In this article, we will take a look at 15 of the most innovative companies in the world. If you want to see more of the most innovative companies in the world, go directly to 5 Most Innovative Companies in the World.
When most people think of innovation today, they think of computer technology or information technology.
Many of the world's most valuable companies are computer technology or information technology companies. Companies like Apple and Microsoft are worth trillions of dollars. Companies like Apple and Microsoft also make some of today's most useful products such as smartphones or computer operating systems.
Given their past history of making very useful and innovative products, it's likely that the leading computer technology or information technology companies will make very useful and innovative products in the future too.
Improving Semiconductors
One reason for why the computer technology sector has been so innovative is due to semiconductor chips becoming more efficient over time.
Intel describes the trend otherwise known as Moore's law, "From careful observation of an emerging trend, Moore extrapolated that computing would dramatically increase in power, and decrease in relative cost, at an exponential pace. The insight, known as Moore’s Law, became the golden rule for the electronics industry, and a springboard for innovation."
As a result of cheaper semiconductors, computers and smartphones became more affordable and more people were able to purchase them. With more computer and smartphone users, many information technology companies were able to gain more users for their internet services and apps. With the information technology companies having more resources, they were able to create innovative online services and apps that offered more utility. With more useful online services and apps, more people bought computers and smartphones. This cycle helped power innovation in the industry for decades.
Although Moore's law has helped the computer industry innovate for multiple decades in the past, making faster and cheaper semiconductors at the rate described by Moore's law isn't possible due to physics currently.
As a result, the computing industry has had to look for other ways of increasing computing speed including investing substantial capital into developing quantum computing. Although there is no guarantee that developing quantum computing will succeed, a breakthrough in terms of developing the technology could help fuel innovation for years to come.
2022
Due to high inflation, the Federal Reserve has raised interest rates multiple times this year and the market has declined fairly substantially as a result.
The tech sector has also been negatively affected by the interest rate increases given that the NASDAQ has declined almost 35% year to date. Given the uncertainty, it could be a good idea for long term investors to buy a well diversified portfolio of stocks across many different sectors.
Best Semiconductor Stocks to Buy in 2021
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Methodology
For our list, we took the top 50 companies from companiesmarketcap.com's Top publicly traded tech companies by revenue and picked 15 very innovative companies from that list that help make semiconductors or were leading information technology companies. We then ranked the 15 by revenue according to companiesmarketcap.com.
Given that the level of innovation is subjective and there are many innovative companies both inside the tech sector and also in other sectors, our list is subjective.
ASML Holding N.V. (NASDAQ:ASML) makes leading lithography systems needed to make the world's most advanced semiconductors. Given the company has spent multiple decades on R&D for its state of the art lithography systems, ASML Holding N.V. (NASDAQ:ASML) has a very wide moat. Some analysts think it could take multiple years for competitors to catch up. Given its importance, ASML Holding N.V. (NASDAQ:ASML) has lately been affected by the U.S. China semiconductor tensions and its stock is down 45% year to date.
NVIDIA Corporation (NASDAQ:NVDA) wasn't always worth more than its competitor Intel. In fact, NVIDIA Corporation (NASDAQ:NVDA) was worth only a fraction of Intel several years ago. Given that NVIDIA Corporation (NASDAQ:NVDA)'s GPUs are better for AI and machine learning in some ways than Intel's semiconductor chips are, however, NVIDIA Corporation (NASDAQ:NVDA)'s stock has surged as the market has priced in substantial future growth in the company's future.
