With the increasing and diversifying demand for electronic devices, the semiconductor industry is expected to grow rapidly in the coming years. Further, the rapid adoption of emerging technologies like AI, IoT, ML, big data analysis, and data centers propel the market growth.
Amid this backdrop, investors could consider investing in fundamentally solid semiconductor stocks NXP Semiconductors N.V. (NXPI), Applied Materials, Inc. (AMAT), and Amkor Technology, Inc. (AMKR) with high-potential.
The Semiconductor Industry Association (SIA) reported global semiconductor industry sales of $49.1 billion during the month of May 2024, indicating an increase of 19.3% from the year-ago value and also an increase of 4.1% from April 2024 sales of $47.2 billion. On the basis of region, year-to-year sales grew 43.6% in the US.
In addition, emerging developments like artificial intelligence (AI), the Internet of Things (IoT), and machine learning (ML) technologies are generating lucrative market growth opportunities for the semiconductor market. The global semiconductor market is projected to grow to $2.06 trillion by 2032, exhibiting a CAGR of 14.9%.
The AI chips market is set to grow by over 30% in 2024, reaching over $71 billion. With advancement in technology, semiconductor chips have also become crucial in today’s digital lives, powering essentials like smartphones, laptops, industrial and automotive applications and resulted in AI chips becoming one of the trending commodities on the market.
Further, with widening manufacturing and automotive industries operations coupled with availability of big data, data centers, and growing need for deep learning and neutral networks, the AI chipsets market is expected to grow at a CAGR of 20.8%, resulting in a market volume of $131.80 billion by 2028.
Given these favorable market trends, let’s look at the fundamentals of the top three Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, the Netherlands, NXPI offers various semiconductor products. Its product portfolio consists microcontrollers, application processors, including i.MX application processors, and i.MX 8 and 9 family of applications processors.
On June 5, NXPI and Vanguard International Semiconductor Corporation announced the plan to create a manufacturing joint-venture VisionPower Semiconductor Manufacturing Company Pte Ltd to build a new 300mm semiconductor wafer manufacturing facility in Singapore.
The strategic joint-venture will bode with the company’s operations and will support 130nm to 40nm mixed-signal, power management and analog products, targeting the automotive, industrial, consumer and mobile end markets.
On June 4, NXPI and ZF Friedrichshafen AG collaborated on next-generation SiC-based traction inverter solutions for electric vehicles (EVs). Under the collaboration, NXPI’s high-voltage isolated gate driver family is integrated into ZF’s next-generation 800-V SiC-based traction inverter solutions for EVs.
The strategic collaboration emphasizes at improving safety, efficiency, range and performance of EVs.
NXPI’s total revenue increased marginally year-over-year to $3.13 billion for the first quarter that ended March 31, 2024. Its non-GAAP gross profit also grew marginally from the year-ago value to $1.82 billion. The company’s operating income of $856 million indicates a growth of 3.8% year-over-year.
Furthermore, non-GAAP net income attributable to stockholders came in at $840 million and $3.24 per common share for the quarter, up 0.7% and 1.6% year-over-year, respectively.
According to the company’s guidance for second quarter, NXPI expects total revenue of $3.02 billion - $3.22 billion. Further, it expects its non-GAAP gross profit of $1.75 billion - $1.90 billion and non-GAAP operating income to range from $1 billion to $1.13 billion. Also, the company’s non-GAAP EPS is projected at $3.00 - $3.41 for the quarter.
Street expects NXPI’s revenue and EPS for the fourth quarter (ending December 2024) to increase 2.2% and 5.3% year-over-year to $3.50 billion and $3.91, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
NXPI’s stock has increased 33.6% over the past six months and 34.2% over the past year to close the last trading session at $282.37.
NXPI’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality. Within the Semiconductor & Wireless Chip industry, NXPI is ranked #14 out of 92 stocks.
Click here to access additional ratings of NXPI for Momentum, Sentiment, Value, Growth, and Stability.
Stock #2: Applied Materials, Inc. (AMAT)
AMAT engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates in three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.
