Over the last 10 years, the S&P 500 has a 10.8% annualized return excluding dividends. Some of the biggest gains have been generated by companies that make the tiniest of products — semiconductors.

Often referred to as integrated circuits (ICs) or microchips, semiconductors are the brains behind electronic devices. They’re made from naturally occurring elements like silicon (aka ‘digital gold’) that, when combined with impurities, have special conductivity powers. On-chip transistors serve as mini electrical switches that can activate or deactivate an electric current. A fingernail-sized microchip contains billions of transistors.

Despite their small stature, microchips enable technological advances in many industries — communications, computing, healthcare, transportation and clean energy. They complete routine tasks, store data and integrate graphics, audio and video. Without them, we wouldn’t have smartphones, smart TVs, tablets, video games or life-saving medical equipment. 

Given the critical role semiconductors play in the global economy, it’s no surprise that chipmakers have hauled in some serious profits over the past decade. In turn, long-time shareholders have been rewarded with tremendous wealth of their own.

Of the top 10 performing S&P 500 stocks over the last 10 years, six are in the semiconductor space. This includes semiconductor materials and equipment leader Lam Research and solar power innovator Enphase Energy. The only names that aren’t in the technology sector are construction products provider Builders Firstsource and pharmaceutical giant Eli Lilly. 

At the top of the list, however, are three mega cap chipmakers boasting mega 10-year gains. Will they continue to dominate over the next 10 years?

#1 - NVDA

10-Year Annualized Total Return: 69.2%

With a $1.7 trillion valuation, NVIDIA Corporation (NASDAQ: NVDA) has blossomed into the fifth largest S&P 500 company and the best stock to own over the last 10 years. Since inventing the graphics processing unit (GPU) 25 years ago, NVIDIA has evolved into a diversified global chipmaker, serving the gaming, professional visualization, data center and automotive markets. 

Much of the recent gains have come from the company’s leadership in artificial intelligence (AI), which is responsible for rapid advancements across virtually all sectors. NVIDIA’s offerings for AI data center infrastructure continue to be in high demand worldwide. Data center revenue skyrocketed 279% year-over-year in the third quarter of fiscal 2024 — and Wall Street is braced for a strong Q4 report and outlook on February 21st.

As NVDA continues to reach record highs, the market continues to brush aside a trailing price-to-earnings (P/E) ratio that has ballooned to 95x. While reminiscent of a dot.com bubble tech valuation, analysts aren’t too worried about a burst either. Last week, four firms reiterated their buy ratings on NVDA, including Goldman Sachs which set an $800 price target.

#2 - AMD

10-Year Annualized Total Return: 47.8%

Last week, Advanced Micro Devices, Inc. (NASDAQ: AMD) rolled out a new architectural solution called AMD Embedded+ that is designed to accelerate time-to-market for electronics manufacturers’ edge AI applications. It marked the company’s latest push into the AI game as it seeks to build on its traditional successes in embedded computing, gaming and data centers. 

Although the market has given AMD credit for its role in future AI hardware growth, it punished the company for issuing soft first quarter revenue guidance that implies just 1% year-over-year growth. Weakness in gaming and embedded processing is expected to spill over into this year but could recover by the second half.

Still, it is AI that is expected to carry the growth torch in 2024. AMD’s data center business has thus far played second fiddle to that of NVDA, but anticipated product launches could close the gap. More importantly, an AI market that is forecast to top $300 billion this year and grow 16% annually from there should make long-term winners out of multiple chipmakers — including AMD.

#3 - AVGO

10-Year Annualized Total Return: 40.2%

Broadcom Inc. (NASDAQ: AVGO) remains one of analysts’ favorite semiconductor plays despite commanding a $1,283.44 share price. Last week, J.P. Morgan added the stock to its Focus List with a Street-high $1,550 price target.

What investors don’t get with Broadcom is direct AI exposure — but this makes the stock an intriguing semiconductor diversifier. Instead, the company will continue to grow by providing chip solutions for a mix of networking, server storage, broadband, wireless and industrial customers. The business is well-balanced by a portfolio of infrastructure software with ties to cloud computing, cybersecurity and other growth markets. 

When Broadcom announces its fiscal 2024 first-quarter results on March 7th, analysts will be looking for a 32% surge in revenue but flat earnings per share (EPS). Considering the company has consistently edged out consensus quarterly EPS estimates over the last five years, another beat is likely.   

Another unique feature of AVGO compared to NVDA and AMD is its dividend. The stock comes with a $21.00 per share annual dividend that equates to a 1.6% forward yield. A 14-year dividend hike streak — that makes it a Dividend Achiever — should keep investors interested in this chipmaker for years to come.