3 Growth Stocks You Can Buy and Hold for the Next Decade

For those with many years before retirement, it is imperative to be invested in growth stocks. While perhaps more volatile than low-priced stocks, over a long period of time, high-quality growth stocks have the potential to increase wealth by leaps and bounds.

After the post-pandemic slump in growth stocks, the AI ​​revolution and the prospect of lower interest rates should reignite growth stocks. Here are three star names that are trading at very reasonable prices today.

Broadcom

Broadcom (NASDAQ: AVGO) didn’t get much credit for the growth before the AI ​​revolution. Until AI hit high gear, Broadcom’s strategy was to buy highly profitable and stable semiconductor franchises in communications infrastructure, while adding infrastructure software to the mix in recent years. It was really a private equity strategy designed to buy companies, cut costs and make profits.

However, the AI ​​revolution and Broadcom’s recent acquisition of VMware have lit a fire in its growth prospects. AI has turbocharged two of Broadcom’s businesses: one in custom ASICs used by cloud giants for their own internal accelerators, and another in high-speed Ethernet networking chips and optical components. Each of these businesses has grown three to four times this year versus 2023, which is amazing growth.

And with the massive VMware acquisition completed at the end of 2023, management has not only been able to cut costs, but accelerate VMware’s growth at the same time. By innovating a new data center virtualization platform, focusing on the largest enterprises with the deepest pockets and charging a premium, management increased VMware’s quarterly revenue from $2.1 billion to $3.8 billion in a span of just two quarters, even as operating costs have fallen. !

Although AI chips and VMware are bound to slow down, their growth should still be strong for years to come. Meanwhile, these high-growth businesses will soon combine to exceed 50% of Broadcom’s total revenue. With AI and VMware chips supporting growth and appetite for more acquisitions in both hardware and software, Broadcom is still a buy even near its all-time highs.

Sea Limited

Southeast Asia’s e-commerce, fintech and video game giant Sea Limited (NYSE: SE) he was a pandemic darling but fell on hard times afterwards. Its hit mobile game Free Fire saw a decline in users and monetization and a ban in India due to geopolitical concerns, while higher interest rates dampened growth in its other businesses.

However, management has shown its agility by cutting costs and achieving profitability by early 2023, within a year of interest rates rising.

The story continues

Now, with profitability stabilized and inflation falling, Sea is striking a happy medium between the pandemic era of hypergrowth and the slower but more profitable period after.

The most recent quarter showed solid growth in all three businesses. E-commerce platform Shopee grew revenue by 33.7%, digital financial services grew by 39.5% and the digital entertainment segment returned to growth after hitting a low last year with bookings up by 21.1 %. And despite the return to reinvestment in growth, particularly in e-commerce, the company remained profitable overall on a GAAP basis.

Sea appears to have cemented a leading position over rivals in Southeast Asia’s digital economy, which is expected to see strong growth in the coming years. According to Bain & Co., Southeast Asia’s economy is expected to grow at an average rate of 5.1 percent over the next 10 years, outpacing even China.

With Sea shares trading at just 3.5 times sales and still 78% below 2021 highs, it’s another growth stock poised to break out again.

Aehr test systems

Aehr test systems (NASDAQ: AEHR) makes test and burn-in equipment used primarily for testing automotive chips, especially the new silicon carbide chips increasingly used in new electric vehicles. Test and burn-in equipment allows chipmakers to subject chips to harsh heat conditions while still on the wafer before being packaged into a device. Hence why the technology has generally been used in chips that need to work under harsh conditions, such as automotive or industrial chips.

However, while the electric vehicle market has seen an expansion in recent years, it went into a severe downturn about a year ago. Hence why Aehr Test Systems is down 78% from July 2023 highs.

Still, if one believes the EV market will eventually rebound, perhaps helped by lower interest rates, then Aehr could be a cheap buy.

Not only that, but the company recently made a big announcement for revenue beyond electric vehicles. On September 5, the company announced that it had received an order for six Sonoma machines to test the AI ​​accelerators of a major cloud infrastructure player. This is Aehr’s first machine order for AI accelerators.

Given the increasingly power-consuming and heat-generating nature of AI chips, it is highly possible that Aehr’s solutions will be adopted not only by this AI company in greater numbers, but also by other AI players. Given AI’s hypergrowth prospects, Aehr could have another big growth segment on its hands, making the recent swoon a great buying opportunity.

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Billy Duberstein and/or his clients have positions in Aehr Test Systems, Broadcom and Sea Limited. The Motley Fool has positions in and recommends Sea Limited. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

3 Breakout Growth Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool