In this article, we discuss the 35 chip stocks in focus amid the tech sector selloff.
The semiconductor industry is on a trajectory of rapid growth, with global revenues expected to exceed $1 trillion by 2030. According to a report on the industry by professional services firm PwC, this expansion is fueled by advancements in memory technology, the rise of automotive semiconductors, regional self-sufficiency initiatives, purpose-built silicon, and the increasing demand for artificial intelligence (AI) applications. Per the report, Memory integrated circuits (ICs), particularly DRAM and high-bandwidth memory (HBM), have been the fastest-growing semiconductor segment. In 2024, DRAM is projected to contribute 14% of total semiconductor revenue. HBM, essential for AI and high-performance computing (HPC), is expected to grow at a 64% compound annual growth rate (CAGR) in bit growth and a 58% CAGR in revenue through 2028. As big companies leverage HBM for AI workloads, closer collaboration is required between foundries and memory firms to integrate logic and memory components effectively.
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PwC highlights that the automotive semiconductor market reached $76 billion in 2023 and is projected to grow to $117 billion by 2028, driven by electric vehicle (EV) adoption and software-defined vehicles (SDVs). Power semiconductors, particularly those utilizing silicon carbide (SiC) and gallium nitride (GaN), are expected to reach $6 billion, comprising 18% of the market by 2028. Meanwhile, automotive system-on-chip (SoC) revenue was $7 billion in 2023 and is projected to grow at a 17% CAGR through 2028, supporting real-time data processing, advanced driver assistance systems (ADAS), and infotainment. The COVID-19 pandemic exposed vulnerabilities in the semiconductor supply chain, prompting major economies to pursue self-sufficiency. By 2027, approximately $400 billion in government funding is expected to be allocated to semiconductor initiatives.
The US has already awarded $29.5 billion in grants and $25.1 billion in loans, with total investments projected to reach $348 billion by 2030. The European Union has allocated $46 billion for incentives, while China has invested over $190 billion through its National Integrated Circuit Investment Fund and local initiatives. South Korea, Taiwan, and Japan have also introduced tax incentives and subsidies to boost domestic semiconductor production. The demand for custom ICs tailored to specific applications is surging, especially in data centers, video processing, and network security. By 2028, the market for data center custom ICs is expected to reach $24 billion. AI is a critical growth driver for the semiconductor industry, requiring GPUs, accelerators, and HBM. The AI-specific silicon market is forecasted to reach $150 billion by 2028.
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For this article, we selected companies that operate in the semiconductor sector that are in focus as investors exit tech stocks amid fears of an AI bubble. These stocks are also popular among hedge funds. 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).
A close up of a circuit board, its microchips creating a powerful computing system.
Chip Stocks In Focus Amid Tech Selloff
35. EMCORE Corporation (NASDAQ:EMKR)
Number of Hedge Fund Holders: 2
EMCORE Corporation (NASDAQ:EMKR) designs and manufactures fiber optic gyro, ring laser gyro, and micro electromechanical system-based inertial sensors and systems. In November last year, the company signed a merger agreement with Velocity One, an aerospace manufacturing holding company. Under the deal, the former would become a wholly-owned subsidiary of the latter for $3.10 per share. Matt Vargas, the CEO of EMCORE said on the occasion that the merger underscored a commitment to the domestic and international customer base, including strengthening relationships with and generating synergies across a range of high-priority US and NATO defense programs and industrial partners. In earnings for the fourth fiscal quarter, the firm reported a revenue of $21.7 million, a 6% quarter-over-quarter increase, while generating a positive cash flow of $1.8 million.
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