According to Deloitte’s 2025 global semiconductor industry outlook, released on February 4, 2025, the semiconductor industry is set for a much better 2025, with projected sales reaching $697 billion, representing an 11.2% year-over-year growth. This projection suggests the industry is on track to achieve the widely accepted goal of $1 trillion in sales by 2030. Deloitte analysts also highlight that “average” chip stock performance over the past two years has been a “tale of two markets”: Companies involved in the generative AI chip market have outperformed, while those in automotive, computer, smartphone, and communications semiconductors have lagged.
This growth story aligns with the significant expansion the semiconductor industry has experienced over the past decade, largely driven by advancements in artificial intelligence and high-performance computing. The entire supply chain, from lithography to equipment and packaging, has benefited from this surge, resulting in unprecedented demand for advanced semiconductors. While the majority of investments in these technologies have come from large-cap companies, small-cap companies are often leading the charge on the innovation front within the emerging technologies, and at the same time, offer diversification away from the crowded large-and-mega-cap stocks.
In November 2024, Francis Gannon, Co-chief Investment Officer at Royce Investment Partners, discussed his thesis on small-caps during an interview with Yahoo Finance. He noted that small-caps have been out of favor for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost the small-cap companies, describing this shift as nothing short of a “revolution.”
In summary, semiconductors represent a long-term investment opportunity, with the small-cap segment garnering attention as a hot topic in recent months. Exciting return opportunities are anticipated in the coming years. With that, let’s explore the top 12 opportunities in the small-cap semiconductor space that we have identified for you.
A technician looking at a circuit board of analog semiconductor products.
Our Methodology
To identify the 12 small-cap semiconductor stocks to buy now, we screened U.S. listed semiconductor companies with a market capitalization between $300 million and $2 billion. The stocks were then arranged in ascending order of the number of hedge fund holders for each company, based on hedge fund data from Insider Monkey’s database as of Q3 2024.
Note: All pricing and market cap data is as of market close on February 7.
At Insider Monkey we are obsessed with 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).
12 Small-Cap Semiconductor Stocks to Buy Now
12. Aehr Test Systems Inc. (NASDAQ:AEHR)
Market Capitalization: $320 million
Number of Hedge Funds: 12
Aehr Test Systems Inc. (NASDAQ:AEHR) provides advanced solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form. The company’s focus includes high-performance semiconductor devices for applications such as electric vehicles, EV charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory storage.
On January 7, Aehr Test Systems Inc. (NASDAQ:AEHR) announced receiving an initial production order from a prominent automotive semiconductor supplier for its FOX-XP wafer level test and burn-in system. This system, featuring an integrated FOX WaferPak Aligner, is designed for the production testing of gallium nitride (GaN) power semiconductor devices. Aehr Test Systems Inc. (NASDAQ:AEHR) views this milestone as a testament to its ongoing success in the automotive sector. The company recognizes GaN as a transformative and rapidly expanding technology in the power semiconductor market. According to Yole Group’s Power SiC/GaN Compound Semiconductor Market Monitor, the GaN market is expected to grow at a compound annual rate of over 40%, reaching $2.5 billion in annual device sales by 2029.
11. Alpha and Omega Semiconductor Ltd. (NASDAQ:AOSL)
Market Capitalization: $1.2 billion
Number of Hedge Funds: 13
Alpha and Omega Semiconductor Ltd. (NASDAQ:AOSL) is a designer, developer, and global supplier of a wide range of power semiconductors. The company’s product portfolio includes MOSFETs, IGBTs, and other power devices that are crucial for various high-volume applications, such as computing, consumer electronics, automotive, and industrial sectors.
On February 6, an analyst from Benchmark raised the price target for Alpha and Omega Semiconductor Ltd. (NASDAQ:AOSL) to $42 from $40 and maintained a Buy rating. Despite FY Q2 results exceeding expectations, the analyst said that the June quarter revenue outlook was 2% below consensus, with gross margin pressure leading to a significant bottom-line miss. However, he remains optimistic about the potential benefits from Nvidia’s Blackwell product family and encouraged investors to “buy the dip” in Alpha and Omega Semiconductor Ltd. (NASDAQ:AOSL) shares.
10. SkyWater Technology Inc. (NASDAQ:SKYT)
Market Capitalization: $464 million
Number of Hedge Funds: 15
SkyWater Technology Inc. (NASDAQ:SKYT) is a U.S.-based semiconductor foundry specializing in advanced semiconductor development, manufacturing, and packaging services for integrated circuits. The company offers a unique, pure-play technology foundry model through its Technology-as-a-Service (TaaS) approach. SkyWater provides a range of services, including custom semiconductor design, fabrication, and packaging, serving sectors such as aerospace, defense, automotive, and industrial applications.
