In this piece, we will take a look at the ten best semiconductor equipment stocks to buy now.
Semiconductors are the modern-day equivalent of oil when it comes to the general well-being of the global economy. Tens of thousands of gadgets, computers, cars, and other items and products rely on a steady stream of chips to power up today’s world. As a result, chip manufacturers often have a steady flow of orders that they have to consistently churn out to ensure that a multitude of industries are not disrupted.
However, while chip manufacturers often see most media coverage, the complex nature of transforming sand into a chip capable of 20 petaflops of output requires thousands of steps. To execute these steps, manufacturers rely on a diverse set of suppliers for a myriad of products such as chip manufacturing machines, specialty chemicals, masks, design technologies, and other items. Firms that provide these products and technologies are called semiconductor equipment providers and their role in the industry is just as important as the chip manufacturers’ is.
To understand why semiconductor equipment stocks are important, consider the Biden Administration’s $280 billion CHIPS and Science Act. Signed by the President in 2022, it aims to ensure that the American semiconductor industry catches up to its peers in Taiwan and South Korea and is not dependent on any disruptions in the South China Sea. The biggest beneficiary of the CHIPS Act is the Taiwanese contract chip manufacturer that leads the world in manufacturing technologies. It ranked 4th on our recent list of trending AI stocks, and the firm has received $6.6 billion in direct funding and it is eligible for $5 billion in additional loans to set up advanced manufacturing facilities in Arizona.
Yet, even though the first of these facilities is set to start production in the first half of 2025, the fact that the firm’s operations are based in Taiwan is already creating problems. For starters, a report from Reuters suggests that the world’s leading AI GPU manufacturer (which ranked 3rd on our list above) might have to ship its GPUs to Taiwan for packaging after they’ve been manufactured in the US. This is because after the chips are manufactured, they have to be packaged to ensure power supply and communications with the rest of the computer system.
The packaging technologies for these advanced chips are called Chip-on-Wafer-on-Substrate (CoWoS), and for the Taiwanese firm, all of its packaging facilities are located in its home region. The need to ship the chips to Taiwan for packaging is not the only hurdle for the fab’s American manufacturing operations. Another problem, and one that is directly related to semiconductor equipment stocks, relates to the different chemicals that are required throughout the chip manufacturing process.
These chemicals include sulfuric acid, acetone, ammonium hydroxide, and others to ensure the purity of the silicon wafer throughout the fabrication process. However, according to a report from Macquarie Bank, since the Taiwanese fab relies on Taiwan-based firms for its chemical supply chain, the costs of manufacturing chips at the Arizona site could be 30% higher than in Taiwan. The higher costs stem from the fact that the chemical companies are hesitant to move to the US since they might be unable to enjoy economies of scale and the resulting cost benefits. The bank outlines that the lack of an American chemical supply chain that is qualified by the Taiwanese fab means that chemicals such as sulfuric acid might be costlier to ship internationally than their list price.
Therefore, it’s clear that semiconductor equipment firms play an equally important role in chip fabrication. Another important example of this fact is the Dutch chip manufacturing machinery provider that ranked 9th on a recent list of AI news and ratings that Wall Street was watching. This firm is the only company in the world capable of manufacturing high-end chip-making tools called EUV scanners. Without these tools, firms such as the Taiwanese fab cannot make leading-edge chips with feature sizes smaller than 7-nanometer. In fact, the rising threat of China utilizing Western technologies for military use has also led the US government to stop the chip manufacturing equipment provider from selling its equipment to China’s Semiconductor Manufacturing International Corporation (SMIC). The sanctions have dealt a sharp blow to Chinese chip manufacturing ambitions, with the latest chip from Huawei still being manufactured on the older 7-nanometer node. In contrast, the latest iPhone uses chips built through the 3-nanometer process technology.
A close up of a technician working on a semiconductor chip in a clean room.
Our Methodology
To make our list of the best semiconductor equipment stocks to buy, we ranked all US-listed semiconductor equipment stocks by the number of hedge funds that had bought the shares in Q3 2024 and picked out those with the highest number of investors.
Why are we interested in the stocks that hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Amkor Technology, Inc. (NASDAQ:AMKR)
Number of Hedge Fund Holders In Q3 2024: 27
Amkor Technology, Inc. (NASDAQ:AMKR) is an Arizona-based semiconductor equipment provider that provides semiconductor testing, packaging, and other associated services. Its shares are down 17% year-to-date, which is unsurprising even though packaging technologies have gained importance in the chip industry because of AI chips. Amkor Technology, Inc. (NASDAQ:AMKR) depends to a large extent on the health of the smartphone industry. For the nine months ending in September, 49% of the firm’s revenue came from smartphones and communications devices. The market for these devices depends on consumer spending, and Amkor Technology, Inc. (NASDAQ:AMKR)’s shares dropped by a massive 18% in July after the firm’s midpoint third-quarter EPS guidance of $0.49 missed analyst estimates of $0.65. Naturally, the smartphone market has to recover for the firm to benefit from tailwinds. Amkor Technology, Inc. (NASDAQ:AMKR) has also won funding from the US government under the CHIPS Act for packaging, and it is also a TSMC partner for the Arizona site. Both these factors can help the firm in today’s AI-driven chip era.
Amkor Technology, Inc. (NASDAQ:AMKR)’s management commented on its TSMC deal during the Q3 2024 earnings call. Here is what they said:
“First of all, the MOU that we signed with TSMC, now is that it’s intended to offer our mutual customers a seamless manufacturing supply chain and a technology offering between Asia and the US and by standardizing on advanced packaging technology in the US versus Asia that offers these joint customers a seamless transition for dual qualification of specific devices. And that will happen in our Peoria factory, it will be for the Compute segment, but also for the Communications segment technologies. Now we have to remember that our Peoria factory, our Arizona factory is not captive to TSMCs, but we will run TSMC technology in that factory, specifically for joint customers.
And on top of that for other customers, Amkor will install Amkor advanced packaging technology. Now with respect to the test business, we see for test, specifically for AI devices, currently a high concentration of test in Taiwan. We believe that the industry is ready and looking for alternatives to derisk that supply chain. So we are definitely interested and actively pursuing to invest in test in general, but also specifically in that segment of test.”
9. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Number of Hedge Fund Holders In Q3 2024: 29
Axcelis Technologies, Inc. (NASDAQ:ACLS) is a specialty semiconductor equipment provider that focuses on ion implementation technologies. Ion implementation is an indispensable part of chip fabrication, as the minute scale of the manufacturing technology increases the purity of the end chip product. However, Axcelis Technologies, Inc. (NASDAQ:ACLS)’s shares are down 39% year-to-date on the back of a broader slowdown in the semiconductor industry. The stock fell by 11% in August after the firm’s second-quarter earnings as sluggishness in the memory market and AC applications continued to remain a drawdown. Over the long term, the narrative will be driven by management’s goal of $1.6 billion in revenue for 2027. Axcelis Technologies, Inc. (NASDAQ:ACLS) is also a TSMC supplier, and the firm can benefit from a sustained recovery in the EV market because of its silicon carbide products.
Axcelis Technologies, Inc. (NASDAQ:ACLS)’s management commented on its silicon carbide products during the Q3 2024 earnings call. Here is what they said:
“Revenue from our power markets was approximately 57% of total, down sequentially from 63% in Q2 2024. Shipments to Silicon Carbide applications moderated in the third quarter. However, on a year-to-date basis for 2024, Silicon Carbide has been strong growing year-over-year reflecting continued build out of capacity. We expect fourth quarter revenue for Silicon Carbide to remain relatively consistent on a sequential basis. The long-term opportunity in silicon carbide remains an important growth driver for Axcelis. Yel [ph] estimates that silicon carbide market will grow from $2.7 billion in 2023 to $9.9 billion in 2029 or a 24% CAGR and ion implantation is one of the most critical manufacturing steps to make a silicon carbide device.
We are well positioned as the market leader in implant for silicon carbide given the breadth of our portfolio and focused investments we’ve made in this market for several years. We are deeply embedded in our customers technology roadmaps and widely engaged with customers to help them transition from 150 millimeters to 200 millimeters wafer capacity. In addition, we are seeing interest in our solutions to enable customer’s transition to trench MOSFETS. The transition to trench architecture is a tailwind for Axcelis given the need for deeper implants which require our high energy tools where we are the technology and market leader. From an end market perspective, we are keeping a close eye on the transition from 400 volts to 800 volts electric vehicles over time, which is enabled by silicon carbide, given better efficiency compared to traditional silicon.”
8. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Holders In Q3 2024: 30
Ambarella, Inc. (NASDAQ:AMBA) provides semiconductor equipment and materials that are used in video cameras and image processing solutions. These products mean that the firm performs well when the automotive, industrial, and internet-of-things (IoT) industries are performing well. As a result, Ambarella, Inc. (NASDAQ:AMBA)’s shares have recently started to gain momentum after they were down 1.7% by late November. The tailwinds are from expected improvement in the IoT and industrial sectors, with the firm’s third-quarter earnings accompanied by a $78 million Q4 revenue guide which beat analyst estimates of $69.1 million. During the quarter, Ambarella, Inc. (NASDAQ:AMBA) also grew revenue by 63% annually on the back of strong demand for automotive and IoT products. Looking ahead, continued recovery in these markets could create tailwinds for the firm.
Ambarella, Inc. (NASDAQ:AMBA)’s management commented on its AI products during the Q3 2025 earnings call. Here is what they said:
“Company-specific factors more than offset the overall weakness in the market, with our strength originating from our customers’ new product ramps, especially those incorporating our new higher-priced AI influence processors such as CV5. We again achieved a record level of AI revenue, which in turn contributed to a higher blended average selling price. We are now forecasting fiscal 2025 revenue to increase by 22% to 24% year-over-year versus our prior estimate for revenue growth in the mid- to high teens.
Last quarter, we described our new product momentum as a series of waves and the next year in fiscal 2026, we expect the first wave from CV5 to continue and be augmented with the commitment of the second wave CV7. We expect the first and second new product waves to enable us to grow revenue again in fiscal 2026 with both auto and IoT expected to grow despite the weakness in the overall market. Our CV3 AD family of SoCs for Level 2+ and high level of autonomy represents the third wave with revenue expected to commence in calendar year 2026 or our fiscal 2027. During the third quarter, we received the first silicon of our CV3-AD655 AI SoC, which targets advanced Level 2+ applications, including mass-market passenger vehicles, and we are now delivering engineering samples to customers.”
7. Onto Innovation Inc. (NYSE:ONTO)
Number of Hedge Fund Holders In Q3 2024: 34
Onto Innovation Inc. (NYSE:ONTO) is a semiconductor manufacturing equipment provider that sells lithography systems for defect inspection, packaging, and other use cases. Its product use cases mean that the firm is exposed to the performance of the broader semiconductor industry as opposed to specific sectors. Yet, the fact that Onto Innovation Inc. (NYSE:ONTO) plays a role in the packaging industry also means that the firm can benefit from tailwinds from AI-packaging demand. Packaging is a key bottleneck in the AI industry as we discussed in detail in the introduction of this piece. However, Onto Innovation Inc. (NYSE:ONTO)’s shares have seen turbulence recently as they fell by 11% after the firm’s third-quarter results. The drop came after the results beat analyst estimates by a hairline. Looking ahead, Onto Innovation Inc. (NYSE:ONTO)’s hypothesis depends on the successful execution of its JetStrap lithography system and the chip sector’s broader recovery.
Artisan Partners mentioned Onto Innovation Inc. (NYSE:ONTO) in its third-quarter investor letter. Here is what the fund said:
“Notable adds in the quarter included Samsara, Illumina and Onto Innovation Inc. (NYSE:ONTO). Onto Innovation provides process control solutions and inspection systems needed for advanced semiconductor packaging inspection and optical metrology. Wafer-level packaging inspection has been a small yet rapidly growing segment within process control tied to increasing chipset sales from AI, edge computing and wearable technology advancements. Optical metrology growth has been driven by a transition to 3D chip architecture, which requires greater numbers of sensitive layers to be measured and tracked. This growth has been further supported by gross margin and operating margin expansion, as increasing complexity drives pricing power. Shares declined in the quarter, and we used it as an opportunity to build our position.”
6. Entegris, Inc. (NASDAQ:ENTG)
Number of Hedge Fund Holders In Q3 2024: 42
Entegris, Inc. (NASDAQ:ENTG) is a global semiconductor equipment company that primarily provides products and services to enable chip manufacturers to maintain the purity of their products and manufacturing facilities. Therefore, the shares are down 6.5% year-to-date as while AI chip demand has generated catalysts for the chip industry, lags in other sectors such as automotive and industrial have led to hard times for firms like Entegris, Inc. (NASDAQ:ENTG). The stock’s major drop came in July after the firm’s third-quarter guidance missed analyst estimates and indicated a prolonged slowdown in the chip sector. Entegris, Inc. (NASDAQ:ENTG)’s shares fell by 11% in November after the company $807 million in revenue and $0.77 in EPS missed analyst estimates of $832 million and $0.78. The Q4 midpoint revenue guidance of $825 million also missed estimates of $879 million. Looking ahead, the firm has to rely on the chip sector’s recovery to experience any catalysts.
