The backstory

The idea stems from the recent events with Intel (NASDAQ:INTC). Back in August, Intel announced that the US government would acquire a 9.9% equity stake. This was mainly financed from the government converting unpaid or promised grants. However you spin it, the government now has a passive stake in the company.

When I look at Intel, it does make sense. Having domestic chip-making capacity is a national priority for America. Intel is arguably the only semiconductor company that does leading-edge research and development, along with some manufacturing in the US.

It therefore serves the purpose for both sides. The government get some support in reducing reliance on foreign companies and related countries. As for Intel, it’s well known that it has struggled competitively and financially in recent years. The deal gives Intel a significant boost, along with the ability to expand its US manufacturing.

The numbers add up

Let’s take it one step further. Based on the government’s price, it’s already up 94%. If an investor bought Intel shares when it was announced, they would be up 59% in just two months!

Over the past year, Intel is now up 84%. So a good portion of the move over this period has come since the August announcement. This highlights the unique strategy of considering buying US stocks in which the government has taken a stake.

To be clear, I’m not suggesting blindly buying the stock. There have been occasions when government investments have backfired. For example, back in 2009 a 61% stake was taken in General Motors. When this was sold in 2013, the administration actually lost money to the tune of around $10bn!

Instead, when a deal is announced, an investor can do their own research and assess whether the government’s commitment could be a material boost to the company. If it could (as with Intel), then it may be worth considering for a portfolio.

On the other hand, if an investor doesn’t fully understand the business or the stock is too risky for their tolerance, then it can be passed on. The notion of a new equity stake by the administration is more of an alert, so that when the headline breaks, it’s an opportunity for an investor to do some digging.

Final thoughts

The idea of researching stocks after it’s announced that the government is involved could provide potential investment opportunities. After all, it should benefit from preferential treatment from the administration. However, there are risks.

There coudl be changes in government policies, of course. And with Intel, it still has to deal with a hyper-competitive industry. Even with government support, it could still lose out on market share outside of America. It could also face limited strategic flexibility, as it may be under pressure to act in a certain way.

Even with these concerns, I think it’s a really interesting strategy for investors to consider. As for Intel, it’s an example also worth thinking about for a portfolio.

The post This unique investing strategy for the S&P 500 isn’t as crazy as it sounds appeared first on The Motley Fool UK.

Multiple missed mega-trends

First up is Intel (NASDAQ: INTC), the chip company that will be familiar to most. Indeed, as I type this, there is an Intel sticker on the laptop telling me there’s Pentium processor inside.

Down nearly 70% over five years though, the stock’s struggled for eons.

However, Intel was once the world’s undisputed chip titan before badly losing its way. There are a few reasons why, but basically it took its eye off the ball and executed poorly.

For example, it missed the biggest consumer tech wave of the century — smartphones — and later lost Apple as a customer for Macs (in 2020). Then it failed to lead in the artificial intelligence (AI) revolution, losing out spectacularly to Nvidia.

Under the previous CEO, Intel attempted to enter the third-party chip manufacturing business to take on Taiwan Semiconductor Manufacturing Company (TSMC). That also hasn’t been a success, pushing the firm to a $2.8bn loss in 2023, its first annual loss in decades.

In recent days, the firm sold a 51% stake in its Altera programmable chips unit for $4.46bn. Perhaps it can use this cash to pursue growth avenues and reinvigorate the business. However, it’s worth noting that Intel paid just under $17bn for Altera in 2015. So it’s selling a majority stake at a lower valuation.

Given the long-standing record of poor innovation and capital allocation, I have no intention to invest.

Swiping left

The name Match Group (NASDAQ: MTCH) might not be immediately familiar, but dating app Tinder probably is. The company owns this, as well as Hinge, Meetic (a leading dating service in Europe), and many niche apps.

Over the past five years, Match stock has crashed 70%. This is largely because the company’s number of paying users has fallen for several consecutive quarters, including on its flagship Tinder app. 

Having said that, the company’s still profitable. This year, it’s expected to generate earnings per share of about $2. That puts the stock on a low forward-looking price-to-earnings ratio of 14. That’s the sort of multiple I’d expect to see from a FTSE 100 blue-chip, not a Nasdaq tech share!

