In this piece, we will take a look at the 13 high growth semiconductor stocks that are profitable in 2024.
The semiconductor industry is undoubtedly one of the hottest in the world right now – and for a good reason. Starting from a purely share price-based perspective, these stocks have seen some of the strongest gains on Wall Street over the past couple of years. This windfall has made investors forget the bloodbath that the sector faced as recently as in 2022. Understanding these events is essential when talking about semiconductor stocks. To get a better view of their performance, let’s take a look at one of the most well-known semiconductor stock indexes, the Philadelphia Semiconductor Index (SOX) or the SOX.
The SOX index also known as the PHLX Semiconductor index, is a collection of 30 top semiconductor stocks. Some of its constituents include big-ticket semiconductor stocks such as Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA). Over the past three years, the index has gained 66%. However, there’s more to the performance of these semiconductor stocks. The three-year performance of the index is representative of the cyclical nature of the semiconductor industry, something that was on full display during 2022.
As Microsoft Corporation (NASDAQ:MSFT)-backed OpenAI was taking the world by storm with its ChatGPT chatbot in November 2022, semiconductor stocks were in trouble. The PHLX Semiconductor’s peak close in 2022 was $3,900, and during that yea it lost 44.5% to sit at $2,162 in October. This was a time marked by high inflation around the world, and central banks were in the middle of a rapid interest rate hiking cycle. These conditions were exacerbated for the chip sector as the booming demand for personal computing products during the coronavirus pandemic led to chip designers like NVIDIA and Advanced Micro Devices, Inc. (NASDAQ:AMD) over-ordering chips and then waiting for the glut to resolve.
Here’s what the management of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) had to say during the earnings call for the second quarter of 2022:
“Moving into the second quarter of 2022, we expect our business to be supported by HPC and automotive-related demand, partially offset by smartphone seasonality. On the inventory front, we expect the supply chain to continue to maintain a higher level of inventory as compared to the historical seasonal level for a longer period of time, prolonged by recent COVID-related supply chain disruptions and uncertainties brought about by geopolitical tension.”
However, a quarter later, TSMC’s management shared:
“On the inventory side, due to the softening device momentum in smartphone, PC and consumer-end market segments, we observe the supply chain is already taking action and expect inventory level to reduce throughout the second half of 2022. After two years of pandemic-driven stay-at-home demand, this type of adjustment is reasonable, in our view. Our expectation is for the excess inventory in the semiconductor supply chain to take a few quarters to rebalance to a healthier level.”
This shift is a classical aspect of the semiconductor industry and semiconductor stocks as it highlights the cyclical nature of the business. Semiconductors are cyclical because after consumers and businesses spend large amounts of money to buy chips, they might decide to wait for their products to become outdated before making the splurge once again.
The cyclical nature brings us to the hottest trend in the semiconductor industry right now, artificial intelligence. Artificial intelligence allows businesses and consumers to apply computing to novel use cases. One illustration is Apple Inc. (NASDAQ:AAPL)’s Neural Engine in the M3 chip for the MacBook. The neural engine is a new chip design that is different from Central Processing Units (CPUs) and Graphics Processing Units (GPUs) and it forces the tech hungry consumer to upgrade their products faster than would have been the case otherwise.
So right now, the reason why AI semiconductor stocks like NVIDIA are rising is because the industry expects an upgrade to generative artificial intelligence for enterprise and personal computing use cases. This upgrade was best summarized by NVIDIA CEO Jensen Huang earlier this year. Speaking in the Middle East, the executive, whose firm’s shares have soared by 96.7% in 2024, shared that the shift would be worth trillions of dollars. We looked at his comments as part of our coverage of 12 Best Artificial Intelligence Stocks to Buy Now According to Wall Street Analysts, with Huang sharing:
“So now, we’re in the beginning of this new era. And what’s going to happen is, there’s about a trillion dollars worth of installed base of data centers around the world. And over the course four, five years, we’ll have two trillion dollars worth of data centers that will be . .uh. . powering software around the world. And this architecture for accelerated computing is ideal for this next generation of software called generative AI.”