SkyWater Technology Inc. (NASDAQ:SKYT) recently signed a preliminary memorandum of terms (PMT) with the U.S. Department of Commerce for up to $16 million under the CHIPS for America program. This funding aims to boost production capabilities at its Minnesota facility, benefiting markets like aerospace, defense, biomedical, industrial, thermal imaging, and quantum computing. The $16 million CHIPS Program funds will be combined with $19 million in incentives from Minnesota’s Forward Fund, complementing the company’s planned $320 million CapEx co-investments through 2026. This brings the total anticipated external investment to over $350 million this decade.
Additionally, SkyWater Technology Inc. (NASDAQ:SKYT) will leverage the Advanced Manufacturing Investment Tax Credit, expected to cover up to 25% of qualified capital expenditures. The company plans to use the funds to increase U.S.-based 200 mm semiconductor technology production capacity by 30%, create approximately 70 jobs in Bloomington, modernize the facility, ensure a consistent silicon supply for DOD and commercial programs, and accelerate technology development for customers.
9. Ichor Holdings Ltd. (NASDAQ:ICHR)
Market Capitalization: $1.1 billion
Number of Hedge Funds: 17
Ichor Holdings Ltd. is a designer, engineer, and manufacturer of critical fluid delivery subsystems and components for the semiconductor capital equipment industry. The company specializes in advanced subsystems that facilitate the efficient transport of gases and liquids used in semiconductor fabrication processes. It also provides precision-machined components, weldments, electron beam (e-beam) and laser-welded components, precision vacuum and hydrogen brazing, surface treatment technologies, and other proprietary products.
On February 4, Ichor Holdings Ltd. (NASDAQ:ICHR) reported its Q4 2024 results. The company achieved revenue of $233 million, marking a 10.5% quarter-on-quarter (QoQ) increase, which was at the upper end of its November guidance range. The adjusted gross margin stood at 12.0%, and net income was $2.8 million, translating to an adjusted EPS of $0.08. CEO Jeff Andreson highlighted the 10% sequential revenue growth in Q4 and expressed optimism for another quarter of growth in Q1 2025. Despite cost headwinds impacting Q4’s gross margin, the company anticipates significant improvement in 2025. Andreson also noted a strengthened customer demand profile, indicating a robust business environment for leading-edge foundry and logic investments, along with a recovery in overall memory investments.
8. CEVA Inc. (NASDAQ:CEVA)
Market Capitalization: $775 million
Number of Hedge Funds: 17
CEVA Inc. (NASDAQ:CEVA) delivers innovative silicon and software IP solutions, enabling smart edge products to connect, sense, and infer data with exceptional reliability and efficiency. The company boasts the industry’s only comprehensive portfolio of communications and scalable Edge AI IP, empowering connectivity, sensing, and inference in cutting-edge smart edge products across various sectors, including consumer IoT, mobile, automotive, infrastructure, industrial, and personal computing. With over 17 billion smart edge products powered by its technology, CEVA Inc. (NASDAQ:CEVA) is used in diverse applications such as AI-enhanced smartwatches, IoT devices, wearables, autonomous vehicles, and 5G mobile networks.
On January 6, 2025, MediaTek (a Taiwanese semiconductor company) and CEVA Inc. (NASDAQ:CEVA) announced a new partnership to enhance mobile entertainment with CEVA’s RealSpace Elevate multi-channel spatial audio solution, integrated into MediaTek’s Dimensity 9400 flagship 5G smartphone chip. This collaboration, revealed at CES 2025, leverages Bluetooth LE Audio for immersive audio experiences. The RealSpace Elevate solution offers head tracking and a three-dimensional sound environment, enriching music, movies, games, and calls. This partnership aims to provide high-quality audio that matches 4K visual clarity, with improved performance, AI, and battery life.
In November 2024, CEVA Inc. (NASDAQ:CEVA) reported its Q3 2024 results, with revenue of $27.2 million, reflecting a 13% year-over-year (YoY) increase. Licensing and related revenue rose 12% YoY to $15.6 million, while royalty revenue increased 15% to reach $11.6 million. CEVA-powered device shipments hit 522 million units, driven by record shipments of Bluetooth, Wi-Fi, and cellular IoT devices. The company signed 10 new IP licensing agreements in the quarter, including deals for 5G-Advanced satellite communications and spatial audio. Management also authorized the expansion of the share repurchase program by an additional 700,000 shares, bringing the total shares available for repurchase to approximately 1 million.
7. MaxLinear Inc. (NASDAQ:MXL)
Market Capitalization: $1.4 billion
Number of Hedge Funds: 18
MaxLinear Inc. (NASDAQ:MXL) is a provider of high-performance analog and mixed-signal semiconductor solutions for broadband, mobile and wireline communications, data center, and industrial applications. The company specializes in designing and manufacturing integrated circuits (ICs) that enable high-speed data transmission and processing. Its customers primarily include electronics distributors, module makers, original equipment manufacturers (OEMs), and original design manufacturers (ODMs).
