Semiconductors are the lifeblood of modern technology, powering everything from smartphones to cutting-edge computing systems. With the growth of AI, IoT, and 5G technologies, the demand for these tiny but crucial components is surging. While chipmakers have enjoyed years of rising revenue and earnings, the rise of artificial intelligence is propelling these companies to new heights.
For investors, this surge presents an opportune time to scoop up the shares of fundamentally strong semiconductor stocks such as KLA Corporation (KLAC), Applied Materials, Inc. (AMAT), and Qorvo, Inc. (QRVO). These companies are not only experiencing robust revenue growth but are also poised to capitalize on the industry's momentum.
According to the Semiconductor Industry Association, global semiconductor sales reached $149.90 billion in the second quarter of 2024, an increase of 18.3% year-over-year and 6.5% from the prior quarter. Moreover, the U.S. government has poured billions into the sector to boost domestic manufacturing, fueling advancements in everything from communications and computing to healthcare and clean energy.
Despite geopolitical challenges like the Israel-Palestine conflict, the iShares Semiconductor ETF (SOXX) has surged 34.9% over the past nine months, underscoring the industry's robust fundamentals. The global semiconductor market is expected to continue its upward trajectory, with projected annual sales increases of 16% in 2024 and 12.5% in 2025.
According to Statista, the global semiconductors industry’s revenue is expected to expand at a CAGR of 10.1%, reaching $980.80 billion by 2029.
As technology continues to evolve, with AI and high-performance computing (HPC) at the forefront, semiconductor stocks are poised to benefit significantly. AI applications require immense computing power, and the demand for AI chips is only growing. This makes the semiconductor industry an attractive space for investors.
With that in mind, let’s delve deeper into the Semiconductor & Wireless Chip stocks you won’t want to miss out on, starting with our third pick.
Stock #3: Qorvo, Inc. (QRVO)
QRVO develops and commercializes technologies and products for wireless, wired, and power markets worldwide. It operates through three segments: High Performance Analog (HPA); Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG). The company also serves diverse markets, including consumer electronics, smart home/IoT, automotive, EVs, network infrastructure, and aerospace/defense.
On June 18, QRVO launched three new highly integrated RF multi-chip modules (MCMs) designed for advanced radar applications. These modules utilize QRVO’s cutting-edge packaging and process technology to offer a compact size, superior performance, lower noise, and reduced power consumption for modern phased array and multifunction radar systems.
With the recent Anokiwave acquisition, the company is better equipped to offer complete solutions for phased array radar applications.
On June 17, QRVO unveiled three new MMIC power amplifiers tailored for Ku-Band satellite communications (SATCOM) terminals. These products enhance performance and efficiency in satellite uplink systems, supporting the growing demand for high-speed data communications in defense and aerospace applications. They offer output power ranging from 8W to 55W, allowing users to select the ideal power level for their specific needs.
For the first quarter of 2025, which ended on June 29, 2024, QRVO's non-GAAP revenue increased 36.2% year-over-year to $886.67 million, while its adjusted gross profit grew 29.8% from the year-ago value to $362.70 million. Its non-GAAP operating income stood at $98.13 million, up 110.1% year-over-year. The company’s non-GAAP net income amounted to $83.52 million or $0.87 per share, reflecting an increase of 148.5% and 155.9% year-over-year, respectively.
Building on this quarter's momentum, the company updated its financial guidance for the second quarter of 2024. QRVO anticipates revenue between $1.00 billion and $1.05 billion, with a non-GAAP gross margin between 46% and 47%. It also forecasts non-GAAP EPS to range from $1.75 to $1.95.
Analysts expect QRVO’s revenue for the fourth quarter (ending March 2025) to increase 2.9% year-over-year to $968.46 million, while its EPS for the same quarter is expected to grow 6.8% from the prior year to $1.48. Moreover, the company has consistently exceeded expectations, surpassing the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 21.5%, closing the last trading session at $106.20.
QRVO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
QRVO has a B grade for Growth, Sentiment, and Quality. It is ranked #15 out of 90 stocks in the Semiconductor & Wireless Chip industry. Click here to access the other QRVO ratings for Value, Momentum, and Stability.
