In this piece, we will take a look at 5 semiconductor stocks with growth potential. For a background of the semiconductor industry and more stocks, head on to 10 Semiconductor Stocks With Growth Potential.
5. Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)
Number of Hedge Fund Holders: 28
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) is an industrial company that targets the semiconductor industry. It designs and sells tools to the chip companies involved in late-stage processes, such as packaging the semiconductors after they have been fabricated and cut into individual chips.
For its fourth fiscal quarter, Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) brought in $485 million in revenue and $2.17 in non-GAAP EPS, beating analyst estimates for EPS and meeting them for revenue. This highlighted improved cost efficiencies but signaled a tightening market. DA Davidson raised the company’s price target to $100 from $90 in September 2021, outlining that it expects Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)’s revenue to beat previous CAGRs due to demand for new technologies.
28 of the 867 hedge funds held a stake in Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) during Q3 2021 according to Insider Monkey’s research.
4. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 41
ASML Holding N.V. (NASDAQ:ASML) is one of the, if not the most, important firms in the semiconductor industry. Its lithography machines, which use light to fabricate semiconductors, are used by all of the leading chip manufacturers globally since it is the only company capable of manufacturing them.
ASML Holding (NASDAQ:ASML) is one of Morgan Stanley’s top picks in the European semiconductor and tech hardware spaces for 2022 as the firm believes the company is benefitting from the chip shortage.
Morgan Stanley also thinks that ASML (ASML) could generate $34.05 billion in revenue, or 30.2 billion euros, in 2022.
In its Q2 2021 investor letter, Polen Capital mentioned ASML Holding N.V. (NASDAQ:ASML), stating that:
“Dutch technology company ASML is the world’s only supplier of photolithography systems to leading-edge semiconductor manufacturers. It is a gross simplification and a valid point to note that ASML’s technology enables the computing technology we use today. For years, ASML engineers bent the laws of physics and enabled Moore’s Law—which states that computer chips will become faster and cost less—to progress.
Incremental innovation gains mushroomed with the rollout of Extreme Ultraviolet (EUV) technology. We were impressed by management’s recent acknowledgment that demand for ASML’s lithography systems is exceeding their prior expectations. Recent announcements by management and major customers for ASML give us even more confidence in the sustainability of growth. We believe ASML could grow its earnings at a high-teens rate over the coming five years.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 83
NVIDIA Corporation (NASDAQ:NVDA) is the world’s leading graphics processing unit (GPU) designer and seller. The company’s products are used to run the latest video games, power-gaming consoles, crunch numbers for data centers, and more.
Citi kept a $500 price target for the company’s shares in November 2021. 83 of the 867 hedge funds part of Insider Monkey’s Q3 2021 survey had owned NVIDIA Corporation (NASDAQ:NVDA)’s shares.
Vulcan Value Partners, mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2021 investor letter. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”
2. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 67
The Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s leading contract chip manufacturer. It manufacturers semiconductors using designs provided to it by its customers, and has some of the largest consumer electronics firms’ on its list.
For its Q4, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported $15.7 billion in revenue and $1.15 in GAAP EPS, beating analyst estimates for EPS only. It also kicked off pilot production of its leading-edge 3-nanometer (nm) manufacturing process in December, sticking to the plan revealed by CEO Dr. C.C. Wei at the Q3 earnings call.
Cowen set a $120 price target for the company in October 2021, stating that while the demand for its products is strong, it might peak soon. An Insider Monkey poll of 867 hedge funds in Q3 2021 revealed that 67 held a stake in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
L1 Capital mentioned the chipmaker in its 3Q21 investor letter, which outlined that:
“Even though they are not majority State owned and we would expect many of China’s technology champions to continue to grow strongly, outcomes for shareholders may be unsatisfactory… The Fund has retained its investment in Taiwan Semiconductor Manufacturing Company (TSMC) which is well placed to maintain its global leadership in semiconductor manufacturing. Due to geopolitical risks, we limit the position size of TSMC in the Fund.”
1. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 65
Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor designer that sells central processing units (CPUs), graphics processing units (GPUs) and custom designed chip products. It has delivered strong growth over the past two years.
Wedbush raised its price target to $165 from $140 in November 2021, outlining that as long as Advanced Micro Devices, Inc. (NASDAQ:AMD) executes, its future is a strong growth story.
According to Insider Monkey’s research, 65 of 867 hedge funds in Q3 2021 held Advanced Micro Devices, Inc. (NASDAQ:AMD)’s shares.
Artisan Partners Limited Partnership mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2020 investor letter outlining that:
“We also exited our positions in Advanced Micro Devices. Our investment campaign in Advanced Micro Devices (AMD) began in the second half of 2018, and we have seen a new management team reinvigorate the company’s product portfolio of microprocessors for PCs and servers, graphics processors, and video game consoles. These new, higher-margin products have helped the company partially close its margin gap with peers and capture share from market leader Intel. While we believe there is meaningful runway for further share gains and margin expansion, AMD has appreciated far beyond our mid-cap market cap mandate, and we exited our position.”
You can also take a peek at the 10 Best Performing Semiconductor Stocks of 2021 and 10 Healthcare Stocks to Buy According to John Rogers’ Ariel Investments.
