Valued at $591.8 billion in 2022, the global semiconductor market is expected to reach $1.88 trillion by 2032, exhibiting a CAGR of 12.28%. The rising penetration of digital technologies largely propels this growth, rapid adoption of AI and growing demand in the industrial and automotive industries have largely propelled this growth. This data demonstrates that semiconductor usage will continue to skyrocket for the foreseeable future. These semiconductor stocks are prime to master this industry and deliver high returns over the next couple of years.
Wolfspeed (WOLF)
Wolfspeed (NYSE:WOLF) is a semiconductor company that designs and supplies silicon carbide materials and devices for high-power applications. It has had steady growth through the last few years, which is reflected in investor expectations.
Q4 2023 earnings records exceeded expectations by $110 million. This defied market expectations, with analysts now predicting an upside of 57.49%. This is supported by financial institutions, which own a considerable 113.99% of company stock. This stems from short selling. Adding to this, out of 18 Yahoo Finance! investors, seven recommended a buy, while none recommended a sell. Quarterly YoY revenue growth of 19.90% contradicts the EPS of -3.95, indicating that the company is growing.
The company’s growth and growth potential are becoming increasingly apparent. It has recently expanded on a $275 million semiconductor manufacturing deal. This shows customer satisfaction and lays out the potential for future sales. The sale of Wolfspeed RF (Radio Frequency) indicates a shift in management’s perspective, leading to a focus on the semiconductor division.
Strong institutional confidence, high growth potential and being in one of the most growth-prone sectors for the near future make WOLF a buy stock.
Microchip Technology (MCHP)
Microchip Technology (NASDAQ:MCHP) develops, manufactures and sells specialized microcontroller, mixed-signal, analog and Flash-IP integrated circuits. MCHP is up 2.13% YoY with a 12-month median price target of $94.50, representing a 14.68% increase from its current price of $82.40.
In Q3 2024, Microchip topped analyst estimates, reporting revenue of $1.77 billion and EPS of $0.77. The company also boasted a levered FCF margin of 26.29%, above the sector median of 8.96%. Furthermore, Microchip paid off $392.0 million of debt and declared a record quarterly dividend of $0.45 per share, reflecting the company’s operational capabilities even in a sluggish year for chipmakers.
Looking forward, Microchip will receive a boost from the recent release of their 3.3 kV XIFM plug-and-play mSiC gate driver, designed to accelerate the adoption of high-voltage silicon carbide power modules. The company aims to simplify system integration with this new driver, which offers significant advantages in terms of efficiency, size, and weight. Moreover, earlier this year, the U.S. Commerce Department awarded Microchip $162 million to bolster domestic production of semiconductors. The grants are expected to triple production at two Microchip factories, accelerating growth.
Axcelis Technologies (ACLS)
Axcelis Technologies (NASDAQ:ACLS) is an American company that designs, manufactures, and services ion implantation equipment used in the production of semiconductors. After falling more than 44% from its all-time high in 2023, the stock is now trading at a bargain. Axcelis has a P/E ratio of just 15.72, less than half the average P/E ratio of the iShares Semiconductor ETF. Analysts agree the stock is undervalued. The median 12-month price forecast from eight analysts is $169.15, 51.15% higher than Axcelis’s current price.
The global ion implantation machine market is expected to grow at a modest CAGR of 6.4% until 2030, but Axcelis’s growth in 2023 far surpassed that. Despite the industry downturn last year, the company reported full-year revenue of $1.13 billion, a 23% increase from 2022. Additionally, its net income of $246.3 million increased 35% YoY. Axcelis also carries a backlog of $1.2 billion, highlighting the strong demand for its products despite a broader slowdown.
While current market conditions restrain Axcelis’s growth, AI could drive a comeback. Personal computers with AI capabilities require significantly more DRAM (Dynamic Random Access Memory) than traditional computers. As a result, demand for memory and storage chips could surge, becoming a tailwind for Axcelis later this year. According to CEO Russell Low, the memory segment “will recover in the second half of the year, enabling strong growth in 2025.”
On the date of publication, Michael Que 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.