Stock #2: Applied Materials, Inc. (AMAT)
AMAT is a materials engineering solutions provider with a market cap of $158.29 billion. The company provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. It operates through three segments: Semiconductor Systems; Applied Global Services (AGS); and Display and Adjacent Markets.
On July 8, AMAT introduced 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, reducing resistance by as much as 25%. Additionally, a new enhanced low-k dielectric material has been developed to lower chip capacitance and strengthen logic and DRAM chips for more efficient 3D stacking.
On June 13, buoyed by its strong financial performance, AMAT announced a quarterly dividend of $0.40 per share on its common stock, payable to its shareholders on September 14, 2024.
The company pays an annual dividend of $1.60, which translates to a yield of 0.84% at the current share price. Its four-year average dividend yield is 0.84%. Moreover, its dividend payouts have increased at a CAGR of 14.8% over the past three years.
In the fiscal second quarter that ended on April 28, 2024, AMAT’s net revenue increased marginally to $6.65 billion. Its non-GAAP gross profit grew 1.9% from the year-ago value to $3.16 billion. In addition, its adjusted net income amounted to $1.74 billion and $2.09 per ordinary share, reflecting an increase of 3.1% and 4.5% year-over-year, respectively.
According to the business outlook for the fiscal third quarter of 2024, the company expects its net revenue to range from $6.25 billion to $7.05 billion. The non-GAAP EPS is expected to range from $1.83 to $2.19.
Street expects AMAT’s revenue for the third quarter (ended July 2024) to increase 3.8% year-over-year to $6.67 billion. Its EPS for the third quarter is expected to grow 6.3% from the previous year, settling at $2.02. In addition, the company has topped the revenue and EPS estimates in each of the trailing four quarters, which is promising.
The stock has gained 33.5% over the past nine months to close the last trading session at $191.18.
It’s no surprise that AMAT has an overall rating of B, equating to a Buy in our POWR Ratings system. It also has a B grade for Momentum, Sentiment, and Quality. Out of 90 stocks in the same industry, AMAT is ranked #12.
Beyond what is stated above, we’ve also rated AMAT for Growth, Value, and Stability. Get all AMAT ratings here.
Stock #1: KLA Corporation (KLAC)
KLAC designs manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide. The company operates through three segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection.
On August 1, the company declared a quarterly dividend of $1.45 per common share, payable on September 3, 2024, to shareholders of record on August 15, 2024. KLAC pays an annual dividend of $5.80, which translates to a yield of 0.78% at the prevailing price levels. Its four-year average dividend yield is 1.15%. Also, it has a record of 14 years of consecutive dividend growth.
KLAC’s total revenues for the fiscal fourth quarter that ended June 30, 2024, increased 9.1% year-over-year to $2.57 billion. The company’s adjusted net income attributable to KLAC came in at $892.81 million or $6.60 per share, up 20.2% and 22.2% year-over-year, respectively. In addition, its cash flow from operating activities stood at $892.61 million.
For the first quarter of fiscal 2025, the company expects non-GAAP EPS to be between $6.40 and $7.60. Total revenue is forecasted to range between $2.60 billion to $2.90 billion. The non-GAAP gross margin is anticipated to grow 60.5% to 62.5% year-over-year, with a 2% benefit.
The consensus revenue estimate of $2.76 billion for the fiscal first quarter (ending September 2024) represents a 15.1% increase year-over-year. The consensus EPS estimate of $7.05 for the ongoing quarter indicates a 22.8% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
KLAC shares have surged 51% over the past year and 47.5% over the past nine months to close the last trading session at $746.78.
KLAC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Momentum and Sentiment. Within the same industry, KLAC is ranked #10. Click here to access additional ratings for KLAC (Growth, Value, and Stability).
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AMAT shares were trading at $193.30 per share on Monday afternoon, up $2.12 (+1.11%). Year-to-date, AMAT has gained 19.69%, versus a 12.93% 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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