In this article, we will discuss: 10 Best Semiconductor Penny Stocks To Buy.
Semiconductors have propelled advancements in communications, computers, health care, military systems, transportation, clean energy, and a wide range of other uses. The United States is still at the forefront of cutting-edge manufacturing, design, and research because it invented semiconductor technology. The Semiconductor Industry Association reported $526.8 billion in sales in 2023. Over 70% of the sales made by American semiconductor companies go to foreign clients. In 2023, the US exported $52.7 billion worth of semiconductors, continuing to have a steady trade surplus in this commodity.
According to UN Comtrade DataBase, US imports of semiconductor devices were $26.83 billion, making it the world’s largest importer. On the other hand, China was the world’s top exporter of semiconductor devices in 2023, having shipped $61.32 billion worth of these goods.
The semiconductor industry is growing due to key trends like remote work, electric cars, and, AI, and McKinsey predicts that by 2030, the semiconductor market will reach $1 trillion, with the computing, wireless, and automotive sectors accounting for almost 70% of this growth.
Today, chipmakers are leaning towards 2 nm chips, however, developments from big tech companies indicate that by 2025-2027, it won’t go much beyond that. Hence, with the slowing of Moore’s Law, the semiconductor industry is shifting its focus to accelerated computing, especially in regards to AI. Moreover, there are promises on the software front as well, with AlphaTensor, developed by DeepMind, being touted as a finder for novel matrix-multiplication ways that could lead to the discovery of faster algorithms to speed up computing.
According to Fortune Business Insights, the global semiconductor market was valued at $611.35 billion in 2023 and is expected to grow at a CAGR of 14.9% from $681.05 billion in 2024 to $2062.59 billion by 2032. Regionally, Asia Pacific dominated the global industry, reaching $308.95 billion in 2023, exhibiting the highest growth in the market across the globe. The North American market is growing dynamically, mainly due to rising investments in research and development. The Semiconductor Industry Association (SIA) reveals that US semiconductor manufacturing companies have maintained a high level of R&D spending, allocating almost one-fifth of their total yearly revenue to this area. Innovations in chips were the main driver of this consolidation, which reached a record of $50.2 billion in 2021.
Supply chain challenges, due to the COVID-19 pandemic and geopolitical tensions, especially in China, revealed the United States’ reliance on foreign semiconductor suppliers, resulting in significant shortages. As a result, the US boosted its investment in domestic manufacturing and approved the $52 billion CHIPS and Science Act of 2022 in an effort to raise its share of global semiconductor production, which had fallen from 37% in 1990 to 12%. In order to improve regional capacities, businesses are constructing factories in the US. Through 2030, the value of US-based semiconductor projects that are underway, announced, or being considered ranges from $223 billion to more than $260 billion per Mckinsey.
On June 5th, the SIA revealed that global semiconductor industry sales totaled $49.1 billion in May 2024, up 19.3% from $41.2 billion in May 2023 and 4.1% from $47.2 billion in April 2024. The World Semiconductor Trade Statistics (WSTS) organization compiles monthly sales data, which represents a three-month moving average. Concerning revenue, SIA accounts for approximately two-thirds of non-US chip companies and 99% of the US semiconductor sector.
“The global semiconductor market has grown on a year-to-year basis during each month of 2024, and year-to-year sales in May increased by the largest percentage since April 2022,” said John Neuffer, SIA president and CEO. “The Americas market experienced particularly strong growth, with a year-to-year sales increase of 43.6%.
Sales YoY rose in the Asia Pacific/All Other region (13.8%), China (24.2%), and the Americas (43.6%), but plummeted in Japan (-5.8%) and Europe (-9.6%). The Americas (6.5%), China (5.0%), Asia Pacific/All Other (3.0%), and Japan (1.6%) had a rise in month-over-month sales in May, while Europe saw a decline (-1.0%).
Even if these numbers point to an improvement in the semiconductor supply chain, the chip scarcity that was caused by the COVID-19 pandemic in early 2020 may not have been fully resolved. According to automotive data experts at S&P Global, the chip shortage’s impact on new vehicle manufacturing will have subsided by the middle of 2023. Even though there were still supply constraints for chips, this is now the new normal, allowing automakers to forecast their availability and adjust production schedules appropriately.