As for NVIDIA, its shares set a new record in after market trading after they crossed the $1,000 price mark following its first quarter earnings report. The results saw NVIDIA earn $26 billion in the first quarter, to mark 262% annual growth. Its profit was just as impressive, as it grew by 462% annually to sit at $15.2 billion. Analysts had expected $24.65 billion in revenue and $6.12 in adjusted EPS, and NVIDIA’s EPS of $6.12 led it to beat both of them.
A technician focused on a complex semiconductor chip in their lab.
Our Methodology
For our list of high growth profitable semiconductor stocks in 2024, we made a list of 47 semiconductor and semiconductor equipment stocks with a market value greater than $300 million and a positive price to earnings ratio. They were then ranked by their three-year average annualized revenue growth rate as of December 2023 and the top semiconductor stocks with the highest growth rate were chosen.
Moreover, for each of these stocks, we looked at how many hedge funds from our database held shares according to the last round of 13F filings. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this underlooked indicator.
13. Entegris, Inc. (NASDAQ:ENTG)
TTM P/E Ratio: 63.57
3-Yr. Average Revenue Growth rate: 23.75%
Number of Q4 2023 Hedge Fund Shareholders:
Entegris, Inc. (NASDAQ:ENTG) is a backend semiconductor manufacturing product and equipment firm. It provides chemicals, materials protection, and other products that ensure the quality of a silicon wafer during the manufacturing process. The firm’s latest financial results, released in April 2024, disappointed investors as Entegris, Inc. (NASDAQ:ENTG)’s high-end second-quarter revenue guidance of $810 million fell below analyst estimates of $813 million.
Out of the 933 hedge funds part of Insider Monkey’s database covering regulatory filings for Q4 2023, 36 held a stake in Entegris, Inc. (NASDAQ:ENTG). Among these, Robert Joseph Caruso’s Select Equity Group owned the biggest stake which was worth $785 million.
12. Rambus Inc. (NASDAQ:RMBS)
TTM P/E Ratio: 63.57
3-Yr. Average Revenue Growth rate: 23.85%
Number of Q4 2023 Hedge Fund Shareholders:
Rambus Inc. (NASDAQ:RMBS) is a semiconductor intellectual property firm whose products typically involve memory chips. Some of its products include DDR5 and DDR4 memory interface chipsets. The shares are down by 1.7% since the latest earnings report, as they struggle to recover from a $0.05 EPS and $2.26 million revenue miss.
Among the 933 hedge funds tracked by Insider Monkey for their fourth quarter of 2023 investment holdings, 29 had bought a stake in Rambus Inc. (NASDAQ:RMBS). Out of these hedge fund investors, the one with the largest stake was Israel Englander’s Millennium Management. It owned 1.8 million shares that were worth $126 million as of the end of December.
11. Nova Ltd. (NASDAQ:NVMI)
TTM P/E Ratio: 46.98
3-Yr. Average Revenue Growth rate: 24.34%
Number of Q4 2023 Hedge Fund Shareholders: 21
Nova Ltd. (NASDAQ:NVMI) is a specialized Israeli semiconductor firm whose products enable chip makers to ensure design and measurement compliance during fabrication. Evercore ISI initiated coverage on Nova Ltd. (NASDAQ:NVMI)’s stock in April 2024. It rated the shares as Outperform and set a $210 share price target.
For their investment stakes during 2023’s December quarter, 21 out of the 933 hedge funds part of Insider Monkey’s research were Nova Ltd. (NASDAQ:NVMI)’s stakeholders. Phill Gross and Robert Atchinson’s Adage Capital Management owned the largest stake which was worth $164 million.
