Technology stocks have led the market higher for much of the past decade, and that momentum should continue. Let's look at three great tech stocks to consider buying right now.
Micron
One of the biggest bottlenecks in artificial intelligence (AI) infrastructure right now is memory. Graphics processing units (GPUs) and other AI chips need high-bandwidth memory (HBM), so companies have been diverting their production away from DRAM (dynamic random access memory) to HBM. Meanwhile, both the DRAM and NAND (flash memory) memory markets face substantial supply constraints.
DRAM is very fast and used for short-term memory, while NAND is slower and used for long-term storage. DRAM is in short supply due to resources being diverted to HBM. NAND is in short supply because companies significantly slashed production a couple of years ago after a price crash, and they have been slow to increase production with better opportunities elsewhere. Micron Technology (MU 3.01%) is in a unique position because it participates in both these markets and is in the midst of what looks like a supercycle.
NASDAQ: MU
Key Data Points
Micron is an HBM leader, and its entire supply of HBM3 is already sold out for this year. At the same time, HBM needs three to four times the wafer capacity of regular DRAM, which is lowering global supply and driving up prices. Meanwhile, the company has shifted its NAND focus more toward high-end drives to serve AI workloads. With NAND supply tight, prices are also through the roof.
Pricing should be the biggest driver for Micron, which will lead to higher gross margins and more operating cash flow. However, the company is also working to increase capacity and has increased its capital expenditure (capex) budget to try to keep up with soaring HBM demand.
Broadcom
Broadcom (AVGO 1.11%) has one of the strongest growth outlooks of any mega-cap tech stock. The company's networking portfolio is showing strong growth, but its biggest growth driver is in helping customers develop custom AI chips.
NASDAQ: AVGO
Key Data Points
Broadcom is a leader in ASIC technology, and it helped Alphabet design its highly regarded Tensor Processing Units (TPUs). It continues to benefit from the success of TPUs, and Anthropic recently placed a $21 billion TPU order to be delivered this year. Meanwhile, other hyperscalers (owners of large data centers) have sought Broadcom's services to help them design their own custom AI chips. Analysts at Citigroup have recently estimated that Broadcom's AI revenue could surge from around $20 billion to $100 billion by fiscal 2027 on the back of its AI chip offers.
That's a huge prediction, given that Broadcom generated less than $64 billion in revenue this past fiscal year. However, that estimate has the potential to be low. It doesn't include much Anthropic revenue in fiscal 2027, or a contribution from Apple, which is widely believed to be working with Broadcom to develop its own custom AI chips.
Image source: Getty Images.
Taiwan Semiconductor
One of Broadcom's biggest edges in the ASICs market is its close relationship with Taiwan Semiconductor Manufacturing (TSM 4.36%), giving it access to manufacturing capacity and the foundry's advanced packaging technologies. Few companies are as vital in the AI data center boom as TSMC, as it is the only foundry that has shown it can produce advanced logic chips at scale with few defects.
Whether Nvidia continues to dominate the AI infrastructure market with its GPUs or AI ASICs begin to take a material share, TSMC wins regardless as long as chip demand continues to increase. The chip manufacturer works closely with all the top chip designers in the space, and sees AI chip demand growing at a mid-40% compound annual growth rate (CAGR) over the next few years.
NYSE: TSM
Key Data Points
As Intel and Samsung Electronics have struggled with yields (a low defect rate) for chips at smaller node sizes (higher-density chips that are more powerful and energy-efficient), TSMC has become a virtual monopoly in manufacturing advanced logic chips. (Notably, Samsung has turned more attention to HBM recently.) As such, TSMC is both aggressively expanding capacity to meet customer needs, and raising prices.