Meanwhile, there’s a 2.6% dividend yield. So on this basis, it could be said that the stock offers decent value.

The issue I have here though is that there seems to be a paradox at the heart of the business model. Most of Match’s apps are purportedly there to help users find a partner. But once they do, they delete the app.

So when the product works, it loses users, which is unlike most successful digital platforms (Netflix, YouTube, etc). And if it isn’t effective, users burn out or become disillusioned (especially men, who make up the bulk of Match Group’s paid subscriber base).

In 2023, group revenue was $3.4bn. This year? It’s forecast to be $3.4bn.

I think the paradox I’ve just described is why the company has failed to scale like other tech platforms, despite owning nearly all of the most popular dating apps. Therefore, I continue to avoid the shares.

The post 2 household-name stocks I’m avoiding in my Stocks and Shares ISA right now appeared first on The Motley Fool UK.

In the end though, I went with Nvidia, as I tend to prefer founder-led innovators to legacy incumbents. They’re generally more nimble and less like the Titanic to turn round.

Looking at Intel’s share price — down 61% in five years and near a 10-year low — I don’t regret that decision. But I still wouldn’t buy the fallen stock today. Here’s why.

What’s gone wrong?

Intel’s nemesis has been Nvidia’s graphics processing unit (GPU). It’s at the heart of the artificial intelligence (AI) revolution, which Intel has utterly failed to capitalise on.

Unfortunately, this isn’t the first time it’s missed out on a huge growth market. The firm famously passed up the opportunity to provide chips for Apple‘s early iPhone!

In 2021, Pat Gelsinger became CEO, tasked with reinvigorating the business. He announced that Intel would start manufacturing for external clients, a significant shift from its traditional focus on producing chips solely for itself.

This pitted it against leading chipmakers Taiwan Semiconductor Manufacturing (NYSE: TSM) and Samsung. But this pivot has been incredibly costly, with capital expenditure close to $70bn since the end of 2021.

This has weighed heavily on Intel’s profits, to put it mildly. And investors have lost faith with the third-party foundry strategy, leading to Gelsinger’s ousting on 1 December.

Things to like?

Now, I should say that I primarily invest in growth shares and high-yield dividend stocks. With revenue down approximately 30% in three years and the dividend axed in August, Intel is neither.

But for dyed-in-the-wool value investors, there might be things to like here. The firm still holds a significant share of the server and PC chip markets. And the stock is trading on a low price-to-sales (P/S) ratio of 1.7.

If Intel is broken up, the firm could be worth more than the sum of its parts. Its core product business remains solidly profitable, while it has just over $100bn in physical assets on the balance sheet. That’s more than its current $95bn market cap, though it also has approximately $26bn in net debt.

Looking ahead, AI-enabled PCs could become commonplace, while the rocketing AI server market should also offer growth opportunities, assuming Intel can seize them (not guaranteed).

A tale of two tankers

The stock’s forward price-to-earnings (P/E) ratio is around 24.7. That’s actually higher than rival TSMC (22.7), despite the Taiwanese chipmaker firing on all cylinders due to the AI boom (it makes Nvidia’s GPUs).

Of course, TSMC faces its own risks, mainly centred around the decades-old dispute between China and Taiwan. Donald Trump’s ambivalent attitude towards the island’s defence adds uncertainty.

Nevertheless, I prefer TSMC stock (which I hold) over Intel. In Q3, the Asian chipmaker’s revenue jumped 39%, while net income surged 54%.

Chief executive CC Wei said: “Almost every AI innovator is working with TSMC.” Therefore, it’s a natural beneficiary of the AI revolution, as it’s making most of the cutting-edge chips.

Perhaps new management can finally turn the Intel tanker around. For me though, I’d rather be invested in the TSMC tanker that’s steaming straight ahead in the AI age.

The post 1 stock I’m avoiding like the plague in today’s market! appeared first on The Motley Fool UK.