10. ASML Holding N.V. (NASDAQ:ASML)
TTM P/E Ratio: 46.98
3-Yr. Average Revenue Growth rate: 24.34%
Number of Q4 2023 Hedge Fund Shareholders: 62
ASML Holding N.V. (NASDAQ:ASML) is one of the most important semiconductor companies in the world. It is the only firm that makes advanced machines for chip manufacturing. These machines are in hot demand and have spurred competition between two of the world’s largest semiconductor manufacturers, Intel Corporation (NASDAQ:INTC) and the Taiwan Semiconductor Manufacturing Company (NYSE:TSM). While Intel has spent quite a bit to procure the latest High NA scanners from ASML Holding N.V. (NASDAQ:ASML), TSMC is holding out as it evaluates current equipment and worries about the price.
Insider Monkey dug through 933 hedge fund SEC filings for last year’s fourth-quarter and found that 62 had held a stake in ASML Holding N.V. (NASDAQ:ASML). Out of these, the largest stakeholder was Ken Fisher’s Fisher Asset Management as it owned $3.7 billion worth of shares.
9. Camtek Ltd. (NASDAQ:CAMT)
TTM P/E Ratio: 56.10
3-Yr. Average Revenue Growth rate: 26.48%
Number of Q4 2023 Hedge Fund Shareholders: 19
Camtek Ltd. (NASDAQ:CAMT) is another semiconductor manufacturing equipment firm but one that is much smaller than ASML. Its products allow chip manufacturers to evaluate fully assembled chips for any defects. The firm has been doing well on the financial front as of late since it has beaten analyst EPS estimates in all four of its latest quarters.
After compiling 933 hedge fund Q4 2023 SEC filings, Insider Monkey found that 19 funds had held stakes in Camtek Ltd. (NASDAQ:CAMT). Richard Driehaus’ Driehaus Capital was a significant shareholder, holding 2 million shares that were worth $142 million.
8. Lam Research Corporation (NASDAQ:LRCX)
TTM P/E Ratio: 34.61
3-Yr. Average Revenue Growth rate: 29.16%
Number of Q4 2023 Hedge Fund Shareholders: 67
Lam Research Corporation (NASDAQ:LRCX) is one of the largest semiconductor manufacturing systems providers in the world. The average of 26 analyst price targets for the firm during the past twelve months is $986 and the consensus rating is Buy.
As of December 2023 end, 67 out of the 933 hedge funds covered by Insider had acquired a stake in Lam Research Corporation (NASDAQ:LRCX). Ken Fisher’s Fisher Asset Management owned the largest stake which was worth $2.3 billion.
7. Monolithic Power Systems, Inc. (NASDAQ:MPWR)
TTM P/E Ratio: 90.09
3-Yr. Average Revenue Growth rate: 29.20%
Number of Q4 2023 Hedge Fund Shareholders: 35
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is a small semiconductor company that provides power management chips for personal computing and a variety of other applications. Its shares are up by 15% since the latest earnings, as a 200% growth in AI server demand impressed investors.
By the end of last year’s fourth quarter, 35 hedge funds from our database were Monolithic Power Systems, Inc. (NASDAQ:MPWR)’s stakeholders. Among these, Ian Simm’s Impax Asset Management owned a hefty stake that was worth $189 million.
6. Analog Devices, Inc. (NASDAQ:ADI)
TTM P/E Ratio: 38.9`
3-Yr. Average Revenue Growth rate: 29.98%
Number of Q4 2023 Hedge Fund Shareholders: 62
Analog Devices, Inc. (NASDAQ:ADI) is one of the biggest signals conversion and power management semiconductor providers in the world. Investment bank Barclays was out with a rather strong analyst note for the company in May 2024 when it increased Analog Devices, Inc. (NASDAQ:ADI)’s share price target to $210 from $185 and kept an Equal Weight rating for the shares.
After compiling regulatory filing data from 933 hedge funds that covered their fourth quarter holdings, Insider Monkey found that 62 held positions in Analog Devices, Inc. (NASDAQ:ADI). One of the company’s biggest shareholders in our database is David Blood and Al Gore’s Generation Investment Management. It owned 4.3 million shares that were worth $864 million.