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Semiconductors are the invisible powerhouses fueling today’s most revolutionary technologies, from smartphones and cloud computing to the rise of artificial intelligence (AI) and 5G. As the world becomes more connected and intelligent, the demand for these tiny yet essential components is exploding. With AI alone propelling chipmakers to record-breaking financial heights, these micro marvels are more vital than ever, powering the innovations that define the future.
As demand for these advanced technologies gains further momentum, chip giants like Nvidia (NVDA), Advanced Micro Devices (AMD), and Broadcom (AVGO) often dominate headlines, benefiting from the massive industry tailwinds. However, several lesser-known semiconductor stocks have been quietly outperforming the broader market this year.
Monolithic Power Systems (MPWR), Credo Technology (CRDO), and Semtech (SMTC) may not immediately spring to mind when considering semiconductor stocks, but these three names have delivered stellar YTD gains, and have earned consensus "Strong Buys" ratings from Wall Street analysts. With projections calling for the global semiconductor market to reach an astonishing $607.4 billion in 2024 and hit an eye-popping $980.8 billion by 2029, it might be an opportune time to scoop up shares of these three hidden gems now.
Semiconductor Stock #1: Monolithic Power Systems
Founded in 1997, Washington-based Monolithic Power Systems, Inc. (MPWR) is a fabless semiconductor powerhouse, driving innovation in high-performance power electronics. Serving industries from telecommunications and cloud computing to automotive and consumer tech, Monolithic’s products power a range of essential applications. The company’s unique blend of reliability, efficiency, and environmental responsibility makes it a leader in the power electronics space.
Valued at a market cap of around $45.02 billion, shares of this chip giant have skyrocketed almost 99% over the past year and 45.7% on a YTD basis, smashing the broader S&P 500 Index’s ($SPX) returns of 33.7% over the past year and 20.3% on a YTD basis.
On Sept. 13, Monolithic announced a quarterly dividend of $1.25 per share, set to be distributed to its shareholders on Oct. 15. The company’s annualized dividend of $5.00 per share offers a modest yield of 0.54%. By maintaining a payout ratio of 51.79%, the company rewards shareholders while ensuring ample flexibility to pursue future growth opportunities.
Following the company’s Q2 earnings results on Aug.1, which sailed past Wall Street’s estimates, shares of Monolithic closed up more than 1% in the next trading session. The company reported impressive revenue of $507.4 million, reflecting a nearly 10.8% year-over-year increase and surpassing estimates by approximately 3.4%.
This growth was driven by a surge in demand for AI power solutions, positive order trends across various end markets, and initial revenue ramps from design wins secured in previous years. On an adjusted basis, the company’s earnings of $3.17 per share shot up 12.8% annually and blew past Wall Street’s forecast of $3.07 per share. At the end of Q2, the company's cash, cash equivalents, and investments rose to an impressive $1.31 billion, up from $1.29 billion in Q1.
While Monolithic generated an operating cash flow of approximately $141 million in Q2, down from $248 million in the previous quarter, its solid cash position underscores its financial resilience and ability to thrive in a competitive market. Looking forward to Q3, management projects revenue to range between $590 million and $610 million, with a GAAP gross margin expected to land between 55.2% and 55.8%. Also, non-GAAP gross margin for the quarter is anticipated to range between 55.5% and 56.1%.
Analysts tracking Monolithic expect the company’s profit to increase 18.6% year over year to $10.41 per share in fiscal 2024 and jump another 34% to $13.95 per share in fiscal 2025.
MPWR stock has a consensus “Strong Buy” rating overall. Out of the 12 analysts offering recommendations for the stock, nine suggest a “Strong Buy,” two recommend “Moderate Buy,” and one has a “Hold” rating.
The average analyst price target of $934.78 indicates only 2.3% potential upside from the current price levels. However, the Street-high price target of $1,075 suggests that MPWR could rally as much as 17.6%.
Semiconductor Stock #2: Credo Technology Group Holding
Credo Technology Group Holding Ltd (CRDO) is driving the future of data infrastructure with high-speed connectivity solutions that break bandwidth barriers. As data rates surge and bandwidth demands grow, Credo delivers innovative, power-efficient solutions optimized for optical and electrical Ethernet applications. From 100G to the emerging 1.6T markets, its cutting-edge technologies, powered by proprietary SerDes and DSP innovations, tackle system bottlenecks while enhancing power efficiency, security, and reliability.
