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Semiconductor stocks have struggled since last summer, with the SMH ETF underperforming the broader market and several individual names experiencing sharp corrections—a familiar pattern in this highly cyclical industry.
But not all chip stocks are created equal. Some companies provide highly specialized, mission-critical technologies that support the incredibly complex semiconductor manufacturing process. These firms have built durable, long-term advantages through deep industry entrenchment, recurring revenues, and strong business models, which has made them some of the best compounding stocks over time, despite periodic volatility.
After a 10-month correction, select names now trade well off their highs, creating a rare opportunity for investors to gain exposure to long-term winners at attractive valuations. ASML Holdings (ASML), Lam Research (LRCX),andMicron Technology (MU) all stand out today with compelling growth catalysts, upward-trending earnings estimates, and reasonable valuations, making them three of the most attractive stocks to consider right now.
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ASML Holdings: An Irreplaceable Chip Stock
ASML Holdings is a linchpin of the global semiconductor industry. The company is the sole producer of extreme ultraviolet (EUV) lithography machines, which are essential for manufacturing the world’s most advanced chips. These systems are so complex and capital-intensive that no other company has been able to replicate them, making ASML’s role in the semiconductor supply chain truly irreplaceable.
ASML currently holds a Zacks Rank #2 (Buy), supported by a near-unanimous wave of earnings estimate upgrades. This reflects growing optimism around both demand for its systems and the company's long-term earnings power.
Despite its unmatched position in the chipmaking process, ASML is trading at just 28x forward earnings, which is below its long-term median and suggests the stock may still be undervalued relative to its growth prospects. Analysts expect earnings to grow at an impressive 18.9% annually over the next three to five years, making ASML one of the most compelling long-term plays in the semiconductor space.
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Lam Research: A Core Stock Holding for Chip Investors
Lam Research is a foundational player in the semiconductor ecosystem, specializing in etch and deposition equipment, which are two of the most critical and complex steps in advanced chip manufacturing. Its tools are deeply embedded in the production lines of the world’s leading foundries and memory makers, including TSMC, Samsung, Intel, and Micron. Because Lam’s systems are custom-built and highly integrated into client workflows, they enjoy long replacement cycles and high switching costs, making the company’s revenue base both sticky and resilient.