Investing regularly for growth

The first step is continuing to be regular in investing. I can funnel £20k a year into my ISA and invest that money tax free. Of course, this isn’t free money, I still have to earn it. But the point is to keep putting money away when I can.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The benefit of this is that my gains can compound at a faster rate by investing month by month. Further, with some of my allocation to dividend stocks, it makes sense to invest regularly. This means that I don’t have to potentially get caught out by missing the next dividend payment.

Another step is gearing my ISA more towards growth stocks. I’m in my 30s, so I still have decades to go before potentially looking at retirement. Therefore, I can afford to focus more on growth stocks instead of less risky options such as bonds or Cash ISA products. In theory, this should (over the long term) boost my chances of becoming a millionaire versus the other options.

Snapping up cheap shares

Next, I’m focused on keeping my finger on the pulse of what’s going on, in order to take advantage of opportunities. For example, I recently bought shares in Intel (NASDAQ:INTC). The share price hit its lowest levels in a decade as it posted a Q2 loss per share of £0.29. It’s forecasted to lose money in this current quarter too.

It has come under fire as a company that hasn’t been able to take advantage of artificial intelligence (AI). The stock is now down 38% over the past year, but I decided this was a good time to add the holding to my portfolio.

The business has taken steps to cut costs, with reductions in headcount and other operating expenses to the tune of £7.7bn by 2025. Further, the dividend has temporarily been suspended, which I feel is a good thing right now to enable the money to be used internally.

Intel is investing heavily in its new 18A and 20A process technologies. This could be the kicker that helps the firm to get back to being profitable and leading in the semiconductor manufacturing space.

Having an holistic approach

A fourth step is making sure that I have a diversified range of exposure. Owning stocks like Intel from the US makes sense. I just need to look at the chart of the S&P 500 versus the FTSE 100 over the past couple of years to see the vast outperformance of the S&P 500. Owning stocks not just from the UK can help to accelerate my portfolio growth.

Finally, over time I need to know when rebalance my portfolio. Although I own stocks for the long term, I need to be smart in knowing when to cut my losses, when to trim some profit and when to add more to an existing holding. This can help me to smooth out my performance.

The post 5 steps that could turn me into a Stocks and Shares ISA millionaire appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

ASML

What it does: The company supplies the machines used in the manufacturing of semiconductors, including for AI.

By Oliver Rodzianko. ASML (NASDAQ:ASML) is the strongest investment I know of right now.

Management forecasts revenue growth of 45% for 2025, so now is a good time for me to buy the shares.

My outlook is reinforced by its forward price-to-earnings ratio of just 24. That’s only slightly higher than the industry median of 19.

ASML is known for its extreme ultraviolet lithography systems used to manufacture world-leading semiconductors. There are very few businesses able to challenge it.

I estimate the share price could increase by 40% in the next 12 months. However, its revenue growth is likely to slow down in 2026.

It’s also worth remembering that the demand for AI chips could taper soon as companies question the return on investment of data centre spending.

Nonetheless, I’m bullish on ASML. It’ll be the next investment that I make.

Oliver Rodzianko does not own shares in ASML.

Intel

What it does: Intel is one of the world’s largest design and manufacturer of computer components and related products.

By Jon Smith. Intel (NASDAQ:INTC) might seem a controversial choice right now. The stock is down 31% over the past year, largely due to poor financial results. The business has so far been unable to capitalise on artificial intelligence (A.I.) in the same way other tech firms are. The latest results shows a Q2 net loss, with the outlook for another loss this quarter.

Despite these risks, I think the stock looks cheap. I’m clearly not the only one, with several larger companies reportedly sniffing around for a potential buyout. Putting this to one side, the firm is now in full transformation mode.

Cost cutting alongside focusing investment on core business areas for growth should help to turn the company around in the medium term. Granted, I might not be able to pick the perfect lowest price on the share, but I’m seriously thinking about buying the stock for a long-term recovery.

Jon Smith does not own shares in Intel.

KLA Corp 

What it does: KLA Corp provides quality control and yield management solutions to the global semiconductor industry. 

By Edward Sheldon, CFA. The semiconductor industry looks set for strong growth over the next decade and one stock I like in this area of the market (and have been buying for my own portfolio recently) is KLA Corp (NASDAQ: KLAC). It plays a vital role in the industry as its technology helps to ensure chip quality and production efficiency. 

