Imagine trying to run an advanced AI model on an outdated chip; it’s like streaming 4K video on dial-up internet. AI needs power, speed, and efficiency, and that’s exactly why semiconductor companies thrive. The AI revolution creates an insatiable demand for high-performance chips, making the semiconductor industry one of the biggest winners in this technological shift.
For investors, this could be an opportune time to load up the shares of fundamentally strong chip companies like Broadcom Inc. (AVGO), QUALCOMM Incorporated (QCOM), and STMicroelectronics N.V. (STM) for solid gains.
In 2024, global semiconductor sales hit an all-time high of $627.60 billion, reflecting a 19.1% increase from the previous year. The momentum is far from over, with industry projections pointing to another year of double-digit growth in 2025, reaching an estimated $717 billion in revenue.
Much of this surge comes from the rapid expansion of AI infrastructure. Cloud providers are investing heavily in advanced processors to support large language models (LLMs) and AI workloads, leading to soaring demand for semiconductors. This trend is expected to continue, with market research firm TrendForce projecting AI server investments to soar 45% year-over-year, from $205 billion in 2024 to $298 billion in 2025.
Beyond data centers, AI chips are making their way into everyday devices. The rise of AI-driven smartphones, edge computing, and personal computing innovations is further fueling demand. As a result, the global AI chip market is projected to more than double from $123.16 billion in 2024 to $311.58 billion by 2029, growing at a CAGR of 20.4%.
With AI adoption accelerating across industries, semiconductor companies are poised for long-term success. With that being said, let’s dive deeper into the fundamentals of the featured Semiconductor & Wireless Chip stocks, beginning with number three.
Stock #3: STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM designs, develops, manufactures, and sells semiconductor products internationally. The company operates through the Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments.
On December 12, STM partnered with quantum computing startup Quobly to develop scalable quantum processor units (QPUs) using STM’s advanced FD-SOI semiconductor technology. This collaboration aims to make large-scale quantum computing more feasible and cost-effective by leveraging STM’s 28nm FD-SOI manufacturing process.
The first commercial quantum products are expected by 2027, targeting applications in materials development and systems modeling. This move strengthens STM’s position in next-generation computing, expanding its role in the emerging quantum technology market.
STM’s trailing-12-month ROCE of 8.98% is 80.9% higher than the industry average of 4.96%. Similarly, its trailing-12-month EBITDA and net income margins of 25.67% and 11.73% compares favorably to their respective industry averages of 10.56% and 4.10%.
For the fourth quarter that ended December 31, 2024, STM reported net revenues of $3.32 billion, up 2.2% sequentially. Its gross profit grew 2.1% quarter-over-quarter to $5.22 billion for the same period. The company’s net income and EPS attributable to parent company stockholders came in at $341 million and $0.37 for the quarter, respectively.
Analysts expect STM’s revenue for the fiscal year (ending December 2026) to grow 14.3% year-over-year to $13.16 billion. The company’s EPS is expected to increase 111.8% year-over-year to $1.76 for the same period.
Shares of STM have gained marginally over the past month to close the last trading session at $24.48.
STM’s stance is apparent in its POWR Ratings. The stock has a B grade for Value. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among 90 stocks in the Semiconductor & Wireless Chip industry, STM is ranked #34. Click here to access additional ratings of STM for Growth, Momentum, Stability, Sentiment, and Quality.
Stock #2: Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor-based devices and products worldwide. The company operates in two segments: Semiconductor Solutions and Infrastructure Software.
On December 31, 2024, AVGO paid its shareholders a quarterly dividend of $0.59 per share. The company’s annual dividend of $2.36 translates to a 1.01% yield on the prevailing prices, while its four-year average dividend yield is 2.32%.
Its dividend payouts have grown at CAGRs of 13.4% and 14.1% over the past three and five years, respectively. Also, AVGO has a record of 14 years of consecutive dividend growth.
