5 Best Semiconductor Equipment Stocks to Buy

In this article, we will take a look at the 5 best semiconductor equipment stocks to buy now. If you want to explore similar stocks, you can go to 10 Best Semiconductor Equipment Stocks to Buy.

5. Teradyne, Inc. (NYSE:TER)

Number of Hedge Fund Holders: 33

On March 24, KeyBanc analyst Steve Barger raised his price target on Teradyne, Inc. (NYSE:TER) to $117 from $110 and maintained an Overweight rating on the shares.

As of April 26, Teradyne, Inc. (NYSE:TER) has returned 13.55% to investors over the past 6 months. The stock is placed fifth on our list of the best semiconductor equipment stocks to buy now.

At the close of the fourth quarter of 2022, 33 hedge funds were eager on Teradyne, Inc. (NYSE:TER) and held stakes worth $874.9 million in the company. Of those, Alkeon Capital Management is the largest investor in the company and has a stake worth $186.5 million.

4. KLA Corporation (NASDAQ:KLAC)

Number of Hedge Fund Holders: 44

KLA Corporation (NASDAQ:KLAC) is trading at a TTM PE ratio of 14.69, as of April 26, and the stock has gained 16.69% over the past 6 months. KLA Corporation (NASDAQ:KLAC) is one of the best semiconductor equipment stocks to buy according to hedge funds.

As of January 27, Wells Fargo analyst Joe Quatrochi has a $455 price target and an Overweight rating on KLA Corporation (NASDAQ:KLAC).

KLA Corporation (NASDAQ:KLAC) was a part of 44 investors’ portfolios at the end of Q4 2022 that held collective positions worth $986.8 million in the company. As of December 31, Alkeon Capital Management is the top shareholder and has a position worth $264 million.

Aristotle Atlantic Partners, LLC, made the following comment about KLA Corporation (NASDAQ:KLAC) in its Q4 2022 investor letter:

“KLA Corporation (NASDAQ:KLAC) is a supplier of process control equipment and data analytics products for a broad range of industries, including semiconductors, printed circuit boards (PCB) and displays. It provides solutions for manufacturing and testing wafers and reticles, integrated circuits (IC or chip), packaging, light-emitting diodes (LED), power devices, compound semiconductor devices, microelectromechanical systems (MEMS), data storage, PCBs, flat and flexible panel displays, and general materials research, as well as providing contracted and comprehensive installation and maintenance services across its installed base. Customers in international markets account for about 90% of the company’s revenue.

We see a unique opportunity in KLA to benefit from the increasing complexity of semiconductor wafer manufacturing through its leading position in process technology and wafer inspection. We believe Wafer Fab Equipment (WFE) spending will continue to rise over the next decade, as semiconductor capital intensity remains elevated and as semiconductors continue to account for a larger share of the global economy due to the above average growth of IoT devices, auto electrification, data center and cloud computing, and mobile communication/computing. We see the stock as an attractive investment opportunity, as investor expectations for 2023 have been reset at lower levels following WFE capital expenditures (CapEx) cuts by foundries and semiconductor companies.”

3. ASML Holding N.V. (NASDAQ:ASML) 

Number of Hedge Fund Holders: 59

On April 19, ASML Holding N.V. (NASDAQ:ASML) announced earnings for the fiscal first quarter of 2023. The company reported an EPS of $5.42 and outperformed EPS estimates by $0.88. The company’s revenue for the quarter amounted to $7.39 billion, up 92.73% year over year and ahead of Wall Street estimates by $465.72 million. As of April 26, the stock has surged 26% over the past 6 months. ASML Holding N.V. (NASDAQ:ASML) is placed third among the best semiconductor equipment stocks to buy now.

This April, Deutsche Bank analyst Robert Sanders updated his price target on ASML Holding N.V. (NASDAQ:ASML) to EUR 650 from EUR 675 and maintained a Buy rating on the shares.

59 hedge funds disclosed having stakes in ASML Holding N.V. (NASDAQ:ASML) at the close of the fourth quarter of 2022. The total value of these stakes amounted to $5 billion. As of December 31, GQG Partners is the largest shareholder in the company and has a stake worth $305.7 million.