The way I see it, this is a great ‘picks-and-shovels’ play on semiconductors. No matter who turns out to be the winner in the long run (I think there will probably be multiple winners), KLA Corp should do well as it provides essential services that all chip manufacturing plants require. It’s worth noting that the company is growing at an impressive rate today thanks to high demand for AI chips. This financial year (ending 30 June 2025), revenue and earnings per share are expected to climb 17% and 27% respectively. 

Now, one risk to be aware of here is that the chip industry can be cyclical at times. As a result, chip stocks can be volatile. We are looking at a long-term ‘secular’ growth trend here, however. So, I see huge potential in the long run. 

Edward Sheldon owns shares in KLA Corp.

Shopify

What it does: Shopify offers an all-inclusive e-commerce platform that enables sellers of all sizes to build online businesses.

By Alan Oscroft. Shopify (NYSE: SHOP) might just qualify as the best picks-and-shovels business in the online selling space. That is, like those who sell equipment to gold prospectors, it makes its money no matter who wins at the sharp end.

Shopify recently posted revenue of $2bn in its second quarter, up 21%. That’s billion, in just one quarter, and growing strongly.

And for the next quarter, the company expects revenue to grow at “a low-to-mid-twenties percentage rate on a year-over-year basis.” More twenties, excellent. Oh, and it’s aiming at a double-digit free cash flow margin.

What’s the risk? Right now, I think the big one is the price-to-earnings (P/E) valuation. We have a trailing P/E of 81. Eek! Forecasts would drop that to around 57 by 2026, which is still very high.

But I think Shopify’s long-term earnings growth potential could be phenomenal.

Alan Oscroft has no position in Shopify.

The post Best US stocks to consider buying in October appeared first on The Motley Fool UK.

At that level, it might seem like investors can’t lose. But I think there’s much more to this than initially meets the eye.

Tangible book value

A firm’s tangible book value’s what its equity’s worth after subtracting its intangible assets (like intellectual property) and all of its liabilities. And it can be an important metric.

In theory, this amount is what could be raised by liquidating the company’s assets and paying off its debts. When a stock trades below this level, it might therefore look as though investors can’t lose.

Barron’s estimates the tangible book value of Intel to be around $19.50 per share. I have that number closer to $19.15, but the difference probably doesn’t matter too much. 

Either way, the Intel share price is currently very close to its tangible book value. That makes it look like it’s in deep value territory. But there are two big reasons I don’t think this is obviously the case.

Depreciation

One is that I’m not sure how accurately Intel’s accounting reflects the true value of its tangible assets. That’s because the company’s recently changed its approach to depreciation.

When a business invests in equipment or machinery, this appears on its balance sheet as an asset. The value of this reduces to zero over time as it reaches the end of its useful life. This is depreciation.

Since the start of 2023 though, Intel’s increased its estimate of the useful life of some of its machinery. As a result, it’s depreciating the book value of those assets slower than before.

I don’t know whether or not that’s justified. But it raises the possibility for me that the book value of the company’s assets might be higher than what the firm could realise by selling them. 

Liquidation

Additionally, I don’t think Intel’s going to sell off its assets any time soon. The firm isn’t going bankrupt and that means it’s more likely to use them to keep designing and manufacturing chips.

This makes investors unlikely to receive a cash payout above the current share price due to the stock trading below its tangible book value. And if the firm did go bankrupt, I still doubt this would happen.

When a business is in distress, it’s rarely able to realise the full value of its assets besides cash. Taking advantage of this has been an important part of billionaire investor Warren Buffett’s success with Berkshire Hathaway.

Even if Intel’s approach to depreciation accurately reflects the economic value of its assets, I doubt this is what they would sell for in a bankruptcy. That means the protection for shareholders is limited.

Is the stock too cheap to ignore?

It’s rare to find anything other than a bank trading below the value of its tangible assets. And Intel’s share price has certainly struggled due to the company’s mistakes.

With the firm outspending its rivals I wouldn’t rule out a recovery. But I’m doubtful that there’s safety in the stock trading below tangible book value and I think there are better opportunities elsewhere.

