The global semiconductor industry is growing with the increasing use and integration of electronics across applications such as network communication devices, data processing, industrial automation, consumer electronics, automotive, and government projects. But the industry could be in a tough spot with the threat of a chip shortage looming.
Against this backdrop, invest in fundamentally solid semiconductor stocks like Taiwan Semiconductor Manufacturing Company (TSM), Qorvo, Inc. (QRVO), and QUALCOMM Incorporated (QCOM) before the next chip shortage occurs. It might be wise to do so. These stocks are poised for significant growth in the near future.
The semiconductor industry is rapidly expanding due to technological innovation across various fields. Key technologies such as artificial intelligence (AI), machine learning (ML), cloud computing, 5G networks, autonomous vehicles, and big data analytics that rely heavily on semiconductor components are driving industry growth.
With such huge demand, it is expected that there will soon be a shortage of semiconductor chips. According to a report from Bain and Company, the surge in demand for graphics processing units due to AI alone could increase total demand for certain components by more than 30% by 2026. This is coupled with geopolitical tensions and a surge in demand for AI-enabled devices. It could probably cause the next chip shortage.
That said, the Semiconductor Industry Association (SIA) reported that global semiconductor industry revenue totaled $149.9 billion in Q2 2024, an 18.3% increase compared to Q2 2023. did. Sales in June 2024 amounted to 50 billion dollars, an increase of 1.7%. Increase compared to May 2024.
World Semiconductor Trade Statistics (WSTS) predicts that the global semiconductor market will grow by 12.5% into 2025, reaching an estimated valuation of $687 billion. This growth is expected primarily in the memory and logic segment, which is expected to increase significantly.
Moreover, government initiatives are further increasing the growth prospects for this sector. CHIPS and the Science Act are intended to strengthen U.S. semiconductor manufacturing by investing in U.S. chip manufacturing capacity, expanding domestic production and reducing supply chain vulnerabilities.
So by investing in these three stocks, you can take full advantage of their current growth potential. As demand continues to increase and technology advances, these companies are well-positioned to benefit from the expanding semiconductor industry, potentially delivering significant returns in the near future.
With these trends in mind, let’s analyze the fundamentals of three Semiconductor & Wireless Chip stocks, starting with #3.
Stock #3: Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests and internationally sells integrated circuits and other semiconductor devices. The company offers a variety of wafer fabrication processes, as well as customer and engineering support services.
On August 20, ESMC, a joint venture between TSM, Robert Bosch GmbH, Infineon Technologies AG and NXP Semiconductors NV, marks the initial stages of land preparation for the joint venture’s first semiconductor research laboratory in Dresden, Germany. The ceremony was announced.
This new venture will allow TSM to expand its market exposure and business operations.
TSM’s net revenue for the second quarter of fiscal 2024 ended June 30 was $20.82 billion, an increase of 40.1% year over year. Gross profit increased 37.6% year-on-year to $11.07 billion. The company’s operating income was $8.86 billion, representing year-over-year growth of 41.9%.
Moreover, the company’s net income and EPS increased by 36.3% and 36.4% year-on-year to $7.66 billion, or $0.30.
Analysts expect TSM’s revenue for the third quarter of its fiscal year ending September 2024 to be $23.33 billion, up 38.1% year over year. EPS for the current quarter is expected to be $1.78, up 37.9% year-over-year. Additionally, the company beat consensus revenue and EPS estimates in all four of his subsequent quarters.
TSM stock has increased 32.1% over the past six months and 118.1% over the past year, closing at $188.19.
TSM’s strong fundamentals are reflected in its POWR Rating. The stock has an overall rating of “B”, which equates to a “buy” according to our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to the best degree.
The quality grade is A and the sentiment grade is B. TSM is ranked #11 out of 91 stocks in the Semiconductor & Wireless Chips industry.
In addition to the POWR ratings above, we also have ratings for TSM for Growth, Momentum, Value, and Stability. Get all TSM reviews here.
Stock 2: Quorvo Co., Ltd. (QRVO)
QRVO develops and commercializes technology for wireless, wireline and power markets. The company’s business spans three segments: Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG). We also provide foundry services for defense and aerospace customers.