ClearBridge Investments made the following comment about ASML Holding N.V. (NASDAQ:ASML) in its Q4 2022 investor letter:

“ASML Holding N.V. (NASDAQ:ASML) makes semiconductor chip manufacturing equipment and is a leading supplier of lithography systems to the semiconductor industry. We expect ASML to grow above expectations as its innovative EUV technology is deployed and industry capacity expands. This in turn should lead to margin expansion and earnings leverage. In addition to more visible growth and profitability drivers relative to Intel, ASML also has a stronger balance sheet and higher returns on capital. As a semiconductor capital equipment provider, ASML directly improves the energy efficiency of semiconductor manufacturing, and governance and diversity initiatives at ASML are best in class.”

2. Lam Research Corporation (NASDAQ:LRCX)

Number of Hedge Fund Holders: 68

At the close of Q4 2022, 68 hedge funds were long Lam Research Corporation (NASDAQ:LRCX) and held positions worth $3 billion in the company. Of those, Alkeon Capital Management was the leading investor in the company and held a position worth $253.5 million.

Lam Research Corporation (NASDAQ:LRCX) reported strong earnings for the third quarter of fiscal 2023, on April 19. The company generated a revenue of $3.87 billion and beat Wall Street consensus by $22.27 million. The company reported an EPS of $6.99 and outperformed EPS estimates by $0.46.

This April, Mizuho revised its price target on Lam Research Corporation (NASDAQ:LRCX) to $520 from $525 and reiterated a Buy rating on the shares. The stock has returned 20.25% to investors on a year-to-date basis, as of April 26. Lam Research Corporation (NASDAQ:LRCX) is one of the best semiconductor equipment stocks to buy now.

1. Applied Materials, Inc. (NASDAQ:AMAT) 

Number of Hedge Fund Holders: 70

Applied Materials, Inc. (NASDAQ:AMAT) is the best semiconductor equipment stock to buy now according to hedge funds. As of April 26, the stock has gained 13.78% year to date and is trading at a PE multiple of 14x.

On March 1, KGI Securities analyst Derek Chang upgraded Applied Materials, Inc. (NASDAQ:AMAT) to Outperform from Neutral and reiterated his $145 price target on the shares.

At the end of the fourth quarter of 2022, Applied Materials, Inc. (NASDAQ:AMAT) was spotted on 70 hedge funds’ portfolios. These funds held positions worth $3.7 billion in the company. As of December 31, Generation Investment Management is the dominant stockholder in the company and has a position worth $678 million.

Davis Advisers made the following comment about Applied Materials, Inc. (NASDAQ:AMAT) in its 2022 annual investor letter:

“If Berkshire represents “growing value” then Applied Materials, Inc. (NASDAQ:AMAT) might be said to represent “undervalued growth.” Founded more than a half century ago, Applied Materials has grown to be the largest supplier of manufacturing tools, services and software to the semiconductor industry. Holding more than 15,000 patents, Applied has become the irreplaceable supplier to the critical global growth industry, semiconductors. Because this company’s earnings can be uneven, short-sighted investors often label this company as “cyclical” and assign it a relatively low valuation.

We disagree and, having perused more than 50 years of data, conclude that Applied is unquestionably a growth company trading at a value price. Figure 8 shows the two sustainable drivers of this growth. The green bars indicate that semiconductor manufacturers have grown industry revenue at 7.5% over the last decade, more than three times the growth of the U.S. economy over this same decade. The orange line indicates that the percentage of this revenue that the industry commits to capital spending has gradually risen from roughly 20% to 30%. Putting these two trends together, it should come as no surprise that Applied has grown revenue at a rate of 11%, and operating income at more than 19% over this same time period.

In the near term, the impact of the chip industry’s post-pandemic inventory correction, which could reduce equipment demand, may more than offset the benefit of recent supply chain issues that limited Applied Materials’ ability to meet customer demand. Longer term, geopolitical tensions between China and the U.S. are driving investment in potentially redundant chip production globally, while at the same time the U.S. and her allies are restricting export of leading edge production tools into China. Even though the near term is frustratingly veiled in uncertainty, the recent shortages and trade restrictions have firmly established that access to chip-production technology is essential to every major industrial economy. Given this, we see more opportunity than risk and estimate that Applied Materials could sell at about 10 times what the company could be earning three-to-five years from now.”

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