The post Below tangible book value, are Intel shares too cheap to ignore? appeared first on The Motley Fool UK.

Here, I’m going to highlight two dividend shares currently in oversold territory. From a long-term investment perspective, I think they look interesting right now.

What does oversold mean?

Before I discuss the two stocks, it’s worth explaining what the term ‘oversold’ means. Often, investors use it to describe stocks that have experienced large share price falls. And that’s fine.

However, the technical definition of an oversold stock is one that has a ‘relative strength index’ (RSI) of less than 30.

The RSI is a technical indicator that measures the magnitude of recent share price movements. It’s this definition that I’ll be using here.

A high-quality stock

Moving on to the stocks, first up is US-listed coffee giant Starbucks (NASDAQ: SBUX). Down about 20% this year, it currently has an RSI of 22.

Now, this stock’s historically been an excellent long-term investment. However recently, the company has experienced a slowdown in sales in the US and China, sending its share price down.

But I believe the company has the ability to return to growth. Faster service and more promotions could help to turn things around. As could an improvement of its stores.

After the recent share price fall, Starbucks shares trade on a forward-looking P/E ratio of about 18.

That’s not a super-low earnings multiple. But for a company with a powerful brand, a very high return on capital, and an excellent dividend growth track record (over the last 13 years the dividend has grown by around 20% a year), I’d argue it’s quite attractive. The stock’s yield is currently about 3.2%.

Of course, there could potentially be further share price weakness ahead. Especially if economic conditions in China remain weak.

It’s worth noting that an oversold stock can remain oversold for a while. It can even get more oversold. Taking a long-term view, however, I think this stock has considerable potential.

A beaten-up chip stock

The other stock I want to highlight is semiconductor powerhouse Intel (NASDAQ: INTC), which is also listed in the US.

Down nearly 40% this year, it currently has an RSI of 23.

Now, most semiconductor stocks have performed well recently. Not Intel though. It has suffered due to the fact that the artificial intelligence (AI) boom has diverted spending away from the group towards companies that produce AI chips, like Nvidia and AMD.

Losses in the company’s foundry (chip manufacturing) business have also spooked investors.

I see the potential for a rebound, however. Recently, Intel launched its own chip for AI (the ‘Gaudi 3’).

Meanwhile, CEO Pat Gelsinger has said operating losses for the foundry business will peak this year.

I’ll point out that I don’t expect the chip stock to rebound in the short term. Ultimately, it’s going to take a few years for Intel to get its growth and profits up.

Issues such as US government export restrictions could put further pressure on growth in the near term.

Taking a five-year view however, I think the stock – which currently trades at 15 times next year’s earnings forecast and yields about 2% – could produce decent returns.

The post 2 ‘oversold’ dividend stocks that have the potential to rebound appeared first on The Motley Fool UK.

That’s something I’m looking to change as steady growth becomes uncertain during the current economic landscape. So, here are three stocks I’m considering buying in 2023.

BT Group

BT is one of the most dependable British companies for passive income. In recent times, its shareholders have been paid dividends of around 6% on average.

I will be looking to add BT shares to my portfolio in 2023 on a regular basis. Like most investors, I like to make consistent monthly additions to my portfolio. I believe BT could be a prime candidate for a portion of that money.

The company’s shares are currently down around 50p since the end of July, from £1.76 to £1.26. At the same time, BT currently has an average price target of £1.97 for the next 12 months. Therefore, if I start investing regular amounts in BT, I could benefit from growth and income. 

Intel

Intel (NASDAQ:INTC) is a stock that I already bought this year. I didn’t originally buy the stock for passive income, but I’m now looking at buying more to diversify the income my portfolio generates.

I invested in Intel because I think the stock is undervalued, with a price-to-earnings (P/E) ratio of around 9. That’s low, considering the company has a strong product outlook for the future and sound financials.

The dividend payout percentage from Intel has been rising consistently for the past year. The payments have been the same, $0.3650 every quarter of this year. However, that means the percentage has increased from 3.04% in January to 4.99% in September.

As such, I feel as though Intel shares are on sale. I can get a higher return on my dividend payments from buying in now than from when I bought in earlier this year.