With that said, here are the 10 Best Semiconductor Penny Stocks To Buy.
A close-up of discrete semiconductors in a manufacturing lab.
Methodology:
In this article, we first used a stock screener, Finviz, to list down all semiconductor stocks trading under $5.00 (as of the writing of this article) with over 30% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? 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. POET Technologies Inc. (NASDAQ:POET)
Number of Hedge Fund Investors: 2
Revenue Growth Rate (year-over-year): -15.73%
Based in Toronto, POET Technologies Inc. uses the exclusive POET Optical Interposer to create cutting-edge semiconductor solutions that integrate electrical and photonic components. Data centers, telecoms, the Internet of Things, automotive LIDAR, and on-board optics all employ their products, such as POET Starlight and POET Lightbar. They are expanding in China, Singapore, the US, and Canada. POET has been recently awarded the 2024 AI Breakthrough Awards Program’s “Best Optical AI Solution.”
POET, in partnership with Luxshare, Foxconn Interconnect Technology, and MultiLane, is working on a 3.2T optical engine program and 800G and 1.6T optical transceiver modules for the data center and artificial intelligence markets. POET’s emphasis on innovative optical solutions for AI applications is strengthened by this recognition. Analysts view POET as a potential winner in the burgeoning AI equipment market, sparking a spike in interest with trading volumes of $661,493 for the company. POET has a solid balance sheet ($22.8 million in working capital as of Q1 2024), with market cap increasing by 302.11% YoY and growing collaborations, putting it in an ideal position to grow in the data center and AI markets.
POET is risky due to its small market capitalization status and untested mass-production capabilities, even with its recent achievements. Potential challenges come from regulatory difficulties in China, where its joint venture SPX operates, particularly in light of the unstable semiconductor industry. POET is also susceptible to production delays or failures due to its reliance on new technologies and collaborations, which might undermine investor trust and hurt its stock price. Additionally, as an innovative technology provider with no long-standing customer relationships, POET could be outcompeted by an even more innovative solution. Q1 2024 sales dropped to $0.01 million as a result of a change in emphasis toward the development of new products for the high-speed optical transceiver market and the early phases of commercialization.
Still, POET strengthened its financial position in 2024 by raising about $28.5 million through private placements and an ATM offering to fund its expansion. POET also exhibited advanced products at OFC, such as an 800G transmit optical engine chiplet and C-Band light sources, setting itself up for future market development despite a net loss in terms of revenue of $5.7 million in terms of revenue in the first quarter of 2024.
Therefore, analysts recommend a “strong buy” on POET, which is now trading at $3.52. The stock has an average price target of $7.50 and offers investors a potential upside of 113.07%.
Insider Monkey monitored that two hedge funds out of the 920 hedge funds held a position in POET Technologies Inc. (NASDAQ:POET) as of the end of the first quarter of 2024.
9. SemiLEDs Corporation (NASDAQ:LEDS)
Number of Hedge Fund Investors: 2
Revenue Growth Rate (year-over-year): -15.20%
SemiLEDs Corporation is a manufacturer and distributor of LED chips, modules, and components for general, industrial, and specialized lighting applications, such as UV curing and medicinal treatments. Manufacturers of lighting products as well as end customers in the US, Taiwan, and other foreign markets are among its clientele. The business doesn’t provide services for exchanging energy or electric car ownership.
LEDS’s stock price has been stagnant over the years. Despite occasional speculative rallies, the company’s fundamentals remain weak, with $5.67 million in trailing 12-month revenue, negative free cash flow (cash burn rate increasing by 57.07% in TTM), and holding $1.7 million in cash against $5 million in debt. It faces ongoing losses, with negative operating income over the years. Its largest customer, Revlon, paused orders, further straining its financial position in 2021. The sales are weak, decreasing over the last five quarters, posing a risk. SemiLEDs’ sales for the second quarter of 2024 dropped to $886K from $1.6 million in the first, mostly as a result of a production halt for the Chinese New Year holiday. In terms of revenue, the net loss in terms of revenue for the second quarter of 2024 dropped to $559K, or $0.11 per diluted share, from the previous quarter’s $598K, or $(0.12) per diluted share. Currently, the stock is trading at $1.34.
