The best semiconductor stocks have been hit by curveballs over the last year that have upended the industry. Analysts expect sales and earnings growth of only 1.5% and 2.9%, considerably lower than the 13.8% yearly average EPS growth expected over the next five years. Analysts expect SWKS’s earnings to rise 10.0% next year, accompanied by a sales increase of 5.7%. Over the last five years, the stock’s P/E ratio has ranged between 10.1 and 40.4, so it’s currently trading cheaply based on historic standards.

  1. The companies are listed in ascending order of their latest quarter YoY revenue growth.
  2. NVDA has since found its footing thanks to buzz surrounding artificial intelligence (AI) and has quadrupled since then.
  3. Adjusted earnings-per-share of $2.37 compared unfavorably to $3.23 in the previous year, but was $0.02 above expectations.
  4. To skip the detailed analysis of the semiconductor industry, go directly to the 5 Best Semiconductor Stocks According to Billionaires.
  5. That said, many semiconductor stocks could generate strong returns, as the tech sector has promising growth prospects in the long run, despite its latest slowdown.

Therefore, for investors willing to take the risk, the long-term potential of semiconductor stocks could be rewarding. On February 2nd, 2023, the company announced results for the first quarter of fiscal year 2023 for the period ending December 25th, 2022. Revenue decreased 11.6% to $9.46 billion, which missed estimates by $110 million. Adjusted earnings-per-share of $2.37 compared unfavorably to $3.23 in the previous year, but was $0.02 above expectations.

Best Semiconductor Stocks of January 2024

It is yielding about 1.5%, and the company has averaged annual dividend growth of roughly 30% since 2018, when it was instituted. And behind financial strength and earnings momentum is increasing demand for semiconductors worldwide in the form of a one-two punch. “Quality Communications” was started in the living room of Dr. Irwin Jacobs in 1985. The company’s first product and service was a satellite used by long–haul trucking companies that could locate and message drivers. Qualcomm, as it is known today, develops and sells integrated circuits for use in voice and data communications. The chip maker receives royalty payments for its patents used in devices that are on 3G, 4G and 5G networks.

It was on fire to start off 2020, adding further gains of 27% before the coronavirus pandemic triggered the March market crash. Maxim is another one of those semiconductor stocks with a long history and plenty of potential. It’s in positive territory for the year, but at this point it is struggling to break 5%. Clearly, this ‘A-rated’ stock has legs, making it one of the best semiconductor stocks to buy. Furthermore, AMD stock was the top performing stock in the S&P 500 in 2019. In 2020 — despite the challenges of a pandemic that disrupted PC manufacturer supply chains, and a September tech sector selloff — AMD is up more than 50%.

Toyota Motors, the world’s largest car manufacturer by volume, is likely to cut global production in September by 40% from its previous plan due to the semiconductor supply crunch, per a report from Nikkei. Volkswagen also may need to further cut its production, while Ford is expected to idle production for one week at a U.S. plant that manufacturers its popular F-150 trucks, on account of the shortage. The consumer electronics industry is also now feeling the pinch, with Apple indicating that the production of its products such as the iPhone and iPad could be impacted by tight chip supply. The company has announced an investment of $40 billion in a U.S. plant, and it plans to build a second chipmaking plant in Japan which could cost more than $7.4 billion. TSM has investments across different advanced technologies, including AI, 5G, and IoT, which makes it one of the most coveted tech companies in the market today.

Hitch a ride with this chipmaker

However, there are several trends that point to structurally higher semiconductor demand, which should, in turn, drive investments in chip fabrication equipment. Higher digitization following Covid-19, the 5G upgrade cycle in the wireless market, and the need for more advanced chips for applications such as AI and machine learning, and cloud computing are big levers of semiconductor demand growth. Separately, the demand for increasing re-shoring of semiconductor production to the U.S. from overseas could also drive sales. In terms of its financials, NXP Semiconductors is coming off a strong start to 2021. The company recently reported revenue of $2.57 billion, slightly better than analysts’ expectations of $2.56 billion. But it’s the bottom of the income statement where the company really shone.

Kulicke and Soffa Industries (KLIC, $50.65), which provides semiconductor manufacturing equipment and services, had stellar 2021 results. Nvidia has solid fundamentals and not only does it remain one of the best semiconductor stocks, but it arguably remains the best AI stock among its peers. Nvidia (NVDA, $492.98) stock bottomed near the $100 per-share price in October 2022, after the U.S. government initiated new restrictions on chip exports to China.

The Best Semiconductor Stocks to Buy

With issues such as climate change and skyrocketing energy prices forcing homeowners into a rethink about the power grid, SPWR might benefit. As well, labels shares modestly undervalued based on its proprietary metrics. Technically speaking, Wolfspeed might attract traders looking to bet on volatility.

He has been widely published, writing for Technical Analysis of Stock & Commodities magazine, Investopedia, Benzinga, and others. He runs, has authored several trading courses and books, coaches individual clients, and regularly trades stocks, currencies, and ETFs. It has a “B” financial how to pick a stock health grade from Morningstar, and has slightly underperformed the S&P 500 over the last five years (-0.8 percentage points per year). ACLS has a Morningstar financial health grade of “B” and has outperformed the S&P 500 by an average of 38.2 percentage points per year over the last five years.

The industry has been facing a global shortage since the COVID-19 pandemic as the whole world moved their lives online, generating demand for electronics. The semiconductor supply was already quite flaky before the pandemic due to reasons including, but not limited to, political tensions and the trade war between the US and China. The pandemic was just a catalyst in realizing the supply chain weaknesses in the industry. KLIC is a solid choice among semiconductor stocks for income investors too.

The SOXX ETF edged out the S&P 500 for the 1-year return, but it significantly outperformed the S&P for the 3-, 5- and 10-year returns, through January 31, 2022. For the 12-months ending January 31, 2022, semiconductor ETFs rose 24.01%, as measured by the ICE Semiconductor Index. By comparison, large-cap US stocks, as measured by the S&P 500 index, returned 23.29% for the same period. Chips form the bedrock of the digital age and will likely only increase in importance as devices and machinery become ever more connected.

One of the top reasons to invest in the company is that almost all semiconductor companies source their chips from them. This means whether the stock market is up or down, Taiwan Semiconductor is expected to report strong revenue numbers. KLA Corporation reported its first quarter (fiscal 2023) earnings results on October 26. The company reported revenues of $2.72 billion for the quarter, which represents an increase of 31% compared to the prior year’s quarter. This revenue growth rate was stronger than what the analyst community had expected, as KLA’s top line beat the analyst consensus by $120 million. KLA’s solid revenue performance can be explained by the fact that many semiconductor companies have increased their investments into manufacturing capacity thanks to ongoing healthy chip demand.

Many companies in this sector struggle to cope with the industry’s cyclical nature. Hardware, such as PC and laptop chips, tends to become a commodity as the years progress and more advanced chips come out. If a new market is growing quickly, other chipmakers might pile on with similar products. Companies that gradually increase their sales over time are the best investments, but overall revenue growth matters even more for semiconductor stocks.

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