Semiconductor industry has been categorised as the most important segments of the overall market and is the backbone of modern digital economy. Society’s dependence on a range of electronic devices and interconnected systems continues to increase on a daily basis, and because of this, importance of semiconductor industry has become more definite. Experts believe that semiconductor industry has direct or indirect connection to all sectors of a particular market. Therefore, top investors continue to check top semiconductor companies to buy so that they don’t miss an opportunity to exploit the benefits of overall sector.
Over past few years, demand of semiconductors has become more pronounced, with higher interest levels in blockchain and cryptocurrencies. While some traders and experts still show interest in blockchain technology, trend of generative AI resulted in another boom in the overall semiconductor industry. While there had been several top semiconductor companies to buy in 2023, stock price performance of NVIDIA Corporation proved that the wave of generative AI is not fading away anytime soon. The company had a market cap of just ~$400 billion at the end of Dec 2022. By 2Q23, its market cap climbed to $1 trillion. Stock of the company gained more than ~200% on YTD basis.
December report by World Semiconductor Trade Statistics organization expects that annual global semiconductor sales is expected to fall by 9.4% year-over-year in 2023, before increasing by more than 13% in 2024 to reach $588.4 billion.
With this in mind, let us now have a look at top semiconductor companies to buy as per stock market experts and veterans
1. Analog Devices, Inc.
The company has been categorised as a leading analog, mixed-signal, and digital signal processing chipmaker, which has significant market share lead in converter chips, that are utilised in translating analog signals to digital and vice versa.
It announced its financial results for 4Q and FY23 that ended on October 28, 2023. For 4Q, the company delivered revenue and profitability above midpoint of its outlook, even though there have been tough macro-economic environment. For the year, 2023 was the company’s 3rd consecutive year of strong revenue, as the company benefitted from Industrial and Automotive businesses.
It saw 4Q revenue of $2.7 billion, with continued double-digit year-over-year growth in Automotive and. Its FY23 operating cash flow came in at $4.8 billion and FCF was $3.6 billion. Board of Directors of the company declared quarterly cash dividend of $0.86 per share. Payment date of the dividend has been set at December 14, 2023.
The company expects customer inventory digestion to persist in 1H of the year, which exhibits its return to normal lead times and tough macro-economic landscape. Despite challenges, the company expects that its strong business model and focus on execution excellence should support its operating margins and FCF throughout the cycle.
In the long-term, there remains significant opportunities for the company for the it is extremely positive. Product portfolio of the company has been designed to take advantage of numerous secular trends. Its opportunity pipeline remains strong and expanding, and commitment to strategic investment in innovation, customer engagement, and supply resiliency is undeterred. For 1Q24, the company projects revenue of $2.5 billion (+/- $100 million) that includes the benefit of a 14th week in quarter.
2. Micron Technology, Inc.
Historically, the company focused on designing and manufacturing DRAM for the PCs. Later on, it expanded into NAND flash memory market.
In 4Q23, it saw revenue of $4.01 billion as compared to $3.75 billion in the prior quarter and $6.64 billion in the same period of the previous year. GAAP net loss of the company came in at $1.43 billion, or $1.31 per diluted share and Operating cash flow of the company was $249 million in comparison to $24 million for the prior quarter and $3.78 billion for the same period of the previous year.
For FY23, it expects revenue of $15.54 billion in comparison to $30.76 billion for the prior year, with GAAP net loss coming at $5.83 billion, or $5.34 per diluted share. Operating cash flow of the company was $1.56 billion against $15.18 billion for the prior year.
During FY23, it saw tough environment for memory and storage industry. Still, the company sustained technology leadership, was able to launch several leading-edge products, and took strong actions on supply and cost. Its FY23 performance places it well as the market recovery takes shape in the next year, supported by increased demand and disciplined supply.
3. QUALCOMM Incorporated
The company develops and licenses wireless technology and it also designs chips for the smartphones. Key patents of the company include CDMA and OFDMA technologies, that are considered as standards in wireless communications which are backbone of all 3G and 4G networks.
It announced its results for the 4Q and year ended September 24, 2023. The company’s recent Snapdragon Summit announcements help the technology leadership, developing Qualcomm as the leader in on-device generative AI and mobile computing performance.
On the GAAP basis, it saw 4Q23 revenues of $8,631 million, which exhibits a decline of 24% on year-over-year basis. Its net income came in at $1,489 million in 4Q23, down by 48% year-over-year.
Analysts at KeyCorp initiated the coverage on the shares of the company, restating an “overweight” rating. They have a $145.00 price objective in the report dated September 14th. Analysts at Susquehanna increased their price objective on from $130.00 to $140.00, giving the stock a “positive” rating on November 2nd.
While above are some of the top semiconductor companies to buy as per stock market experts and veterans, we believe there are several other stocks which are expected to benefit as the overall semiconductor industry sets on a growth path. These include Intel Corporation, Broadcom Inc., etc.
McKinsey believes that because of autonomous and e-mobility technologies, semiconductor demand in automotive sector should get tripled by the year 2030. Such factors might result in labor and supply shortages moving forward. McKinsey also expects that semiconductor will become a trillion-dollar industry by the end of 2030, exhibiting 6%-8% growth rate.