SemiLEDs Corporation had a dramatic increase in revenue to $1.3 million compared to $886 thousand in the second quarter and gross margins from 13% to 41% in the most recent quarter. After making great progress in reducing their operating losses, they enlisted Roth Capital Partners to investigate strategic options that may potentially increase their operational runway. SemiLEDs believes that their compliance plan, which was approved by Nasdaq, satisfies the minimal requirements for listing continuation, given the equity held by existing stockholders. These developments demonstrate SemiLEDs’ persistence in enhancing efficiency and making the transition to sustainable growth in the face of difficult market circumstances.
As of the end of the first quarter of 2024, two hedge funds out of the 920 funds reported having stakes in SemiLEDs Corporation (NASDAQ:LEDS). The company’s main investor is Schonfeld Strategic Advisors, which is managed by Ryan Tolkin (Cio) and has 18,300 shares worth $26,718.
8. Mobix Labs, Inc. (NASDAQ:MOBX)
Number of Hedge Fund Investors: 7
The fabless semiconductor business Mobix Labs, Inc. offers wireless and connectivity solutions for high bandwidth cable applications as well as C-Band and mmWave 5G next-generation communication systems. The company is headquartered in Irvine, California, and was formed in 2020. In order to provide fiber optic connectivity for a variety of applications, such as 5G infrastructure, autonomous vehicles, Pro A/V, AR/VR, remote medical systems, and others, the company offers True5G chipset solutions, TrueXero active optical cables, and related products. Additionally, electromagnetic interference filters are used in aerospace, military, defense, medical, and healthcare products.
New EMI-filtered connections, designated ARINC 404 and ARINC 600, have been introduced by Mobix Labs (Nasdaq: MOBX) for use in aerospace and defense applications. The connections demonstrate Mobix Labs’ commitment to both performance and quality with their affordable price and short lead times.
Following the completion of the merger with Chavant, Mobix’s share price fell drastically by 87%, and now the stock is trading at $1.52 from its peak of $11.68. Mobix’s market cap dropped rapidly by 60.66% to $40.80 million, a reflection of investor apprehension and market instability following the merger. Despite suffering significant cash burns throughout the years, the firm is currently on the upswing, with 2749.44% cash growth in TTM. This is a positive sign for investors.
Moreover, Mobix Labs (Nasdaq: MOBX) announced a 302% sequential sales rise to $1.1 million in the second quarter of 2024, lowering its operating loss to $8.56 million. In Q2 2024, the company’s sales increased by an astounding 3478.13% as compared to the same quarter the previous year. By finalizing the acquisition of RaGE Systems, the business expanded its range of technology offerings and broadened its market reach. Additionally, Mobix Labs obtained an equity line of credit from B. Riley Principal Capital II, LLC in the amount of $100 million to facilitate strategic expansion and acquisitions. A worldwide distribution partnership with Arrow Electronics, new product launches, and major contracts in the aerospace and military industries are just a few of the company’s recent accomplishments. With a strong pipeline and partnerships, the company has growth potential.
Keyvan Samini, President and CFO of Mobix Labs, commented in its Q3 2024 earnings call,
“I am pleased to share that Mobix Labs is poised for a substantial revenue increase of over 70% sequentially this quarter, surpassing $2 million. This remarkable growth stems largely from our successful acquisition of RaGE Systems, which has significantly bolstered our revenue. Looking ahead, we anticipate further growth in our market presence and revenue, driven by strategic acquisitions and robust product sales.”
“We are tracking well to our scalable growth plan as we lay the foundational elements necessary to execute our strategy,” said Fabian Battaglia, CEO of Mobix Labs. “We are also pleased with the increased number of opportunities for both components and systems product lines and pursuing sizable platform design wins.”
