2 Unstoppable Growth Stocks I’d Buy With $1,000 and Hold for a Decade
If you have $1,000 that you can put into an investment account, you have plenty of options — index funds, thematic exchange-traded funds, or single stocks can be solid choices. But as artificial intelligence (AI) and the companies capitalizing on the technology have been one of the biggest generators of wealth in the market, I’m willing to keep my money in growth stocks playing an outsize role in the AI space.
Specifically, I’m turning to two companies that sit at the top of the food chain: ASML (NASDAQ: ASML) and Taiwan Semiconductor Manufacturing (NYSE: TSM).
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Neither of these companies designs advanced AI processors that are critical to training and running AI programs. And neither of them is building data centers to provide gigawatts of computing power for AI.
Image source: The Motley Fool.
But they’re important in their own ways — and they have incredible advantages that make them indispensable for the growth and operation of AI.
1. ASML
ASML doesn’t design AI processors or manufacture semiconductors. Instead, the Dutch company builds the incredibly sophisticated machines that semiconductor manufacturers need to produce their most advanced chips.
Its biggest competitive advantage is extreme ultraviolet (EUV) lithography technology, which uses light to print microscopic circuit patterns onto silicon wafers.
And here’s the important part: ASML is the world’s only commercial supplier of EUV lithography systems.
That gives the company an extraordinary position in the semiconductor supply chain. Whether Nvidia, AMD, or another chip designer wins market share, manufacturers still need ASML’s equipment to produce cutting-edge processors.
The company’s latest financial results demonstrate how valuable that position has become. ASML reported record third-quarter revenue of 11.7 billion euros ($13.07 billion), with net income reaching 5 billion euros ($5.58 billion). Its gross margin climbed to 57.5%, up from 54% in the previous quarter.
But I found management’s comments about future demand even more interesting. CEO Christophe Fouquet said customers are already expressing interest in ordering equipment for 2029 and 2030. In fact, ASML now expects its planned production capacity for 2027 and 2028 to fall short of customer demand.
That’s remarkable visibility for a business that manufactures extremely expensive industrial equipment.
ASML expects full-year revenue between 44 billion and 45 billion euros, and the company is exploring ways to expand manufacturing capacity.
ASML’s near-monopoly on EUV technology gives it a competitive advantage that would be extremely difficult to replicate. That’s exactly the kind of business I want to own for the next decade.
2. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing, better known as TSMC, occupies another critical position in the AI industry. Unlike Nvidia and AMD, which design their processors, TSMC actually manufactures them. It’s the world’s largest dedicated semiconductor foundry, producing chips for customers including Nvidia, AMD, Apple, and Broadcom.
And as those companies compete to develop increasingly powerful processors, TSMC stands to benefit from their spending.
But there’s another figure that really caught my attention. High-performance computing accounted for 68% of TSMC’s third-quarter revenue, with sales in that category increasing 22% sequentially. That tells us how important advanced computing has become to TSMC’s business.
Meanwhile, advanced manufacturing technologies accounted for 79% of wafer revenue. Its new 2-nanometer process already accounts for 8% of wafer revenue, and management expects production to ramp up substantially during the fourth quarter.
Management issued guidance for Q4 revenue in the range of $52.3 billion to $54.3 billion, suggesting that demand remains exceptionally strong.
And TSMC’s manufacturing expertise, relationships with leading chip designers, and expanding technological capabilities make it difficult to replace. I believe that competitive advantage will continue to reward long-term investors.
Two stocks worth holding
ASML and TSMC aren’t immune to downturns in the semiconductor industry, and neither stock is guaranteed to outperform over the next decade. But both companies have a quality I particularly value: They can benefit from AI spending without having to pick the winning chip designer.
ASML supplies the equipment. TSMC manufactures the chips. Both should have opportunities to expand their businesses as demand for increasingly powerful semiconductors continues to grow.
That’s why I’d be comfortable splitting $1,000 between these two stocks — using fractional shares, as a single share of ASML will cost you more than $1,000 on its own — and holding them for the next 10 years.
Should you buy stock in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $334,793!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,257,420!*
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Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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