Baron Funds commented on NVIDIA Corporation (NASDAQ:NVDA) in a Q3 2022 investor letter,
“NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company and a leader in gaming and accelerated computing. NVIDIA is powering the growth of AI from the data center to the edge. Shares detracted due to inventory right sizing in NVIDIA’s gaming segment coupled with the broader market sell-off in growth stocks. Given NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, we believe the company can sustain its growth trajectory. See further discussion of NVIDIA in the top net purchases section below. During the third quarter, we took advantage of its stock sell-off to add to NVIDIA Corporation, a fabless semiconductor mega cap that is a global leader in gaming cards and accelerated computing hardware and software. The sell-off was driven by a near-term inventory correction in gaming as a result of a COVID-related pull forward in demand as well as the shift in the Ethereum cryptocurrency from proof-of-work to proof-of-stake. Additionally, investors are concerned over the potential slowdown in data center revenues as a result of a weaker macroeconomic environment as well as the recently announced limitations on semiconductor shipments to China. Despite the near-term uncertainty, we believe that NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, would enable the company to benefit from durable growth for years to come and therefore view the stock price where we added shares as a compelling value for long-term investors. With demand for computing power doubling every one to two years, and Moore’s Law slowing down, there is more need for computing than ever. At the same time, “near free” supply growth (that was possible thanks to Moore’s Law) has slowed dramatically. NVIDIA’s accelerated architecture, with parallel computing at scale, answers that need.”
QUALCOMM Incorporated (NASDAQ:QCOM) is a leading semiconductor producer for smartphones. With the growth in demand for smartphones, demand for QUALCOMM Incorporated (NASDAQ:QCOM)'s semiconductors has increased substantially in the last ten years. Given its scale, QUALCOMM Incorporated (NASDAQ:QCOM) is investing substantial capital to remain on the cutting edge.
12. International Business Machines Corporation (NYSE:IBM)
International Business Machines Corporation (NYSE:IBM) is one of the leaders in AI and also quantum computing. International Business Machines Corporation (NYSE:IBM) describes its quantum computing efforts, "IBM Quantum leads the world in quantum computing. This nascent technology is widely expected to solve valuable problems that today’s most powerful classical supercomputers cannot solve and never will." If it is successful in commercializing the technology, International Business Machines Corporation (NYSE:IBM) and the world could realize substantial benefits.
11. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a leading semiconductor maker that operates at the very cutting edge in terms of producing the smallest and arguably most efficient semiconductors. With its foundry business model, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures semiconductors for other companies who design them. Given U.S. China tensions, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) could be affected by geopolitics.
Intel Corporation (NASDAQ:INTC) is no longer the leader in the semiconductor industry given its competitor's success in terms of manufacturing semiconductors. Nevertheless, Intel Corporation (NASDAQ:INTC) has substantial financial resources and the company is committed to try to regain the lead. Over the past few years, Intel Corporation (NASDAQ:INTC) has spent tens of billions in terms of R&D, and the company plans to spend tens of billions more.
Although Tesla, Inc. (NASDAQ:TSLA)'s main product is electric cars, the company is arguably a computer technology company given that it has invested substantial capital to try to make autonomous driving possible. If it commercializes autonomous driving in the way the market expects, Tesla, Inc. (NASDAQ:TSLA) could have considerable more revenue growth in the future. Tesla, Inc. (NASDAQ:TSLA) is also working on developing robots that could do a variety of different things.
8. Tencent
Tencent is a very innovative tech company based in China given that it was arguably the first company to create the super app in WeChat, which offers many different useful services all in one app. After buying Twitter, Elon Musk is perhaps deciding to try and duplicate many of WeChat's features. Forbes writes, "As a model, Musk has set at least some sights on the original so-called super app, WeChat, which is owned by China-based Tencent. In Musk’s first town hall meeting with Twitter employees last week, he directly mentioned WeChat, indicating that building something like it would further his broader goal of nearly quintupling Twitter’s user base to a billion people."
Although its metaverse investment isn't going very well currently, Meta Platforms, Inc. (NASDAQ:META) is nevertheless a very innovative company given its substantial investments in AI. In terms of the future, there's also potential for Meta Platforms, Inc. (NASDAQ:META) if its metaverse product improves. Meta Platforms, Inc. (NASDAQ:META) has already spent $15 billion on the metaverse and the company plans to invest tens of billions more.
As one of China's leading tech companies, Alibaba Group Holding Limited (NYSE:BABA) has substantial revenues and spends a substantial amount on research and development. According to macrotrends.net, Alibaba Group Holding Limited (NYSE:BABA) spent $8.74 billion in R&D for 2021, up from $6.09 billion in 2020. With the R&D, Alibaba Group Holding Limited (NYSE:BABA) could potentially create new innovative products and services. Given U.S. China tensions and delisting fears, Alibaba Group Holding Limited (NYSE:BABA) shares have fallen 45% year to date.
