As the Trump administration's "Liberation Day" tariffs ripple through the global markets, it might seem like a dangerous time to invest in tech stocks. Many of the world's top tech companies rely heavily on cross-border exports and imports, and high tariffs could throttle their sales and crush their margins.
However, that panicked sell-off is creating some buying opportunities for patient investors who can tune out the near-term noise. The typical American still holds a median of $8,000 across his or her cash accounts, according to the Federal Reserve. Allocating some of that cash into these three beaten-down stocks today might yield some impressive returns in the future.
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1. ASML
ASML(NASDAQ: ASML) is the world's top producer of lithography systems, which are used to optically etch circuit patterns onto silicon wafers. The Dutch company is also the only supplier of top-tier extreme ultraviolet (EUV) systems for manufacturing the world's smallest chips. All of the world's biggest foundries -- including Taiwan Semiconductor Manufacturing (NYSE: TSM) and Samsung -- use those systems.
Over the past 12 months, ASML's stock has declined nearly 40% as investors fretted over the tighter export curbs against China and higher tariffs. However, the Trump administration notably excluded semiconductors from its reciprocal tariffs against other countries, and the booming AI market should continue to generate steady tailwinds for its EUV business.
From 2024 to 2027, analysts expect ASML's revenue and earnings per share to grow at a compound annual growth rate (CAGR) of 12% and 22%, respectively. Based on those expectations -- which could certainly shift as tariffs and trade wars reshape the markets -- ASML's stock looks historically cheap at 20 times next year's earnings.
ASML's near-term growth might be unpredictable, but it will remain the linchpin of the semiconductor market for the foreseeable future. That makes it a great stock to accumulate as shortsighted investors shuffle away from the semiconductor sector.
2. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor, also known as TSMC, is the world's largest and most technologically advanced contract chipmaker. It manufactures chips for fabless chipmakers including Apple, Nvidia, Advanced Micro Devices, and Qualcomm. It produces its top-tier chips in Taiwan, but it also manufactures its lower-end chips in China, Japan, Germany, and the United States.
TSMC's stock has risen about 3% over the past 12 months, but it's dropped 27% year to date as tariffs and rising tensions between Taiwan and China compressed its valuations. However, TSMC's $165 billion commitment to expanding its fabs in the U.S. over the next four years seems to be insulating it from most of the tariff-driven headwinds.
From 2024 to 2027, analysts expect TSMC's revenue and EPS to grow at a CAGR of 22% and 24%, respectively. It expects a lot of that growth to be driven by the rapid expansion of the AI market. Like ASML, TSMC might face some unpredictable challenges as the macro headwinds rattle the broader market. But over the long term, it will remain the bedrock of the expanding semiconductor industry -- and it's still a bargain at 13 times next year's earnings.
3. Supermicro
Super Micro Computer(NASDAQ: SMCI), also known as Supermicro, builds servers for data centers. It's an underdog in that market, but it's carved out a high-growth niche by building more dedicated AI servers than its larger competitors. Its close relationship with Nvidia also gives it access to the chipmaker's top-tier GPUs.
Supermicro was once a hot AI stock, but it plummeted nearly 70% over the past 12 months. That decline was caused by a short-seller's allegations of inflated revenue, the subsequent delay in its 10-K filing to assess its "internal controls over financial reporting," the loss of its auditor Ernst & Young, and a near-delisting from the Nasdaq. The Securities and Exchange Commission and Department of Justice also subpoenaed its financial documents as it dealt with all of those setbacks.
But after slogging through that mess, Supermicro hired a new auditor, submitted its 10-K filing this February, and avoided a delisting. Those improvements could appease the regulators and make it a worthwhile investment again. From 2024 to 2027, analysts expect its revenue and EPS to grow at a CAGR of 38% and 22%, respectively. Those are jaw-dropping growth rates for a stock that trades at 9 times next year's earnings. Assuming Supermicro gets its act together, expands its manufacturing capabilities in the U.S. to mitigate tariffs, and keeps growing, its stock could command a much higher valuation.
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Leo Sun has positions in ASML and Apple. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
