While innovations such as artificial intelligence and virtual reality have dominated headlines in recent years, the undergirding of such technologies catalyzes the relevance of cheap semiconductor stocks for smart investors. Naturally, as pure-play AI hype faded into the background, the chipmakers and related enterprises quickly came into view.
Surely, we all appreciate the blistering performance of graphics processor specialist Nvidia (NASDAQ:NVDA). So far this year, NVDA gained over 220% of its equity value. At the same time, NVDA doesn’t quite make a great case for affordable semiconductor stocks. Priced at almost 63X forward (projected) earnings, Nvidia is wildly expensive. Fortunately, with so much hype on the usual suspects, investors can look to lesser-discussed chip manufacturers. On that note, below are compelling ideas for cheap semiconductor stocks.
Cheap Semiconductor Stocks: AXT (AXTI)
A material sciences company, AXT (NASDAQ:AXTI) develops and manufactures high-performance compound and single-element semiconductor substrate wafers. It’s not the most surprising name among cheap semiconductor stocks. After all, retail investors tend to chase the hottest trends of the moment. Still, given that AXT’s acumen ultimately facilitates relevant sectors such as 5G infrastructure and data center connectivity, the business deserves careful consideration.
Financially, what makes AXTI one of the affordable semiconductor stocks is its low multiple. Trading at 14.24x trailing earnings, the multiple is comparatively more palatable than the sector’s median stat of 24.33x. Also, the market prices AXTI at a revenue multiple of only 1.05, ranking favorably below nearly 80% of its peers.
Better yet, the company symbolizes one of the semiconductor stocks for smart investors because of its operational prowess. Carrying a three-year revenue growth rate (per-share basis) of 16.2%, AXT outflanks 61% of its rivals. As well, its EBITDA growth rate during the same period impresses at 66.4%.
Cheap Semiconductor Stocks: ACM Research (ACMR)
Another quiet but relevant background player among cheap semiconductor stocks, ACM Research (NASDAQ:ACMR) develops, manufactures, and sells semiconductor process equipment for single-wafer or batch wet cleaning, electroplating, stress-free polishing, and thermal processes. These activities are critical to advanced semiconductor device manufacturing along with wafer-level packaging. Presently, ACMR carries a market capitalization of just under $718 million.
While it might not be a household name, ACM belongs on your radar of semiconductor stocks for smart investors. According to Fortune Business Insights, the underlying chip manufacturing equipment market reached a valuation of $101.6 billion last year. Experts project that by 2029, the segment could hit $196.7 billion, representing a near-double-digit compound annual growth rate (CAGR).
ACMI is also one of the affordable semiconductor stocks based on its forward multiple of 12.15. As a discount to projected earnings, ACM ranks better than nearly 82% of its rivals. Also, the company benefits from an enormous three-year revenue growth rate of 47%.
Cheap Semiconductor Stocks: Photronics (PLAB)
An assuming entity among cheap semiconductor stocks, Photronics (NASDAQ:PLAB) is a leading manufacturer of integrated circuit and flat panel display (FPD) photomasks. Per its corporate profile, Photronics was founded in 1969. Since then, it has been a trusted source of photomask supplies. No, it’s not the most exciting tech player. However, the smart money is taking notes, having gained almost 56% since the January opener.
According to 360 Research Reports, the global photomask industry will be a slow but steady mover. In 2022, the segment reached a valuation of $5.59 billion last year. Between 2023 through 2028, experts in the field project that the sector will expand at a CAGR of 4.8%. At the culmination of the forecast period, the industry could hit $7.38 billion.
Despite the strong run in PLAB stock, it remains one of the undervalued semiconductor stocks for smart investors. Specifically, shares trade at a price/earnings-to-growth (PEG) ratio of 0.59x. In contrast, the sector median stands at a loftier 1.19X.
