With the rising consumer demand amid growing applications and advancements in technology, innovations in the chips industry is continuously rising. Also, the adoption of AI-driven devices and changing consumer preferences will hike demand in the future, opening more opportunities for the semiconductor market.
Given the industry’s promising prospects, investors could consider buying quality semiconductor stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), Qorvo, Inc. (QRVO), and QUALCOMM Incorporated (QCOM) for long-term gains.
Despite the lurking semiconductor shortage projections owing to an AI-driven surge in demand for graphics processing units and high demand for AI-enabled devices, coupled with continued geopolitical tensions and other supply risks, the semiconductor market appears promising.
The Semiconductor Industry Association (SIA) reported global semiconductor sales of $53.10 billion for August 2024, reflecting a 20.6% increase from the same period in 2023 and a 3.5% up from July 2024 total of $51.3 billion. Also, on a regional level, sales marked strong year-to-year growth, with the Americas sales up 43.9%, followed by China at 19.2%, and Asia Pacific/All Other at 17.1%.
Further, SIA reported industry global sales of $527 billion in 2023, with around 1 trillion semiconductors sold globally. The CHIPS and Science Act has expanded semiconductor fabrication capacity in the US, and the rising demand has prompted new industry investments in order to increase chip production.
The global semiconductor market is expected to grow from $681.05 billion in 2024 to $2.06 trillion by 2032, expanding at a notable CAGR of 14.9%. Also, the U.S. semiconductor market is expected to grow exponentially, reaching $258.30 billion in 2032, driven by increasing consumer electronics and Integrated Circuits Integration product usage.
With these favorable trends in mind, let’s look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices internationally. The company provides wafer fabrication processes, including processes to manufacture complementary metal-oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others.
On October 3, TSM and Amkor Technology, Inc. (AMKR) signed a memorandum of understanding to collaborate and bring advanced packaging and test capabilities to Arizona to further expand the region’s semiconductor ecosystem. Under the agreement, TSMC will leverage Amkor’s contract turnkey advanced packaging and test services to support its customers.
The strategic collaboration and proximity of TSMC’s front-end fab and Amkor’s back-end facility will accelerate overall product cycle times.
During the third quarter that ended September 30, 2024, TSM’s net sales increased 38.9% year-over-year to NT$759.69 billion ($23.62 billion). Its gross profit grew 48.1% from the year-ago value to NT$439.34 billion ($13.66 billion). The company’s income from operations was NT$360.77 billion ($11.22 billion), up 58.2% year-over-year.
Furthermore, TSM’s net income and EPS totaled NT$325.26 billion ($10.11 billion) and NT$12.54, indicating growth of 54.2% from the prior year’s quarter, respectively.
Analysts expect TSM’s EPS for the fourth quarter (ending December 2024) to increase 50% year-over-year to $2.16. For the same quarter, the company’s revenue is expected to grow 30.7% year-over-year to $25.89 billion. Further, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of TSM have surged 48.1% over the past six months and 126.2% over the past year to close the last trading session at $205.84.
TSM’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating 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 an A grade for Sentiment and Quality. It is ranked #10 out of 91 stocks in the Semiconductor & Wireless Chip industry.
Click here to access additional TSM ratings for Stability, Momentum, Value, and Growth.
Stock #2: Qorvo, Inc. (QRVO)
QRVO engages in the development and commercialization of technologies and products for wireless, wired, and power markets globally. It operates in three segments: High Performance Analog (HPA); Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG).
In terms of forward EV/Sales, QRVO is trading at 2.73x, 8.4% lower than the industry average of 2.98x. Further, the stock’s forward Price/Sales multiple of 2.51 is 15.8% lower than the industry average of 2.98. Likewise, its forward Price/Cash Flow of 12.98x is 42.2% lower than the industry average of 22.44x.
For the first quarter that ended June 29, 2024, QRVO’s total revenue rose 36.2% year-over-year to $886.67 million, of which its ACG revenue increased 55.8% year-over-year to $642.30 million. Its non-GAAP gross profit grew 29.8% from the prior-year quarter to $362.66 million. Also, its non-GAAP operating income stood at $98.12, up 110% year-over-year.
Also, the company’s non-GAAP net income increased 148.7% and 155.9% from the year-ago value to $83.52 million and $0.87 per share, respectively.
Analysts expect QRVO’s EPS for the fourth quarter (ending March 2025) to increase 7.3% year-over-year to $1.49, while its revenue for the same period is expected to grow 2.8% year-over-year to $967.41 million. Also, it has topped the consensus revenue and EPS estimates in all trailing four quarters.
Shares of QRVO have gained 3.4% over the past month and 12.4% over the past year to close the last trading session at $104.28.
QRVO’s sound fundamentals 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 stock has a B grade for Value, Quality, and Growth. Within the same industry, QRVO is ranked #4 of 91 stocks.
Click here to access other ratings of QRVO for Momentum, Sentiment, and Stability.
Stock #1: QUALCOMM Incorporated (QCOM)
QCOM is engaged in the development and commercialization of foundational technologies for the wireless industry worldwide. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On October 16, QCOM announced a quarterly cash dividend of $0.85 per common share, payable on December 19, 2024, to stockholders of record at the close of business on December 5, 2024.
QCOM pays an annual dividend of $3.40, which translates to a yield of 1.99% at the current share price. Its four-year average dividend yield is 2.09%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.1% over the past three years. QCOM has raised its dividends for 20 consecutive years.
On September 25. QCOM's subsidiary, Aramco, and Saudi Arabia's Research, Development, and Innovation Authority (RDIA) announced their plans to launch Design in Saudi Arabia (DISA), an incubator program for Saudi Arabia that aims to support startups adopting AI, Internet of Things (IoT), and wireless technologies for industrial use cases.
QCOM's revenues increased 11.2% year-over-year to $9.39 billion for the third quarter ended June 23, 2024. The company's non-GAAP operating income of $3.02 billion reflects a 19.7% growth year-over-year. Its non-GAAP net income and EPS came in at $2.65 billion and $2.33, up 25.8% and 24.6% year-over-year, respectively.
Street expects QCOM’s revenue and EPS for the fourth quarter (ended September 2024) to increase 14.6% and 27% year-over-year to $9.93 billion and $2.57, respectively. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
QCOM’s stock surged 4.1% over the past six months and 52.5% over the past year to close the last trading session at $171.10.
QCOM’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
QCOM has an A grade for Quality. The stock is ranked #2 list of 91 stocks in the Semiconductor & Wireless Chip industry.
To see additional POWR Ratings of QCOM for Growth, Sentiment, Value, Stability, and Momentum, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TSM shares fell $0.36 (-0.18%) in after-hours trading Friday. Year-to-date, TSM has gained 94.72%, versus a 24.15% 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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