5 Best Semiconductor Equipment Stocks to Invest In

In this article, we discuss the 5 best semiconductor stocks to invest in. To read the detailed analysis of the industry, go directly to the 11 Best Semiconductor Equipment Stocks to Invest In.

5. Entegris, Inc. (NASDAQ:ENTG)

Number of Hedge Fund Holders: 36

Entegris, Inc. (NASDAQ:ENTG) manufactures and supplies various products and solutions, including micro-contamination control products, to semiconductors, glass, and other industries. 

In the fourth quarter, the number of hedge funds with a stake in Entegris, Inc. (NASDAQ:ENTG) remained at 36, the same as the previous quarter, but the combined stake value increased to $2.23 billion in the quarter from $1.69 billion in Q3. With 6.55 million shares worth $785.416 million, Robert Joseph Caruso’s Select Equity Group was the top investor in the company.

The London Company stated the following regarding Entegris, Inc. (NASDAQ:ENTG) in its fourth quarter 2023 investor letter:

“Entegris, Inc. (NASDAQ:ENTG) – ENTG shares rallied during the quarter as visibility in the semiconductor market improved and demand for its value added product suite remains strong. ENTG is benefiting from the higher amount of materials needed for miniaturization and is winning business as its products deliver faster time to yield. Management has been delivering on its debt reduction strategy. We remain attracted to the industry’s high barriers to entry, limited competitors, and high switching costs.”

4. KLA Corporation (NASDAQ:KLAC)

Number of Hedge Fund Holders: 55

KLA Corporation (NASDAQ:KLAC) develops and supplies process equipment, process control equipment, and more. KLA Corporation (NASDAQ:KLAC) is one of the best semiconductor equipment stocks to invest in.

On January 25, KLA Corporation (NASDAQ:KLAC) announced its second-quarter 2024 earnings result with a non-GAAP EPS of $6.16, topping the analysts’ estimates by $0.28. The company generated a revenue of $2.49 billion, which beat the estimates by $30 million.

On February 8, KLA Corporation (NASDAQ:KLAC) announced a quarterly dividend of $1.45, payable by March 1 to the shareholders of record on February 19. The stock’s dividend yield was 0.86% at the time of writing on February 23.

3. ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holders: 62

ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that, through its subsidiaries, is engaged in the development, production, and marketing of semiconductor manufacturing equipment.

In the fourth quarter, the hedge fund sentiment was positive toward ASML Holding N.V. (NASDAQ:ASML) as 62 hedge funds had investments in the stock, compared to 57 funds in Q3. With 4.977 million company shares worth $3.767 billion, billionaire Ken Fisher’s Fisher Asset Management was the most significant stakeholder in the stock.

On January 24, ASML Holding N.V. (NASDAQ:ASML) announced net sales of €7.2 billion in the fourth quarter and €27.6 billion for the full year of 2023.

ClearBridge Investments stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its fourth quarter 2023 investor letter:

“Another welcome change has been the recognition of generative artificial intelligence (AI) opportunities for companies outside the U.S. While our IT holdings trailed their mega cap U.S. counterparts for most of the year, semiconductor equipment makers ASML Holding N.V. (NASDAQ:ASML) and Tokyo Electron, which we consider enablers of AI, as well as enterprise software maker SAP and IT consultant Accenture, which we see as facilitators of AI adoption in new product lines and/or enhanced business models, rose strongly in the quarter. These companies are rolling out new, AI-enhanced products at higher prices which should positively impact earnings in the near term.

On an individual stock basis, the largest contributors to absolute returns in the quarter included ASML and Tokyo Electron in the IT sector.”

2. Lam Research Corporation (NASDAQ:LRCX)

Number of Hedge Fund Holders: 67

Lam Research Corporation (NASDAQ:LRCX) is a California-based company that provides manufacturing and servicing of semiconductor processing systems.

On February 8, Lam Research Corporation (NASDAQ:LRCX) declared a quarterly dividend of $2.00, payable by April 3 to the shareholders of record on March 13. At the time of writing on February 23, the stock’s dividend was 0.86%.

According to Insider Monkey’s database, 67 hedge funds had investments in Lam Research Corporation (NASDAQ:LRCX)’s stock in the fourth quarter. Fisher Asset Management was the most significant investor in the company, with 2.97 million shares worth $2.328 billion, representing 1.14% of the investment portfolio.

Vulcan Value Partners commented on Lam Research Corporation (NASDAQ:LRCX) in its third quarter 2023 investor letter. Here is what it said:

“Lam Research Corporation (NASDAQ:LRCX) designs and manufactures equipment used in the fabrication of semiconductors. Lam is a wonderful business with great long-term prospects. The company has shown tremendous financial resilience against what is currently a challenging industry backdrop. After a significant increase in its stock price over the last year, our margin of safety narrowed. We followed our discipline and sold our position to reallocate capital into businesses with larger discounts.”

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

Number of Hedge Fund Holders: 70

Applied Materials, Inc. (NASDAQ:AMAT) is a California-based company that is engaged in the development, manufacturing, and marketing of semiconductor wafer fabrication equipment and more.

In the last three months, 23 Wall Street analysts covered Applied Materials, Inc. (NASDAQ:AMAT), and 17 kept a Buy rating on the stock. The average price target of $217.52 represented an upside of 10.18% at the time of writing on February 23.

On February 20, Argus analyst Jim Kelleher raised the price target on Applied Materials, Inc. (NASDAQ:AMAT)’s stock to $230 from $170 and maintained a Buy rating. 

Generation Investment Management mentioned Applied Materials, Inc. (NASDAQ:AMAT) in its second quarter 2023 investor letter. Here is what it said:

Applied Materials, Inc. (NASDAQ:AMAT): Semiconductor revenue has grown 6% per year since 2010, driven by increasing demand for smartphones, datacentres and electronic content in vehicles and industrial settings.4 Through work spanning six roadmaps covering many sub-themes within semiconductors (including industry consolidation, capital equipment and generative AI), we are confident that these trends will continue or even accelerate in the coming decades. The rise of generative AI in particular will require high-performing semiconductors, such as Nvidia’s GPUs, in datacentres.

Traditionally the industry relied on semiconductor manufacturers to deliver steady advances in semiconductor performance while reducing costs. This phenomenon is known as Moore’s Law, which was identified by Intel founder Gordon Moore. Traditionally, Moore’s Law relied on shrinking the light source used to expose photosensitive material on a silicon wafer to make smaller semiconductors, which in turn led to falling costs.

In recent years, however, Moore’s Law has slowed. Manufacturing has run up against the limits of physics. Making semiconductors smaller more cheaply has therefore become difficult. The latest generation of lithography machines that create this light source are marvels of modern science, but they are also expensive to produce, not to mention power-hungry. Delivering performance improvements in the most advanced semiconductors is now becoming costlier. This presents a risk, both to generative AI and a net zero world.

All is not lost, however. The semiconductor industry attracts some of the best minds in the world, many of whom are looking at alternative ways to continue to deliver more power-efficient and cheaper semiconductors. A key area of focus is around developing new materials used in manufacturing semiconductors, and new ways of applying (‘deposition’) and selectively removing (‘etch’) these materials to create the desired semiconductor. Applied Materials is one of the companies in the vanguard of these developments…” (Click here to read the full text)

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