Buy These 3 Semiconductor Stocks Now and Thank Yourself in a Decade

Semiconductor chips have remained red-hot amid the ongoing artificial intelligence (AI) boom. According to the Semiconductor Industry Association, global annual chip sales grew by 25.6% to more than $791 billion in 2025. Rising AI spending could bump that to $1 trillion this year.

While that will eventually hit a short-term peak, continued innovation and AI's inevitable expansion beyond data centers to personal devices, robotics, and self-driving vehicles will likely foster long-term growth.

Surprisingly, three semiconductor stocks dominate the industry. They operate behind the curtain, with strangleholds on chip design and production. Here they are, and why investors who buy them now will thank themselves a decade later.

Image source: The Motley Fool.

1. Taiwan Semiconductor Manufacturing

Most chip companies don't actually manufacture the chips they design. Instead, they outsource production to foundries. Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC for short, is the global leader, accounting for an estimated 72% of foundry revenue. Its work with Nvidia on the Hopper and Blackwell chip platforms has helped it increase its market share over the past several years.

TSMC is also producing Nvidia's upcoming Vera Rubin, as well as the upcoming AI chips that Meta Platforms recently announced it's developing for its own AI efforts. It seems unlikely that TSMC will relinquish its industry lead anytime soon. The company's cutting-edge production technology and high capacity are worth their weight in gold because customers can seldom afford production delays or disruptions.

Wall Street analysts currently project Taiwan Semiconductor to grow earnings at an annualized rate of 30% over the long term. AI is arguably the top growth story over the next decade, which bodes well for TSMC stock and its shareholders.

2. ASML

Manufacturing chips is an extremely complex process. The machinery used is arguably more advanced than the chips themselves. ASML Holding (NASDAQ: ASML) sells these machines and systems to TSMC and other foundries. ASML is the world's only company that sells extreme ultraviolet (EUV) lithography machines, a crucial technique used for advanced chips.

Companies will likely continue innovating, developing chips that can do more with less energy. Grand View Research projects the EUV market to grow by more than 17% annually through 2030, as more advanced chips require more EUV lithography machines to manufacture them.

It's not often you can invest in a monopoly. While EUV machines aren't ASML's entire business, it's a great baseline for driving companywide growth. Analysts estimate ASML will grow earnings at an annualized rate of 20% over the long term, providing ample growth to deliver substantial investment returns over the next decade.

3. Arm Holdings

Every processor chip operates on an instruction set architecture (ISA), the foundational language that enables it to function. Arm Holdings (NASDAQ: ARM) develops proprietary ISAs and licenses them to customers who use them to design chips. To date, companies have shipped more than 325 billion Arm chips, used in smartphones, data centers, vehicles, and just about every electronic product.

It's highly unlikely that Arm Holdings will lose ground to competitors, given its vast existing chip and developer base, which makes it extremely difficult to transition to another architecture. Arm Holdings has actually increased its global market share from 42% in 2022 to 50% today, and still has significant opportunities ahead in AI.

That reflects in Wall Street's growth expectations. Analysts estimate that Arm will grow its earnings at an annualized rate of 32% over the long term. Arm's top-notch business quality factors into a very lofty valuation, a P/E ratio currently at 154 times trailing-12-month earnings. That's tough to stomach, but given its projected growth, Arm should grow into that price tag and beyond over the next decade. Plus, investors can always add on dips as they come along.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.