In its February 3, 2025 Investor Presentation, MaxLinear Inc. (NASDAQ:MXL) emphasized its strategic focus on high-growth markets, including broadband access, connectivity, and infrastructure. The company aims to capitalize on the increasing global demand for high-speed internet and data services. MaxLinear projects its serviceable addressable market (SAM) to expand to over $11 billion by 2027, up from approximately $4 billion in 2020, driven by both organic growth and strategic acquisitions.
On January 29, 2025, MaxLinear Inc. (NASDAQ:MXL) reported its Q4 2024 results with net revenue of $92.2 million, a 14% sequential increase but a 26% decline year-over-year. Adjusted loss per share was $0.09, an improvement from the previous quarter’s loss of $0.36, though down from the year-ago quarter’s EPS of $0.01.
The company remains optimistic about its growth prospects for 2025, benefiting from the rising global demand for high-speed connectivity that fuels the adoption of its advanced broadband and networking solutions. The proliferation of data-intensive applications, cloud services, and emerging technologies necessitates robust infrastructure, positioning MaxLinear Inc. (NASDAQ:MXL)’s products as essential components in modern communication networks and supporting a positive long-term growth outlook.
6. nLight Inc. (NASDAQ:LASR)
Market Capitalization: $525 million
Number of Hedge Funds: 21
nLight Inc. (NASDAQ:LASR) provides advanced laser solutions for industrial, microfabrication, and aerospace and defense applications. The company specializes in designing and manufacturing high-performance semiconductor lasers and fiber lasers, which are crucial components in various applications, including material processing, medical devices, and defense systems.
By investing in research and development, nLight Inc. (NASDAQ:LASR) strives to drive innovation in laser technology, positioning itself to meet the evolving demands of its target industries and achieve sustainable growth. However, the company is currently facing short-term headwinds. On January 14, it provided preliminary Q4 2024 results, which were significantly below earlier expectations. The company expects Q4 revenue to be between $46-$48 million, falling short of its previous guidance range of $49-$54 million. This shortfall is attributed to continued weakness in industrial markets, execution challenges in microfabrication, and delayed defense product deliveries. Consequently, both gross margin and adjusted EBITDA are anticipated to be significantly below guidance.
Despite these challenges, nLight Inc. (NASDAQ:LASR) CEO Scott Keeney remained optimistic about the aerospace and defense sectors, highlighting good visibility across multiple programs. Despite the near-term headwinds in some of its commercial markets, management remained confident in the company’s near- and long-term growth prospects in aerospace and defense.
5. Photronics Inc. (NASDAQ:PLAB)
Market Capitalization: $1.4 billion
Number of Hedge Funds: 23
Photronics Inc. (NASDAQ:PLAB) is a leading manufacturer of photomasks, essential components in the semiconductor fabrication process. Photomasks are high-precision quartz plates that contain microscopic images of electronic circuits. The company produces photomasks for various applications, including integrated circuits (ICs), flat panel displays (FPDs), and other advanced technologies.
On December 11, 2024, Photronics Inc. (NASDAQ:PLAB) reported its Q4 FY 2024 results (FY ending October 2024). For the quarter, revenue was $223 million, down 2% year-over-year (YoY) but up 6% sequentially, driven by growth in high-end IC and Generation 10.5+ FPDs. Adjusted net income was $37.1 million, or $0.59 in EPS. The company provided guidance for Q1 2025, expecting revenue between $208 million and $216 million and adjusted EPS between $0.43 and $0.49. Photronics Inc. (NASDAQ:PLAB) remains optimistic about future growth, driven by megatrends such as AI, supply chain regionalization, and edge computing. Commenting on the healthy sequential growth, company CEO Frank Lee highlighted the positive outlook and said:
“Photomask demand trends were favourable as we ended the year and we are cautiously optimistic that these trends will continue into 2025, driven by megatrends such as AI, supply chain regionalization, and edge computing. We believe our competitive advantages and market leadership will allow us to grow along with the photomask market growth trajectory. Combined with financial discipline to expand margins and improve cash flow, we are well positioned to continue growing profitably and creating shareholder value.”
4. ACM Research Inc. (NASDAQ:ACMR)
Market Capitalization: $1.4 billion
Number of Hedge Funds: 23
ACM Research Inc. (NASDAQ:ACMR) is a provider of advanced semiconductor equipment, specializing in wet processing technology and products for the semiconductor manufacturing industry. The company’s product portfolio includes equipment for critical processes such as cleaning, etching, and surface treatment, which are essential for producing high-performance chips.