According to Insider Monkey’s Q1 2024 database, seven hedge funds made investments in this company. Rob Romero’s Connective Capital Management held the largest stake in the company.
7. EMCORE Corporation (NASDAQ:EMKR)
Number of Hedge Fund Investors: 8
EMCORE Corporation is a leading supplier of inertial navigation devices to the aerospace and defense industries. The firm delivers modern component and system-level solutions throughout end-market applications by utilizing industry-leading Photonic Integrated Chip (PIC), Quartz MEMS, and Lithium Niobate chip-level technologies. EMCORE’s facilities in Tinley Park, IL, Budd Lake, NJ, Concord, CA, and Alhambra, CA, are capable of vertically integrating production. The manufacturing sites are all certified to maintain an ISO 9001 quality management system, and its facilities in Concord, Budd Lake, and Alhambra are AS9100 aerospace quality certified.
Supply chain issues for EMKR, such as shortages of semiconductors and higher expenses, contribute to the stock’s dismal performance. The stock has declined sharply since 2000 as a result of the significant loss of investor trust brought on by these combined difficulties. 40% employment reduction and the shutdown of its Alhambra, California, facility are among the major restructuring steps that EMCORE (Nasdaq: EMKR) has announced. With projected savings of $17 million, these steps are part of a larger initiative to lower yearly operating costs, which have been increasing over the years, causing concern. Despite the growth in revenue over the years except in 2022, the net income has been negative due to the higher operation costs. Most, importantly, the cash burn rate has also been increasing over the years, probably due to rising operating expenses, making some investors worried. Due to supply delays and falling sales, EMCORE Corporation (Nasdaq: EMKR) announced a Q2 2024 revenue decrease by 19.04% from the same quarter last year. The company also disclosed a $7.8 million net loss in terms of revenue. Investors should be alarmed by EMCORE’s revised lower estimates, which indicate higher losses and slower-than-expected revenue growth for the third quarter of FY2024 ($19 million to $21 million).
On the bright side, EMKR has seen strong annual revenue growth over the years since 2019, except for 2022, in which there was a 71.40% decrease from 2021 due to lower sales. The company reported strong annual revenue in 2023, with a whopping 115.62% increase from $45.32 million last year to $97.72 million. This was fueled by EMKR’s Inertial Navigation business’s strong growth. For the sixth consecutive quarter, this segment’s revenue grew, demonstrating the company’s successful emphasis on evolving into a pure-play provider of inertial navigation.
Furthermore, EMCORE Corporation (NASDAQ:EMKR) has received an average price target of $15, reflecting analysts’ bullish outlook on the stock. The price target reflects a potential upside of over 948.95% from the current stock price of $1.43. Meanwhile, analysts have given the stock a “Buy” rating.
EMCORE Corporation (NASDAQ:EMKR) was owned by eight of the 920 hedge funds that Insider Monkey examined in the first quarter of this year. Constantinos J. Christofilis’s Archon Capital Management held the largest stake in the company, with 1,255,257.7 shares worth $4.33 million.
6. Sequans Communications S.A. (NYSE:SQNS)
Number of Hedge Fund Investors: 10
Sequans Communications (SQNS) produces 5G and 4G semiconductors and modules for fast-growing IoT devices, focusing on high-speed wireless applications with first clients including Acer, Cisco, and Huawei. Founded by Georges Karam, the firm specializes in low power consumption and worldwide deployment and delivers industry-leading solutions, including the Cassiopeia 4G Cat 4/Cat 6 and Monarch LTE-M/NB-IoT platforms. Renesas Electronics is one of the strategic alliances that support its market presence and acquisition possibilities. SQNS is ideally positioned in the growing 5G/4G IoT sector, having operations in several different countries.
Sequans (NYSE:SQNS) is a microcap prospect with enormous upside potential. Since its 2011 IPO, this “promising company” has been the subject of a lot of hype as the stock shot up into the high $60s due to the company’s prospective market for its chip designs. The stock has been steadily declining since hitting its peak and most recently hit a low of about $0.56 per share, over a 98% decline. While the initial investors have mostly given up, the company is currently recognizing its potential. The company recently signed a $15 million license agreement for its Monarch2 platform, growing its licensing division. In order to reduce R&D costs, Sequans is aiming for profitability in 2025 by focusing on low-power 5G for Massive IoT.
