial growth, the company reported total revenue of about $26 billion in fiscal year 2024. Of that total, about $13 billion (49% of total revenue) was attributable its data center business. Those top line figures represented respective increases of 14% and 94% from the prior year. The company's full-year 2024 GAAP (generally accepted accounting principles) net income was approximately $1.64 billion, a 92% increase from 2023.
AMD launched its next-generation GPUS, the Instinct MI350 Series, in 2025. These are advanced processors for data centers designed specifically to power demanding AI and high-performance computing (HPC) tasks such as training massive AI models and running complex scientific simulations. The company is emerging as a serious competitor to Nvidia in the AI GPU space as it witnesses growing adoption of its Instinct MI300 series accelerators by major cloud providers like Microsoft, Oracle, and Meta Platforms.
These chips also offer significant performance gains, huge memory capacity, and flexible integration options compared to predecessor chip solutions. If you want to invest in a cutting-edge chip stock that is playing an integral role in the AI revolution, AMD looks like a no-brainer buy.
2. ASML Holding
ASML Holding (ASML 2.38%) (short for Advanced Semiconductor Materials Lithography) is a Dutch technology company that holds a global monopoly on the machines required to manufacture the world's most advanced microchips. ASML does not manufacture chips itself. Instead, it builds the lithography machines that chipmakers use to print intricate patterns onto silicon wafers.
These machines use light to etch tiny transistors onto silicon. To be more specific, these machines project deep ultraviolet (DUV) or extreme ultraviolet (EUV) light through a blueprint of the chip's circuit design. This light is focused onto a silicon wafer coated with light-sensitive material, and the process is repeated to build up complex layers as well as the billions of transistors on a chip.
The smaller these patterns are, the more powerful and energy-efficient the resulting chips become. ASML is currently the only company in the world capable of producing EUV lithography machines. These machines are essential for making the cutting-edge chips found in high-end smartphones, AI hardware (like Nvidia's GPUs), and military equipment.
NASDAQ: ASML
Key Data Points
ASML's technology is the foundation of the modern digital economy and its primary customers include the world's leading chip manufacturers such as TSMC, Samsung, and Intel. System sales are the largest revenue component for ASML from its DUV and EUV systems.
A single EUV machine can cost upwards of $200 million, while the newer systems are over $400 million. ASML also generates significant recurring revenue from ongoing support, maintenance, and performance upgrades for the machines installed at customer sites. This service segment benefits from the long, 20-year plus operational lifetime of its systems and a robust global support network.
The rapid expansion of AI and cloud computing markets is fueling demand for high-performance chips which means the major chip manufacturers it counts as its customers are ramping up orders for ASML's equipment. In 2024, ASML achieved record total net sales of 28.3 billion euros, with net income of 7.6 billion euros. The company also reported operating cash flow of more than 11 billion euros in the 12-month time frame. If you want to invest in a quintessential pick-and-shovel play in the semiconductor space, ASML looks like a no-brainer buy.