On January 14, 2025, ACM Research Inc. (NASDAQ:ACMR) updated its 2024 guidance and provided an initial revenue outlook for 2025. The company raised its FY 2024 revenue guidance to a range of $755 million to $770 million, compared to the previous range of $725 million to $745 million provided with the Q3 2024 earnings results release. For 2025, it expects full-year revenue to be between $850 million and $950 million, implying a growth of around 25% year-over-year. Management believes that the impact of new U.S. component export restrictions on its tool production and supply chain in Shanghai is manageable. On the same day, Roth MKM analyst reiterated his Buy rating on ACM Research Inc. (NASDAQ:ACMR) and raised the price target to $25 from $20. The analyst was encouraged by the fact that the newly provided revenue growth guidance of +12%-25% YoY for 2025 indicates continued growth despite increased uncertainty from trade restrictions.
3. Ultra Clean Holdings Inc. (NASDAQ:UCTT)
Market Capitalization: $1.7 billion
Number of Hedge Funds: 24
Ultra Clean Holdings Inc. (NASDAQ:UCTT) is a developer and supplier of critical subsystems, components, parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. The company’s product offerings include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics and process modules, high-level assemblies, and other precision components that ensure the integrity and performance of semiconductor manufacturing.
Over the long term, Ultra Clean Holdings Inc. (NASDAQ:UCTT) anticipates sustained growth in the semiconductor market it serves, driven by diverse, long-term industry demands. These demands include emerging CPU architectures that enable higher-performing servers, essential for cloud computing, artificial intelligence (AI), and machine learning applications. Additionally, it foresees that semiconductor original equipment manufacturers (OEMs) will increasingly rely on partners like Ultra Clean Holdings Inc. (NASDAQ:UCTT) to meet their growing capacity needs. As of Q3 2024, the company’s revenue was fairly concentrated, with two major suppliers accounting for around 52% of their total revenue. While higher concentration poses a risk, the company is focusing on expanding its customer base and cross-selling more offerings to existing customers, which should support long-term earnings growth.
2. Veeco Instruments Inc. (NASDAQ:VECO)
Market Capitalization: $1.4 billion
Number of Hedge Funds: 24
Veeco Instruments Inc. (NASDAQ:VECO) is a manufacturer of advanced process equipment and solutions for the semiconductor and advanced packaging industries. The company specializes in manufacturing systems for the deposition of thin films, which are critical in the production of high-performance electronic devices. Its product portfolio includes ion beam, laser annealing, single wafer wet processing, molecular beam epitaxy (MBE) systems, atomic layer deposition (ALD) systems, and other advanced manufacturing technologies. The company’s customers are mainly concentrated in four end-markets: semiconductor, compound semiconductor, data storage, and scientific & other.
On January 6, 2025, Citi analyst upgraded Veeco Instruments Inc. (NASDAQ:VECO)’s rating from Neutral to Buy, setting a target price of $33. The analyst believes that the company is nearing a cyclical low, indicating a potential recovery from current levels. His favourable outlook was based on the company’s expanding Serviceable Available Market (SAM) and advancements in laser annealing and nanosecond annealing technologies, which are expected to benefit from the industry’s transition towards gate-all-around (GAA) transistors, backside power, and high bandwidth memory (HBM) technologies. AI-related semiconductor revenue contribution to Veeco Instruments Inc. (NASDAQ:VECO)’s total revenue is projected to double from 10% in 2024 to 20% in 2025, driven by advancements in wet processing technology. Additionally, the analyst believes that the company’s current valuation already accounts for a potential sharp decline in the data storage segment anticipated for 2025.
1. Wolfspeed Inc. (NYSE:WOLF)
Market Capitalization: $829 million
Number of Hedge Funds: 26
Wolfspeed Inc. (NYSE:WOLF) specializes in manufacturing silicon carbide (SiC) and gallium nitride (GaN) wide bandgap semiconductor solutions, primarily serving the electric vehicle (EV), renewable energy, power supplies, and industrial markets. Its product families include power devices and silicon carbide and gallium nitride (GaN) materials.
On January 29, 2025, Wolfspeed Inc. (NYSE:WOLF) reported its Q2 2025 (FY ending June 2025) earnings results. Revenue for the quarter declined 13% year-over-year (YoY) to $181 million due to weakness in Industrial & Energy end-markets and inventory adjustments from Materials customers. As construction work winds down at its John Palmour manufacturing facility, capex is expected to sharply decrease to around $300 million in FY 2026, down from around $1.1-1.3 billion guided capex in FY 2025.
The company has access to $2.5 billion in funding (including funds from the U.S. CHIPS Act) to support its U.S. capacity expansion plan. Wolfspeed Inc. (NYSE:WOLF)’s growth outlook remains robust as it continues to invest in increasing production capacity, such as the Mohawk Valley Fab, and expanding the materials factory in Durham, North Carolina, and constructing a new materials manufacturing facility in Siler City, North Carolina.
While we acknowledge the potential of WOLF to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WOLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