We have concerns about $30.0 million in debt and a significant cash burn rate since 2020 of over 97%, since it questions the financial stability of the company. If this situation persists, then the price objective of $15 set by analysts may be difficult to achieve due to possible market saturation and delays in income generation from design wins. Despite these concerns, the consensus opinion is to “buy” the stock. The target price, on average, indicates a possible increase of more than 2578.57%.
Using Sequans’ Calliope 2 platform, a Tier 1 customer has signed on to 4 projects with anticipated yearly revenues in the tens of millions and product releases beginning in Q3 2024. Sequans anticipates a noticeable boost in revenue in the second half of 2024 and further growth in 2025 as a result of its expansion into smart home applications and engagement with the US government. The company aims for a gross margin of at least 60% with a sequential revenue increase across all four quarters of 2024. However, revenue has been dropping over the last five quarters. Despite a significant operational loss of $30 million in 2023, which was mostly attributable to higher operating expenses, product revenues recovered in Q4 2023 with a gross margin of 71.8%.
In Q1 2024, ten hedge funds were long Sequans Communications S.A. (NYSE: SQNS). Cynthia Paul’s Lynrock Lake is the largest stakeholder, with 8,677,913 shares valued at $3.34 million.
5. Navitas Semiconductor Corporation (NASDAQ:NVTS)
Number of Hedge Fund Investors: 11
For use in smartphones, data centers, electric vehicles, and other applications, Navitas Semiconductor Corporation develops and distributes innovative power integrated circuits, such as those made of silicon carbide and gallium nitride. The company has a global reach.
Navitas Semiconductor (NASDAQ: NVTS) is the market leader in GaN technology, which is critical for AI data centers and rapid charging, with a strong client pipeline worth $1.6 billion by the end of the first quarter of 2024, significantly above FY2023 revenue. The company reported a strong revenue surge by 73.49% to 23.18 million from the same quarter previous year, driven by continued GaN adoption in mobile fast chargers and AI-based data centers, and SiC sales in EV, solar, and industrial applications. Unfortunately, the stock has dropped over 37% over the year despite steady sales growth due to “continued softness” in demand in the solar and EV industries. With their ability to address the growing demand for data centers and mobile devices, Navitas’ novel GaN-based ICs might increase income. By 2031, the GaN semiconductor industry is expected to develop significantly, with a predicted value of $33 billion, indicating growth potential. Major power supply companies have awarded Navitas design victories, and the company anticipates “multiple millions” in revenues this year. Additional growth is expected in 2025 from clients like Microsoft, Google, and Amazon.
Nevertheless, Navitas faces significant risks, including its high reliance on China for 74% of its Q1 revenues, which leaves it open to market fluctuations and geopolitical instability. The company has significant capital burn rates and operates at a loss despite having better technology; in the March quarter of 2024, cash burn was $23 million compared to the last quarter. As a result, given the present cash burn rate, the cash runway is less than a year, with $153 million in cash and only $8.5 million in debt. It also has high R&D expenses. It would have to go to the debt market or undertake an equity issue, which would dilute the shares unless there is a drop in expenditures. Short- to medium-term obstacles from more established rivals like Infineon might potentially have an impact on the company’s financial as well as stock performance.
Analysts are bullish on Navitas since it is working with over 160 EV-related clients and has a total design win pipeline worth more than $600 million, up more than 50% from the previous quarter. NVTS has introduced 20 additional fast charger devices to its range, bringing the total number of released consumer products to over 450.
Hence, the consensus rating for NVTS stock, according to analysts, is “buy.” The 12-month price target is $7.41, reflecting a possible 56.66% increase from the current price of $4.73.
Insider Monkey disclosed 11 funds that owned Navitas Semiconductor Corporation (NASDAQ:NVTS) hedge funds in Q1 2024. David Alexander Witkin’s Beryl Capital Management is the largest stakeholder in the company.
