We recently published a list of 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025. In this article, we are going to take a look at where KLA Corporation (NASDAQ:KLAC) stands against other high growth semiconductor stocks that are profitable.
Semiconductors have led industrial advancements and aided key applications such as personal computing, data centers, and cloud computing. As per PwC, Memory ICs were the fastest-growing semiconductor category over the previous 2 decades, with DRAM and HBM standing out. The broader DRAM market is supported by cost and scale, while HBM, because of its advanced technological requirements, reflects a high-barrier, closed-loop ecosystem.
Global Semiconductor Sales Rose 20.7% YoY in November 2024
The Semiconductor Industry Association (SIA) announced that global semiconductor sales touched $57.8 billion during November 2024 month, demonstrating 20.7% growth as compared to November 2023 total of $47.9 billion and 1.6% growth as compared to the October 2024 total of $56.9 billion. As per the report published by SEMI (Semiconductor Equipment and Materials International), the semiconductor industry is expected to begin 18 new fab construction projects in 2025. These new projects will include three 200mm and fifteen 300mm facilities. Notably, the majority will begin operations from 2026 – 2027.
In 2025, the Americas and Japan will be the leading regions with 4 projects each. Next, China and Europe & Middle East regions have 3 planned construction projects. Finally, Taiwan has 2 planned projects, with Korea and Southeast Asia having 1 project each for this year. As per SEMI’s President and CEO, investments have been fueling leading-edge and mainstream technologies to cater to dynamic global demands. Gen-AI and high-performance computing continue to fuel advancements in the leading-edge logic and memory segments. However, mainstream nodes have supported crucial automotive, IoT, and power electronics applications.
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Semiconductor Capacity to Ramp Up
SEMI projects semiconductor capacity to accelerate further, with a 6.6% yearly growth rate to a total of 33.6 million wafers per month (wpm) for 2025. This expansion is expected to primarily stem from leading-edge logic technologies in high-performance computing (HPC) applications and higher penetration of generative AI in edge devices. Overall, the broader semiconductor industry continues to focus on building advanced computing capabilities, and responding to the increased computational demands of LLMs.
Moving forward, foundry suppliers are expected to be the leaders in purchases of semiconductor equipment. The Foundry segment can increase capacity by 10.9% YoY, increasing from 11.3 million wpm in 2024 to 12.6 million wpm in 2025.
Our Methodology
To list the 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025, we conducted extensive research and scanned through several online rankings to shortlist companies having ~10% revenue growth over the previous 5 years and TTM net income of at least $400 million. We also mentioned the hedge fund sentiments around each stock, as of Q3 2024. Finally, the stocks were ranked in ascending order of their hedge fund sentiments.
At Insider Monkey we are obsessed with 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).
The inner workings of a semiconductor manufacturing facility, neon hued machines humming with activity.
KLA Corporation (NASDAQ:KLAC)
5-year Sales Growth: ~15.97%
TTM net income: $2,966.4 Million
Number of Hedge Fund Holders: 61
KLA Corporation (NASDAQ:KLAC) is engaged in designing, manufacturing, and marketing process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries. Simply put, the company specializes in tools monitoring and improving manufacturing processes for semiconductor wafers, integrated circuits, and other devices. Needham analysts upgraded the company’s shares from “Hold” to “Buy.” This upgrade demonstrates the firm’s confidence in KLA Corporation (NASDAQ:KLAC)’s performance during tough times and its ability to outshine competitors.
As per Needham, semiconductor capital customers can limit capacity expansion because of uncertainty, but not technology upgrades, primarily in advanced nodes. This trend is expected to favour KLA Corporation (NASDAQ:KLAC). Just to let the readers know, the semiconductor capital industry refers to the manufacturing of equipment and machinery used to make semiconductor devices, including microchips and integrated circuits. Furthermore, KLA Corporation (NASDAQ:KLAC) is expected to benefit from an ever-evolving AI trend in the semiconductor industry, which continues to fuel demand for more advanced and complex chip designs.
With chip designs becoming more intricate and complex, the need for sophisticated process control tools, like those offered by KLA Corporation (NASDAQ:KLAC), continues to increase. Cantor Fitzgerald reissued a “Neutral” rating on the company’s shares, setting a $925.00 price target on 8th October. Parnassus Investments, an investment management company, released the Q2 2024 investor letter. Here is what the fund said:
“KLA Corporation (NASDAQ:KLAC), a provider of process control and yield management solutions for the semiconductor and related nanoelectronics industries, continued its strong run. We expect KLA will continue to benefit from the increasing complexity of chip designs.”
Overall, KLAC ranks 8th on our list of high growth semiconductor stocks that are profitable heading into 2025. While we acknowledge the potential of KLAC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than KLAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.