MaxLinear (MXL)
A leading provider of radio frequency, analog, digital, and mixed-signal integrated circuits, MaxLinear (NASDAQ:MXL) serves industries involved in connectivity and access, wired and wireless infrastructure, and industrial and multi-market applications. Carrying a market cap of $1.97 billion, it’s one of the larger small-cap enterprises. However, it’s also volatile, slipping almost 26% since the January opener.
Still, for those who enjoy unearthing cheap semiconductor stocks, MXL deserves close inspection. On the operational side, MaxLinear prints a three-year revenue growth rate of 45.8%, smoking 93.43% of the competition. Also, its free cash flow growth during the same frame stood at 60.5%, above 88.85%.
As for affordable semiconductor stocks, it’s difficult to overlook the value proposition. Right now, the market prices MXL at a forward multiple of 20.74. As a discount to projected earnings, MaxLinear ranks better than 61.65% of its rivals. Also, MXL trades at a revenue multiple of only 1.94X, below the 2.77x sector median.
SkyWater Technology (SKYT)
A U.S.-owned and domestically based pure-play semiconductor foundry, SkyWater Technology (NASDAQ:SKYT) isn’t just another name among cheap semiconductor stocks. Rather, it’s one of the most important enterprises for overall economic and national security. With Covid-19 exposing our nation’s vulnerabilities regarding critical chip supply disruptions, bringing more production in-house could go a long way.
According to Mordor Intelligence, the chip foundry market size may reach $143.12 billion by the end of this year. Analysts project that from now until 2028, the segment could expand at a CAGR of 7.34%. At the culmination of the forecast period, the industry could print a valuation of $203.94 billion. Further, increased global demand might make the above forecast a tad bit conservative.
If so, SKYT would appear as one of the semiconductor stocks for smart investors. To be fair, many of its financial metrics – such as a poor profitability picture – embody an aspirational profile. Still, the market prices SKYT at a trialing sales multiple of 1.67, ranking favorably lower than 66.88% of its peers.
Alpha & Omega Semiconductor (AOSL)
A lesser-known entity among cheap semiconductor stocks, Alpha & Omega Semiconductor (NASDAQ:AOSL) is a designer, developer, and global supplier of a broad range of power semiconductors. Per its public profile, Alpha has developed extensive intellectual property and technical knowledge that encompasses the latest advancements in the power semiconductor industry. Currently, AOSL is on a quiet rally, gaining over 10% since the start of the year.
According to Market Research Future, the power semiconductor market reached a valuation of $59.7 billion in 2021. By 2030, the segment should hit a valuation of $97.2 billion. While the underlying growth is modest, the auto industry’s rapid global expansion should provide ongoing relevance. Plus, with AOSL featuring a market cap of less than $900 million, Alpha enjoys a massive addressable market.
Though the company doesn’t print the most sterling financial data, it does feature a stable balance sheet, backed by an equity-to-asset ratio of 0.71x. Also, AOSL is relatively cheap, with a PEG ratio of 0.61x. This stat ranks lower than nearly 72% of sector rivals.
Amkor Technology (AMKR)
Headquartered in Tempe, Arizona, Amkor Technology (NASDAQ:AMKR) is one of the world’s largest providers of outsourced semiconductor packaging and test services. According to its corporate profile, Amkor pioneered the outsourcing of IC packaging and testing. Today, it’s a strategic manufacturing partner for the world’s leading chip companies, foundries, and electronics original equipment manufacturers (OEMs).
One of the larger enterprises on this list of cheap semiconductor stocks, Amkor carries a market cap of just over $7 billion. Since the beginning of this year, AMKR shares gained nearly 13%. Over the past 365 days, they swung up almost 27%. Operationally, Amkor prints a three-year revenue growth rate of 19.5%, beating out 68.17% of its peers. Also, during the same period, its FCF growth rate clocks in at 26.7%, above 72.47%.
Finally, the market prices AMKR at a forward multiple of 18.02. As a discount to projected earnings, Amkor ranks better than 68.42% of the competition. Thus, it’s one of the semiconductor stocks for smart investors to consider.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