On July 8, AMAT unveiled materials engineering innovations designed to increase the performance-per-watt of computer systems by enabling copper wiring to scale to the 2nm logic node and beyond. AMAT’s new integrated materials solution™ extends copper wiring to 2nm and beyond.
The new innovation will scale low-resistance copper wiring to the emerging angstrom nodes in the industry and its low-k dielectric material will reduce capacitance and strengthens chips to take 3D stacking to new heights.
On February 26, AMAT launched its portfolio of new products and solutions designed to cater to the patterning requirements of chips in the “angstrom era.” With transition to process nodes at 2nm and below, chipmakers increasingly benefit from new materials engineering and metrology techniques.
For the second quarter that ended April 28, 2024, AMAT’s net revenue increased marginally year-over-year to $6.65 billion. Its non-GAAP gross profit grew 1.9% year-over-year to $3.16 billion and its non-GAAP operating income for the same period was $1.93 billion.
Furthermore, the company’s non-GAAP net income and EPS came in at $1.74 billion and $2.09, up 3.1% and 4.5% from the prior year’s quarter, respectively.
According to the business outlook for the third quarter fiscal 2024, AMAT expects net revenue to be around $6.65 billion, plus or minus $400 million. Also, the company’s non-GAAP earning per share is expected to be in the range of $1.83 to $2.19.
Street expects AMAT’s revenue and EPS for the third quarter (ending July 2024) to increase 3.8% and 6.3% year-over-year to $6.67 billion and $2.02, respectively. Also, the company has topped the consensus revenue and EPS estimate in all four trailing quarters, which is remarkable.
Shares of AMAT have surged 70.2% over the past six months and 81.4% over the past year to close the last trading session at $254.97.
AMAT’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
AMAT has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #9 out of 92 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings we’ve stated above, we also have AMAT ratings for Value, Growth, and Stability. Get all AMAT ratings here.
Stock #1: Amkor Technology, Inc. (AMKR)
AMKR offers outsourced semiconductor packaging and test services internationally. The company provides turnkey packaging and test services, flip-chip scale package products, flip-chip stacked chip scale packages, flip-chip ball grid array packages and memory products.
On April 8, AMKR and Infineon Technologies AG (IFNNY) entered a multi-year partnership to operate a dedicated packaging and test center at AMKR’s manufacturing site in Porto whose operations are expected to commence in the first half of 2025.
The long-term agreement strengthened the companies’ partnership and bodes well with AMKR’s operations, enhancing supply chain resiliency for advanced products supporting automotive and industrial end markets.
On January 16, AMKR and GlobalFoundries Inc. (GFS) announced their strategic partnership to strengthen the European Union automotive supply chain and expand services for global customers.
During the first quarter that ended on March 31, 2024, AMKR reported total net sales of $1.37 billion, and its gross profit rose 3.7% year-over-year to $201.64 million. The company’s operating income grew 6.4% from the year-ago value to $73.13 million.
In addition, net income attributable to Amkor came in at $58.90 million and $0.24 per common share, up 29.9% and 33.3% from the prior year’s quarter, respectively.
As per the company guidance for the second quarter of 2024, AMKR expects net sales of $1.40 billion to $1.50 billion and its net income is expected between $35 million and $75 million, or $0.14 to $0.30 per share.
Analysts expect AMKR’s revenue for the third quarter (ending September 2024) to grow 2.5% year-over-year to $1.87 billion and its EPS for the same period is expected to increase 21.1% year-over-year to $0.65. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
AMKR’s shares have gained 42.8% over the past six months and 55.6% over the past year to close the last trading session at $43.42.
AMKR’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Momentum. It also has a B grade for Value and Sentiment. Within the same industry, AMKR is ranked #6 out of 92 stocks.
In addition to the POWR Ratings we’ve stated above, we also have AMKR ratings for Growth, Stability, and Quality. Get all AMKR ratings here.
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AMAT shares were trading at $242.31 per share on Thursday afternoon, down $12.66 (-4.97%). Year-to-date, AMAT has gained 50.04%, versus a 17.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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