2 No-Brainer Stocks to Buy With Less Than $1,000
Buying shares of growing companies is one of the best ways to grow your money. The stock market has its down years, as investors were reminded of in 2022, but over many decades, companies that consistently grow can produce compounding returns that multiply a small sum into a sizable amount of money.
Assuming you have some extra cash you don't need for paying bills or reducing debt, here are two outstanding growth stocks you can buy with less than $1,000.
1. Taiwan Semiconductor Manufacturing
The semiconductor industry is a ripe field to look at for growth stocks. Every decade has seen new electronic devices that drive more demand for processors. But the increasing investment in large data centers to train artificial intelligence (AI) models will drive record revenue for leading chipmakers like Taiwan Semiconductor Manufacturing (NYSE: TSM).
TSMC, as it is also known, is the leading manufacturer of the most advanced chips. Its customers include leading semiconductor companies like Nvidia, Intel, Broadcom, and Advanced Micro Devices. Its expertise in developing cutting-edge chip technology has translated into a very profitable business. Last year, TSMC produced $27 billion in net profit on $69 billion of revenue.
Right now is a particularly good time to consider buying shares because TSMC is just emerging out of a cyclical downswing in semiconductor demand. Despite recent weakness in smartphone chips, TSMC still delivered first-quarter revenue growth of 16% over the year-ago quarter. The company is targeting annual revenue growth between 15% and 20% through 2026 as the industry recovers.
One opportunity for TSMC is the exploding investment in data center infrastructure. The company is seeing strong demand for its most advanced 3-nanometer and 5nm chips, driven by AI-related applications. Management expects AI-related demand to grow at an annualized rate of 50% over the next five years.
Over the last 30 years, TSMC has grown revenue and earnings at a 17% annualized rate. That growth would have turned a $10,000 investment into $585,000 including dividend reinvestment over that three-decade span. The stock is up 70% over the last year, beating the S&P 500's return of 25%, and should continue to outperform in the coming years.
2. Microsoft
Software is another lucrative market to look at for long-term winners. Many people are familiar with Microsoft's (NASDAQ: MSFT) consumer products like Windows and Office, but it's a major player in cloud services, which benefits from growing demand for AI services. The stock outpaced the broader market over the last year by rising 35%.
In cloud services, Microsoft continues to gain market share of the cloud computing market, where it currently ranks No. 2 behind Amazon. Microsoft Cloud revenue grew 23% year over year last quarter, as revenue from customer cloud migrations accelerated.
Microsoft's Azure cloud business benefits from new AI services launched over the last year. The number of Azure deals valued at $100 million or more increased 80% year over year in the most recent quarter.
Meanwhile, Microsoft's AI-powered Copilot tool is being widely adopted by enterprise customers. Companies find this tool incredibly valuable to speed up employee workflows and make faster decisions. Almost 60% of the Fortune 500 are using Copilot for Microsoft 365.
Microsoft has grown revenue and earnings at double-digit rates, and its innovation in AI software should keep that streak going. If Microsoft can grow its earnings at an annualized rate in the low teens, as Wall Street analysts expect, investors should expect that growth to triple their investment over the next decade.
Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $761,658!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 2, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