With a market cap of around $5.2 billion, shares of Credo have far outpaced the broader SPX’s gains, delivering stellar returns of roughly 100.8% over the past year and 57.3% on a YTD basis.
Credo announced its fiscal 2025 Q1 earnings results on Sept. 4, and revenue of $59.7 million surpassed estimates, up a remarkable 70% year over year, fueled by a 79.3% annual jump in its total product revenue, which represented almost 90.2% of the company’s topline figure.
Adjusted EPS of $0.04 reflected a dramatic improvement from the year-ago quarter’s adjusted loss per share of $0.03, though it fell short of estimates. Ending the quarter on a strong note, Credo reported a healthy cash and short-term investment balance of $398.6 million, positioning it well for future growth.
Commenting on the Q1 performance, CEO Bill Brennan said, “Our customers’ AI infrastructure deployments remain the catalyst for our recent and expected growth. Going forward in fiscal 2025 and beyond, we expect contributions from our entire suite of innovative, power and cost-efficient, high-speed connectivity solutions.”
For fiscal 2025 Q2, management anticipates revenue to range between $65 million and $68 million. The company expects its GAAP gross margin to range from 61.3% to 63.3%, while the non-GAAP gross margin is anticipated to be slightly higher, between 62% and 64%. Over the longer term, analysts tracking Credo expect the company’s GAAP loss to shrink a notable 87.5% annually in fiscal 2025, with a projected GAAP profit of $0.37 per share in fiscal 2026.
Overall, Wall Street is highly optimistic, with a consensus “Strong Buy” rating for CRDO stock. Of the nine analysts in coverage, seven advise a “Strong Buy,” one suggests a “Moderate Buy,” and one recommends a “Moderate Sell.”
The average analyst price target of $33.88 indicates a roughly 10% potential upside from the current price levels. However, the Street-high price target of $40 suggests that the CRDO could rally as much as 29.8% from here.
Semiconductor Stock #3: Semtech Corporation
Valued at about $3 billion by market cap, California-based Semtech Corporation (SMTC) is a leading innovator in high-performance semiconductors, IoT systems, and cloud connectivity services, driving the future of a smarter, more connected, and more sustainable planet. With a focus on empowering solution architects and developers, Semtech delivers cutting-edge technology solutions across infrastructure, industrial, and consumer markets. The company is committed to enabling breakthrough innovations that shape a more intelligent and sustainable world.
Just like Monolithic and Credo, Semtech’s shares have also crushed the SPX’s returns over the past year, with an impressive gain of 74.1%. Plus, in 2024 alone, SMTC stock soared 104.7%.
After the company unveiled its stronger-than-expected fiscal 2025 Q2 earnings results on Aug. 27, shares of Semtech surged by 11.2% in the subsequent trading session. The company posted net sales of $215.4 million and adjusted EPS of $0.11, reflecting strong sequential growth, despite a slight dip compared to the same period last year. Net sales delivered a solid 4% improvement quarter over quarter, while adjusted EPS surged by a remarkable 83%.
Adjusted EBITDA of 18.8% marked an improvement from the year-ago quarter’s 16.4% and the prior quarter’s 16.1%, indicating Semtech’s increasing operational efficiency and its ability to enhance profitability. While discussing the Q2 performance, CEO Hong Hou emphasized the company's strong execution of its growth strategy, which was highlighted by solid Q2 financial results and an optimistic third-quarter outlook.
CFO Mark Lin also echoed this positive sentiment, stating, “I am pleased to report gross, operating and adjusted EBITDA margin each improved sequentially and year-over-year in our second quarter."
Looking forward to Q3, management projects net sales of approximately $233 million, with a potential variance of $5 million, while gross margin is expected to be around 52%, with a slight fluctuation of 50 basis points.
Additionally, operating income and adjusted EBITDA are expected to hit $40.2 million and $48.7 million for the quarter, maintaining margins of 17.2% and 20.9%, respectively. Analysts tracking SMTC project the company’s GAAP loss to shrink by an impressive 80% annually in fiscal 2025, with a GAAP profit of $0.78 per share expected in fiscal 2026.
SMTC stock has a consensus “Strong Buy” rating overall. Of the 12 analysts covering the stock, nine suggest a “Strong Buy,” one recommends a “Moderate Buy,” and the remaining two have a “Hold” rating.
The average analyst price target of $52.60 indicates a potential upside of 15.6% from current price levels. The Street-high price target of $61 suggests that SMTC could rally as much as 34.4%.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