On January 31, QRVO announced a definitive agreement to acquire Anokiwave, a supplier of high-performance silicon integrated circuits for intelligent active array antennas used in defense, SATCOM, and 5G applications. Anokiwave’s high-frequency beamforming and IF-to-RF conversion ICs complement QRVO’s existing RF front-end portfolio.
The combination of QRVO’s capabilities and Anokiwave’s technology will enable QRVO to deliver highly integrated solutions and SiPs for defense, aerospace, and network infrastructure.
QRVO’s revenue for the first quarter of fiscal 2025 ended June 29, 2024 was $886.67 million, an increase of 36.2% year over year. Non-GAAP operating income increased 110.1% year over year to $98.13 million.
Additionally, the company’s non-GAAP net income was $83.52 million, or $0.87 per share, an increase of 148.5% and 155.9%, respectively, from the prior year period.
QRVO exceeded June quarter estimates for sales, gross profit, and EPS. The company expects a similar increase in the future.
QRVO is forecasting revenue of approximately $1.025 billion for the September 2024 quarter, with potential headroom of $25 million. Non-GAAP gross margin is expected to be between 46% and 47%, and non-GAAP diluted earnings per share is expected to be between $1.75 and $1.95.
Street expects QRVO’s revenue and EPS to increase 8% and 28.3% year over year to $4.27 billion and $7.97 for the next fiscal year, ending March 2026, respectively. Additionally, the company beat consensus revenue and EPS estimates in each of his four subsequent quarters.
QRVO stock has increased 7.8% over the past year, closing at $104.05.
QRVO’s promising outlook is reflected in its POWR rating. The overall rating is B, which is equivalent to a “buy” according to our own rating system.
QRVO earns a B grade for Growth, Sentiment, Value, and Quality. Ranked 3rd out of 91 stocks in its industry.
In addition to the above, we also give it a QRVO grade for momentum and stability. All QRVO ratings are available here.
Stock #1: Qualcomm Incorporated (QCOM)
QCOM develops and commercializes wireless technologies such as 3G, 4G, and 5G, as well as high performance computing and artificial intelligence. That segment includes Qualcomm CDMA technology. Qualcomm Technology License; Qualcomm’s Strategic Initiatives.
On September 11, Qualcomm Technologies, Inc., a subsidiary of QCOM, together with Aramco and the Saudi Arabian Research, Development and Innovation Authority (RDIA), announced the launch of Design in Saudi Arabia (DISA).
DISA aims to support startups implementing AI, Internet of Things (IoT), and wireless technologies for industrial use cases with the help of QCOM’s utilities. This development will help QCOM expand its business worldwide and gather more market exposure.
QCOM’s revenue for the third quarter of fiscal 2024, which ended June 23, was $9.39 billion, an increase of 11.2% from the same period last year. The company reported non-GAAP operating income of $3.02 billion, representing 19.7% year-over-year growth.
QCOM’s non-GAAP net income was $2.65 billion, an increase of 25.8% year over year, and non-GAAP EPS of $2.33, an increase of 24.6% year over year.
Consensus estimates for revenue and EPS for the fiscal fourth quarter ending September 2024 are $9.86 billion and $2.55, reflecting year-over-year increases of 13.8% and 26.1%, respectively. Additionally, the company beat consensus revenue and EPS estimates in all four of his subsequent quarters.
QCOM stock has risen 19.8% over the past nine months and 55.6% over the past year, closing its last trade at $171.78.
QCOM’s positive outlook is reflected in its POWR Rating. The stock has an overall rating of “B”, which equates to a “buy” according to our proprietary rating system.
QCOM’s quality is A grade. It topped the semiconductor and wireless chip industry with 91 stocks.
Click here to see QCOM’s assessment of Growth, Value, Momentum, Stability and Sentiment.
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TSM stock was trading at $186.68 per share Thursday morning, up $4.33 (+2.37%). Year-to-date, TSM has gained 81.05%, compared to the benchmark S&P 500 index’s gain of 21.87% over the same period.
About the author: Aanchal Sugandh
Aanchal’s passion for financial markets drives his work as an investment analyst and journalist. She earned a bachelor’s degree in finance and is pursuing her CFA program. She is adept at using fundamental analysis skills to assess the long-term prospects of stocks. Her goal is to help investors build portfolios that deliver sustainable returns. more…