Carillon Towers mentioned Entegris, Inc. (NASDAQ:ENTG) in its Q3 2024 investor letter. Here is what the fund said:
“Entegris, Inc. (NASDAQ:ENTG) provides specialty semiconductor materials for the microelectronics industry. Recently, investors have become concerned about the overall semiconductor cycle and how demand for Entegris’s chemicals will fare in a slowing economic environment. We remain confident that the company is in an area of the industry that will continue to grow nicely, even in the event there is a slowdown in the broader semiconductor industry. The company is a key consumable supplier, and as the complexity of producing chips rises, the company’s products are even more critical.”
5. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders In Q3 2024: 43
Teradyne, Inc. (NASDAQ:TER) is an American semiconductor test equipment provider. As a result, the shares are up by a modest 17.6% year-to-date as the firm has navigated through an overall sluggish semiconductor industry. Investors were optimistic about Teradyne, Inc. (NASDAQ:TER) heading into the firm’s second-quarter earnings report in July. However, the report saw the firm guide midpoint revenue at $710 million which fell below analyst estimates and the shares fell by 13%. Teradyne, Inc. (NASDAQ:TER)’s midpoint Q4 revenue guidance of $735 million provided at the Q3 earnings also fell short of analysts’ $736 million, sending the stock down by another 11%. However, the firm works with some of the biggest chip companies in the world, such as Qualcomm. This provides it with a robust industry presence which can work in its favor once the consumer electronics and smartphone markets recover.
TimesSquare Capital Management mentioned Teradyne, Inc. (NASDAQ:TER) in its Q3 2024 investor letter. Here is what the fund said:
“Teradyne, Inc. (NASDAQ:TER) develops and manufactures automated test systems and robotics products worldwide. Solid second quarter results were driven by higher spending levels in computer and memory. Mobile, auto, and industrial spending remained soft. Management’s forward guidance was weaker-than-expected and that caused their stock to sell off by -10%.”
4. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders In Q3 2024: 58
Lam Research Corporation (NASDAQ:LRCX) is an American semiconductor manufacturing equipment provider whose products are used in several phases of the chip manufacturing process such as etching and deposition. Yet, despite this, the shares are up by a modest 1.8% year-to-date. While industry sluggishness has had a role to play in the drop, Lam Research Corporation (NASDAQ:LRCX) has also struggled due to semiconductor tensions between the US and China. The shares fell by a sizable 14.8% in mid-July after reports of fresh American sanctions against China and then dipped by another 17% after the firm’s second-quarter earnings saw 39% of revenue being derived from China. However, Lam Research Corporation (NASDAQ:LRCX) has also benefited from AI catalysts that led it to beat second-quarter revenue estimates, and the broader chip recovery coupled with China tensions should drive the hypothesis moving forward.
Columbia Threadneedle Investments mentioned Lam Research Corporation (NASDAQ:LRCX) in its Q3 2024 investor letter. Here is what the fund said:
“Lam Research Corporation (NASDAQ:LRCX) was a disappointing position for the fund during the quarter despite strong long-term returns. The stock experienced volatility in July on the back of a rotation out of large-cap technology into small-cap stocks and some general investor fears about the ROI potential from the AI spend. Escalating tensions between the United States and China have impacted Lam’s returns, as U.S. restrictions on high-tech exports to China, particularly advanced AI chips, have been a major negative for chip providers. The fund had an overweight position to Bloom Energy during the quarter and the stock moved lower, which detracted from performance relative to the fund’s benchmark. We continue to believe that Bloom has the best technology in the world to solve the electricity shortage that overhangs new AI data center builds in the U.S. and around the world. Bloom’s fuel cells plug into natural gas lines and can fit on a data center’s campus without taking up too much real estate. Other solutions to the “time to power” issue inherently take too long to provision, namely, nuclear, wind and solar power as well as new transmission and generation infrastructure.”
3. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders In Q3 2024: 61
KLA Corporation (NASDAQ:KLAC) provides etching, inspection, deposition, and other equipment used in the chip fabrication process. Its strengths are in the inspection end of the chip fabrication equipment sector. The shares are up by 16.7% year-to-date following a massive 19% drop in October after investors became worried about a slowdown in the industry after chip-making equipment manufacturer ASML disappointed with its 2025 guidance. KLA Corporation (NASDAQ:KLAC) is also particularly vulnerable to American chip sanctions against China that prevent US firms from selling their machines. The vulnerability stems from the fact that as of Q3, 42% of the firm’s revenue came from China. However, the firm has seen tailwinds from AI demand on its income statement, which led to its fourth-quarter revenue guidance of $2.95 billion beating analyst estimates of $2.86 billion. KLA Corporation (NASDAQ:KLAC) also has a strong partnership with TSMC that provides it with stable revenue from the world’s largest contract chip manufacturer.
KLA Corporation (NASDAQ:KLAC)’s management shared details about its AI revenue during the Q3 2024 earnings call. Here is what they said:
“We also continue to see AI as an important driver and enabler of our business. Growth in demand for AI CHIPS supports rising process control intensity, which benefits KLA meaningfully. Additionally, KLA was an early adopter in using and incorporating AI into our products and designing our computer architecture to leverage GPUs. KLA’s future product enhancements will leverage AI to improve the performance and customer cost of ownership of our leading-edge systems.”
2. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders In Q3 2024: 64
ASML Holding N.V. (NASDAQ:ASML) is one of the most important companies in the semiconductor industry. This is because the industry cannot function without its machines as it is the only firm in the world capable of making high-end EUV chip manufacturing machines that can easily manufacture chips with feature sizes smaller than 7-nanometer. However, the third quarter hedge fund filing season hasn’t been kind to ASML Holding N.V. (NASDAQ:ASML) as Insider Monkey’s data shows that while 81 funds had owned a stake in the firm in Q2, this dropped to 64 in the previous quarter. Part of the bearishness could be due to ASML Holding N.V. (NASDAQ:ASML)’s third-quarter earnings report led to a 21.6% share price drop as it warned about weak spending by chip manufacturers. However, for its 2025 sales, ASML Holding N.V. (NASDAQ:ASML) sees the figure ranging between €30 billion to €35 billion despite new US sanctions against China in December. Its moat also places the firm well for the broader recovery in the chip sector.
Polen Capital mentioned ASML Holding N.V. (NASDAQ:ASML) in its Q3 2024 investor letter. Here is what the fund said:
“During the period, we added to our ASML Holding N.V. (NASDAQ:ASML) position in the face of recent volatility across the semiconductor sector broadly. As readers may recall, we trimmed the position in 4Q 2023 as we expected stagnating business trends to set in during 2024. Stagnation did occur, as did Al hysteria. We now foresee robust growth and believe ASML will see a significant ramp in business trends in 2025 and beyond. ASML’s business backlog and its customers’ persistent development of leading-edge chip sizes drive our expectation of rapid growth for the company in the coming years. In our view, shares trade at a very reasonable valuation for one of the world’s most competitively advantaged growth companies, particularly considering the accelerated growth we expect.”
1. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders In Q3 2024: 74
Applied Materials, Inc. (NASDAQ:AMAT) is an American firm that sells products used in different chip fabrication processes such as deposition and etching. Its products cater to the needs of chip fabrication, display manufacturing, and other industries. Applied Materials, Inc. (NASDAQ:AMAT)’s shares are up by 9.70% year-to-date as they have been hit particularly hard by the tensions between the US and China. During its fiscal year 2024, 37% of the firm’s revenue came from China. Applied Materials, Inc. (NASDAQ:AMAT)’s stock dropped by 11% in July after reports claimed that the US government could even restrict foreign companies using materials sourced from America from selling their products to China. However, as the industry shifts to new technologies such as gate-all-around transistors, Applied Materials, Inc. (NASDAQ:AMAT) can enjoy favorable catalysts in the future.
Parnassus Investments mentioned Applied Materials, Inc. (NASDAQ:AMAT) in its Q3 2024 investor letter. Here is what the fund said:
“Applied Materials, Inc. (NASDAQ:AMAT), the world’s largest supplier of wafer fabrication equipment for semiconductors, saw its shares pressured by negative sentiment around a potentially broad-based trend of capital expenditure cuts in memory spending.”
AMAT is a semiconductor equipment stock that hedge funds are buying. While we acknowledge the potential of AMAT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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