I will definitely be making regular purchases of Intel stock to increase my stake throughout 2023.

Tesco

Back on our side of the pond, Tesco is another British company paying high dividends. Like BT and Intel, Tesco offers a dividend yield of around 5%.

However, I’m not only looking at the percentage of passive income that Tesco provides. I’m looking at the company because supermarket profits have been soaring.

From 2021 to 2022, Tesco’s profits trebled. As a result, I want to add Tesco to my regular investments because I believe it is a solid bet for dividends. Meanwhile, I hope it will be less of a risk during economic uncertainty than other companies offering similar yields.

I will be increasing my Intel investment and starting to invest in BT and Tesco on a regular basis in 2023.

The post I’d buy these three stocks for passive income in 2023 appeared first on The Motley Fool UK.

They can be found in everyday consumer products, including smartphones, laptops, televisions, and washing machines. They also have applications in many other areas, such as information technology, artificial intelligence, communications infrastructure, medical equipment, transportation networks and military systems. In fact, it’s no exaggeration to say that semiconductors are integral to the entire global economy.

According to the Semiconductor Industry Association, a record 1.3 trillion units were shipped in 2025 with sales surpassing $600bn for the first time. But with AI infrastructure spending still marching upward, analysts’ forecasts are projecting even more growth before the end of the decade.

This could make UK semiconductor stocks an attractive proposition. But what are the best chip companies to invest in, and is this market sector right for you? 

What are semiconductor stocks?

Semiconductor stocks are companies that design and manufacture computer chips, whose shares can be bought and sold on a public stock market. 

The industry is sometimes divided into two sub-sectors:

• Semiconductors
• Semiconductor Equipment & Materials

Companies in the former category are producers of semiconductor chips. Companies in the latter category supply tools, parts, and equipment to the semiconductor industry.

Top semiconductor stocks in the UK

Here are the leading UK semiconductor shares traded on the London Stock Exchange in order of market cap as of January 2026: 

Oxford Instruments

Oxford Instruments is a long-established and profitable technology company. It’s also currently among the largest UK semiconductor stocks.

The company serves a range of different markets, including materials analysis as well as healthcare & life sciences. But in recent years, semiconductors have become an increasingly larger core part of operations, generating 29% of revenue in 2025 – it’s the second largest segment.

Management has signalled its confidence in further growth in demand by building a new state-of-the-art facility in Bristol to house its compound semiconductor systems business. Capabilities include fault-finding and failure analysis within advanced micro devices for the leading semiconductor manufacturers, and cleanliness control in precision manufacturing.

IQE

IQE describes itself as “the leading global supplier of advanced compound semiconductor wafers”. These wafers have a diverse range of applications across handset devices, telecoms infrastructure, and 3D sensing.

In recent years, the company has struggled to maintain growth, with earnings consistently providing elusive growth, a struggle that continued throughout 2025.

However, entering 2026, thanks to the tailwinds of AI spending, the group’s order book does show signs of strength, offering improved demand visibility.

CML Microsystems

CML Microsystems occupies a profitable niche in the development of mixed-signal, radio frequency, and microwave semiconductors for global communications markets. It targets sub-segments with strong growth profiles and high barriers to entry.

CML believes its diverse, blue-chip customer base and broad product range largely protect it from the cyclicality usually associated with the semiconductor industry.

Nanoco Group

Nanoco is another young UK semiconductor company that’s still loss-making – albeit by a small margin.

Its niche focus on quantum dots and nanomaterials limits the group’s current market penetration opportunities. However, with new technological innovations accelerating, demand for its specialised products is slowly starting to ramp up. And in the meantime, the business has continued to deliver resilient revenues reaching £7.6m in its 2025 fiscal year.

Nevertheless, management continues to describe its business as “a world leader in the development, manufacture and supply of quantum dots and other semiconductor nanomaterials”.

Investing in foreign semiconductor markets

UK semiconductor stocks are relatively small when viewed on the world stage. As such, investors seeking to buy shares in industry giants will have to look to overseas stock markets.

Leviathan Taiwan Semiconductor Manufacturing Co and Dutch colossus ASML can both be traded in the US market. And of course, the US has homegrown powerhouses.

