With the rapid technological transformations across several sectors, the semiconductor industry is experiencing rapid expansion. Key technologies like AI, machine learning, cloud computing, 5G networks, autonomous vehicles, and big data analytics rely heavily on advanced semiconductor components, paving new growth opportunities.
Given this backdrop, investors could consider buying fundamentally strong chip stocks STMicroelectronics N.V. (STM), Tower Semiconductor Ltd. (TSEM), and Cirrus Logic, Inc. (CRUS) to thrive in the expanding tech landscape.
The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors totaled $137.70 billion during the first quarter of 2024, an increase of 15.2% year-over-year. John Neuffer, SIA president and CEO, said, “The market is expected to continue to grow during the remainder of the year, with double-digit annual growth projected for 2024.”
The semiconductor industry is poised for substantial growth and expansion in the rapidly evolving technology landscape. This year, trends prominently influencing the chip market include 5G and connectivity, AI and machine learning, autonomous vehicles, the Internet of Things (IoT), augmented reality and virtual reality (AR/VR), and cloud computing and data centers.
The global semiconductor market is projected to reach $1.14 trillion by 2033, expanding at a CAGR of 7.6% during the forecast period (2024-2033). Also, with generative AI fueling demand for high-performance AI chips, revenue from AI semiconductors is expected to total $71 billion in 2024 globally, an increase of 33% from 2023.
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: STMicroelectronics N.V. (STM)
Headquartered in Geneva, Switzerland, STM designs, develops, manufactures, and sells semiconductor products internationally. The company operates through the Automotive and Discrete Group; Analog, MEMS and Sensors Group; and Microcontrollers and Digital ICs Group segments.
On June 10, STM launched STeID Java Card™ solutions for trusted e-Identity and e-Government applications. The smartcard platform meets state-of-the-art requirements for electronic identity (eID) and eGovernment use cases.
The newly introduced secure smartcard OS and applets create a comprehensive portfolio for electronic ID documents and will accelerate the deployment of advanced solutions.
On June 5, STM released an energy-efficient autonomous inertial measurement unit (IMU) with industrial product longevity, which targets vibration sensing and motion tracking in industrial and robotics applications. The ISM330BX 6-axis IMU combines edge-AI processing and STM’s Qvar electric charge variations sensing with product-longevity assurance.
For the first quarter that ended March 30, 2024, STM reported net revenues of $3.47 billion, and its gross profit was $1.44 billion for the same period. The company’s net income and EPS attributable to parent company stockholders came in at $513 million and $0.54 for the quarter, respectively.
Furthermore, the company’s total assets were $24.97 billion as of March 30, 2024, compared to $21.20 billion as of April 1, 2023.
Analysts expect STM’s revenue for the fiscal year (ending December 2025) to grow 14.6% year-over-year to $16.53 billion. The company’s EPS is expected to increase 39.9% year-over-year to $3.03 for the same period. Shares of STM have surged 3% over the past month to close the last trading session at $42.46.
STM’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 and Value. Within the Semiconductor & Wireless Chip industry, STM is ranked #12 out of 92 stocks.
Click here to access additional ratings of STM for Sentiment, Momentum, Growth, and Stability.
Stock #2: Tower Semiconductor Ltd. (TSEM)
Based in Migdal Haemek, Israel, TSEM is an independent semiconductor foundry emphasizing specialty process technologies to manufacture analog-intensive mixed-signal semiconductor devices globally. The company provides various customizable process technologies like SiGe, BiCMOS, mixed-signal/CMOS, and RF CMOS.
On February 26, 2024, TSEM and Tianyi Micro, a leading provider of micro display driver chips specializing in silicon-based micro-OLEDs and micro-LEDs, entered into strategic cooperation for the development of next-generation OLED micro displays for AR/VR to cater to the Chinese and global market needs.
The strategic partnership expands TSEM’s offerings to include dedicated flows for micro display applications and address a broader customer base.
TSEM posted revenue of $327.24 million for the first quarter that ended March 31, 2024, while its gross profit was $72.61 million. The company’s adjusted net profit attributable to the company and EPS came in at $51.84 million and $0.46, respectively.
Also, the company’s cash and cash equivalents and total assets stood at $260.50 million and $2.98 billion as of March 31, 2024, respectively.
Street expects TSEM’s revenue and EPS for the fiscal year (ending December 2025) to increase 10.2% and 16.7% year-over-year to $1.57 billion and $2.22, respectively. Also, the company has topped the consensus EPS estimate in all four trailing quarters, which is remarkable.
Shares of TSEM have surged 5.7% over the past month and 26.7% over the past six months to close the last trading session at $38.64.
TSEM’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.
TSEM has an A grade for Momentum and a B for Value, Sentiment, and Quality. It is ranked #3 out of 92 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings we’ve stated above, we also have TSEM ratings for Growth and Stability. Get all TSEM ratings here.
Stock #1: Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that develops low-power, high-precision mixed-signal processing solutions internationally. It offers audio products, including amplifiers, codecs components that integrate analog-to-digital converters (ADCs) and digital-to-analog converters (DACs), and SoundClear technology.
On February 5, CRUS entered a collaboration with Intel Corporation (INTC) and Microsoft Corporation (MSFT) on a new PC reference design to feature CRUS’ high-performance audio and power technologies and Intel's forthcoming client processor, codenamed Lunar Lake. It also aims to reduce heating, extend battery life, and enable smaller, thinner designs.
For the fourth quarter, which ended on March 30, 2024, CRUS reported net sales of $371.83 million, of which its sales from High-Performance Mixed-Signal rose 3.4% year-over-year to $145.15 million. Its non-GAAP operating income grew 14.3% from the year-ago value to $$76.51 million.
In addition, the company’s non-GAAP net income and EPS came in at $69.05 million and $1.24, indicating growth of 31.2% and 34.8% from the prior year’s quarter, respectively.
As per the company’s business outlook, CRUS expects revenue to range between $290 million and $350 million for the first quarter of fiscal 2025.
Analysts expect CRUS’ revenue for the fiscal year (ending March 2026) to increase 8.3% year-over-year to $1.96 billion, and its EPS for the same period is expected to grow 12.4% year-over-year to $7.07. Furthermore, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
CRUS’ shares have gained 44.1% over the past six months and 56.8% over the past year to close the last trading session at $122.56.
CRUS’ sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Quality, and Sentiment. Within the same industry, CRUS has topped among the 92 stocks.
In addition to the POWR Ratings we’ve stated above, we also have CRUS ratings for Stability and Momentum. Get all CRUS ratings here.
What To Do Next?
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STM shares rose $0.27 (+0.64%) in premarket trading Monday. Year-to-date, STM has declined -15.20%, versus a 14.55% 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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