In terms of the trailing-12-month net income margin, AVGO’s 11.43% is 178.9% higher than the 4.10% industry average. Likewise, its 13.46% trailing-12-month ROCE is 171.9% higher than the 4.95% industry average. Additionally, its 54.90% trailing-12-month levered FCF margin compares favorably to the 11.96% industry average.
For the fiscal fourth quarter, which ended November 3, 2024, AVGO’s net revenue increased 51.2% year-over-year to $14.05 billion, while its operating income rose 9.1% from the prior-year quarter to $4.63 billion. The company’s non-GAAP net income and non-GAAP EPS grew 44.8% and 27.9% from the year-ago value to $6.96 billion and $1.42, respectively. In addition, its adjusted EBITDA amounted to $9.09 billion, up 50.3% year-over-year.
Analysts predict AVGO’s revenue for the fiscal first quarter (ended January 2025) to increase 22.1% year-over-year to $14.61 billion, while its EPS for the same period is expected to improve 37.2% from the previous year to $1.51. Moreover, the company topped its EPS estimates in each of the trailing four quarters, which is impressive.
AVGO’s shares have soared 84.6% over the past year to close the last trading session at $233.04.
AVGO’s POWR Ratings reflect this outlook. It has a B grade for Growth, Sentiment, and Quality. Within the same Semiconductor & Wireless Chip industry, it is ranked #22. Click here to see the other ratings of AVGO for Value, Momentum, and Stability.
Stock #1: QUALCOMM Incorporated (QCOM)
QCOM specializes in foundational technologies for the wireless industry. The company operates through three segments: Qualcomm CDMA Technologies; Qualcomm Technology Licensing; and Qualcomm Strategic Initiatives.
On January 17, 2025, buoyed by its strong financial performance, the company declared a quarterly dividend of $0.85 per common share, payable to its shareholders on March 27.
With 21 years of consecutive dividend growth, QCOM pays an annual dividend of $3.40, which translates to a 1.97% yield on the current price. Over the past three years, the company’s dividend payments have increased at a CAGR of 7.2%. Plus, it has a payout ratio of 30.8%.
On January 7, QCOM and Sony Honda Mobility Inc. (SHM) expanded their collaboration to integrate the latest Snapdragon® Digital Chassis™ solutions into future AFEELA vehicles. This partnership will enhance software-defined vehicles (SDVs) with advanced features such as edge generative AI (GenAI) for personalized in-car experiences, improved driver assistance systems (ADAS), and seamless cloud-connected technology.
By leveraging its expertise beyond smartphones, QCOM is strengthening its foothold in the high-growth automotive semiconductor market, unlocking new revenue opportunities.
The stock’s trailing-12-month EBITDA margin of 30.92% is 193.2% higher than the industry average of 10.55%. Similarly, its trailing-12-month net income margin and ROCE of 25.94% and 41.97% compares to their respective industry averages of 4.10% and 4.95%.
QCOM’s revenue increased 17.4% year-over-year to $11.67 billion in the fiscal 2025 first quarter (ended December 29, 2024). Its non-GAAP net income grew 23.5% from the year-ago value to $3.83 billion, while its EBIT rose 23.4% year-over-year to $4.43 billion over the period. The company’s non-GAAP EPS increased 24% from the prior year’s quarter to $3.41.
Street expects QCOM’s revenue for the second quarter (ending March 2025) to increase 12.6% from the prior year to $10.57 billion. Its EPS for the ongoing quarter is expected to grow by 14.7% year-over-year to $2.80. In addition, the company has surpassed the revenue and EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 11.9% to close the last trading session at $172.23.
It’s no surprise that QCOM has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Quality and a B for Value and Sentiment. Out of 90 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have QCOM’s ratings for Growth, Momentum, and Stability. Get all QCOM ratings here.
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AVGO shares were unchanged in premarket trading Tuesday. Year-to-date, AVGO has gained 0.52%, versus a 4.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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