• Nvidia Corporation – $4.45trn market cap
• Broadcom Inc – $1.61trn market cap
• Intel Corporation – $232.4bn market cap
• Qualcomm Inc – $175.9bn market cap

A further option for UK investors is to buy shares of the London-listed exchange-traded fund VanEck Semiconductor ETF. The fund holds 25 of the world’s top chip stocks (including the six just mentioned), and is a one-stop shop for broad exposure to the industry.

Are semiconductor stocks right for you?

Investors considering buying a semiconductor stock need to take a number of things into account. First, it’s important to be aware that the industry is highly cyclical. It’s notorious for periodic supply-and-demand imbalances, leading to spells of feast and famine. Investors need to be prepared to accept some large swings in the share prices of semiconductor stocks.

Another thing to be aware of is that the industry is very much driven by the maxim of ‘smaller, faster, cheaper’. There’s constant pressure on chip companies to come up with ever more advanced technology at lower prices. It can be as short as a few months before one state-of-the-art product is overtaken by another.

To successfully compete for market share, semiconductor companies need to sustain a breakneck pace of innovation. As such, it’s necessary to recycle a high percentage of revenue back into research and development (R&D).

The best chip companies to invest in

While global semiconductor sales growth is a given, translating it into profitable growth is less certain. Therefore, picking the best chip companies to invest in can be tricky.

High gross margins, operating margins, and free cash flow generation, relative to sector peers, can indicate a company that’s operationally efficient and adept at identifying good areas to target R&D. These qualities, together with a strong balance sheet, may better equip a firm to navigate the hazards of the semiconductor cycle.

If you’re prepared to accept some large ups and downs in share prices and to put a bit of work into finding the stronger businesses in the industry, tapping into the structural growth of this market sector may be right for you.

The post Investing in Semiconductors: Top UK Semiconductor Stocks of 2026 appeared first on The Motley Fool UK.

A Warren Buffett favourite

The first tech stock I’m considering buying is Activision Blizzard (NASDAQ:ATVI). In its own words, its creates “the most epic interactive gaming and entertainment experiences on earth, immersing players in new, unimagined worlds.” The share price is down 17% over the past year.

The business model has been working well in recent years, with the company in the process of being bought out by Microsoft. The deal still needs to go through lengthy regulatory approval, so I’m not buying the stock based on this.

Another investor also sees the appeal in buying this top tech stock, none other than Warren Buffett. The legendary investor revealed recently that via Berkshire Hathaway, he now owns 9.5% of the firm’s shares.

As a risk, Activision Blizzard has suffered reputational damages recently due to alleged cases of sexual discrimination and harassment. I’ll watch closely to see how this unfolds.

A long-time top tech stock

Another top tech stock that I like the look of is Intel (NASDAQ:INTC). The share price is down 24% over the past year, having a particularly bad time last week following disappointing results.

First-quarter revenue was down 7% year-on-year, with the forecast for the rest of the year being somewhat underwhelming. I understand this is a risk, with semiconductor chip shortages being compounded by supply chain issues. The lockdowns in Asia are also hindering production for the tech stock.

However, I’m bullish on the company in the long term. Production issues should ease later this year when lockdown restrictions end. Further, Intel has a well-diversified business with revenue coming from AI, computing, graphics and other divisions.

It’s also a tech stock that isn’t as high-risk as some other growth players that are still trying to reach mass to make a profit. In Q1 alone, Intel generated net income of $8.1bn, with a generous operating margin of 23.7%. Therefore, I don’t see it at any immediate risk of slumping to a loss.

The benefits of investing in tech

Even though I like the above US tech stocks, there are other UK-based options that I also find attractive. The great thing about the tech space is that it’s such a broad and fast growing area. As such, there are always new investing options popping up. Unfortunately, I don’t have an unlimited cash pool to invest in everything!

There’s a great piece that goes into detail on some top UK tech stocks, which can be read here. Some share options include Avast, Darktrace, and Ocado Group.

The post With £1k to invest, I’d buy these 2 top tech stocks appeared first on The Motley Fool UK.