The semiconductor sector's expansion finds its impetus in escalating demand for its products, technological progress, and substantial governmental funding. Consequently, it seems wise to invest in Cirrus Logic, Inc. (CRUS), Broadcom Inc. (AVGO), and QUALCOMM Incorporated (QCOM), which manifest encouraging momentum.
Before delving into the highlighted stocks, let's gain a detailed understanding of how these factors are driving the industry's growth.
The semiconductor industry is experiencing significant expansion as it advances to meet the demands of numerous applications, such as AI, AR/VR, IoT, autonomous and electric vehicles, HPC, aerospace, satellite communications, 5G/6G, smart cities, and health tech. These technological advancements are driving the sector's robust growth.
Custom Market Insights forecasts the global semiconductor chip market to grow at a CAGR of 7.1% and reach $1.12 trillion by 2032.
Moreover, the CHIPS and Science Act has allocated $52.70 billion to bolster American semiconductor research, development, manufacturing, and workforce training. This encompasses $39 billion for manufacturing incentives and $500 million for international ICT security and semiconductor supply chain initiatives.
Within a year of enacting the Act, companies have disclosed investments totaling $166 billion in semiconductor and electronics manufacturing. Since the commencement of the Biden-Harris administration, these commitments have surged, with companies pledging over $231 billion for semiconductor and electronics investments within the United States.
In light of these encouraging trends, let’s look at the fundamentals of the three best Semiconductor & Wireless Chip stocks, beginning with number 3.
Stock #3: Cirrus Logic, Inc. (CRUS)
CRUS is a fabless semiconductor company that pioneers advanced low-power, high-precision mixed-signal processing solutions. It provides a diverse range of offerings, including audio products, intelligent codecs, DSP-equipped codecs, amplified boosters, standalone DSPs, and the SoundClear technology.
On June 20, CRUS unveiled a groundbreaking Pro Audio Family of products featuring advanced analog-to-digital converters and forthcoming digital-to-analog converters and audio codecs.
This innovation would empower manufacturers to craft bespoke, high-quality audio solutions, enhancing their market competitiveness, backed by CRUS' exceptional engineering and support. This development holds the potential to elevate CRUS' growth prospects by enhancing the customer experience.
On June 1, CRUS introduced a premium PC audio solution tailored to the demands of modern ultrathin laptops and headphones. As the PC market gravitates toward sleeker designs, users increasingly seek superior audio quality for various purposes. CRUS seems to be addressing this need with higher-performance, cost-effective audio solutions, thereby expanding its product portfolio and revenue potential.
For the fiscal 2024 first quarter that ended June 24, 2023, CRUS’ income from operations came in at $17.79 million, compared to a loss of $62.84 million the prior quarter. Also, its net income and EPS amounted to $15.60 million and $0.28, compared to a net loss and loss per share of $53.67 million and $0.97 in the previous quarter.
In addition, as of June 24, 2023, the company’s current assets stood at $1.05 billion, compared to $861 million as of June 25, 2022.
The consensus revenue estimate of $1.86 billion for the fiscal year ending March 2025 reflects a 9.9% year-over-year improvement. Likewise, the consensus EPS estimate of $6.27 for the next fiscal year reflects a 19.2% rise from the prior year. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.
Shares of CRUS have gained 5.7% over the past year to close the last trading session at $69.43.
CRUS’ positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CRUS has a B grade for Value, Sentiment, and Momentum. It has ranked #20 out of 91 stocks within the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CRUS’ ratings for Growth, Quality, and Stability here.
Stock #2: Broadcom Inc. (AVGO)
AVGO designs, develops, and furnishes an array of semiconductor devices, emphasizing intricate digital and mixed-signal CMOS devices alongside analog III-V products. The company operates through two segments: Semiconductor Solutions and Infrastructure Software.
On July 12, AVGO secured conditional approval from the European Commission for its VMware, Inc. (VMW) acquisition. The Commission acknowledges the strategic significance of this merger for enhancing enterprise growth in the multi-cloud sector, offering greater customer choice, and fostering innovation.
AVGO's commitment to technology access remedies underscores its commitment to preserving interoperability, a fundamental principle unaffected by the transaction, reinforcing the company's dedication to maintaining healthy competition and fostering financial growth.
During the third quarter that ended July 30, 2023, AVGO’s non-GAAP net revenue increased 4.9% year-over-year to $8.88 billion. Its non-GAAP net income and non-GAAP EPS grew 8.4% and 8.3% from the prior year’s period to $4.60 billion and $10.54, respectively. Moreover, the company’s adjusted EBITDA rose 7.9% from the year-ago value to $5.80 billion.
The consensus revenue estimate of $35.80 billion for the fiscal year ending October 2023 reflects a 7.8% year-over-year improvement. Similarly, the consensus EPS estimate of $42.12 reflects an 11.9% growth from the previous year. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
AVGO has gained 40.3% over the past six months and 104% over the past year, closing the last trading session at $887.03.
AVGO’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
AVGO has an A grade for Quality and a B for Momentum. It has ranked #13 out of 91 stocks within the Semiconductor & Wireless Chip industry.
Click here to access additional AVGO ratings for Growth, Value, Stability, and Sentiment.
Stock #1: QUALCOMM Incorporated (QCOM)
QCOM pioneers and commercializes fundamental wireless technologies. Its operations comprise three sectors: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI), serving the worldwide wireless industry.
On September 11, QCOM unveiled its agreement with Apple Inc. (AAPL), solidifying its role as the supplier of Snapdragon® 5G Modem-RF Systems for AAPL’s slated smartphone launches in 2024, 2025, and 2026. The collaboration further cements QCOM's enduring dominance in the realm of 5G technologies, amplifying its growth prospects.
For nine months that ended June 25, 2023, QCOM’s total revenues registered at $27.19 billion. Its cash inflow from investing activities came in at $1.38 billion, compared to a cash outflow of $5.51 billion in the previous year’s period. As of June 25, 2023, the company’s cash and cash equivalents stood at $6.09 billion, compared to $2.77 billion as of September 25, 2022.
Analysts expect QCOM’s revenue to grow 5.4% year-over-year to 37.62 billion for the fiscal year ending September 2024. Similarly, the company’s EPS for the next year is estimated to come in at $9.18, indicating a 10.6% year-over-year improvement. Year-to-date, the stock has gained 3.5%, closing the last trading session at $110.98.
QCOM’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
QCOM has a B grade for Value, Quality, Sentiment, and Momentum. It is ranked #12 within the same industry.
Click here to access the additional QCOM ratings (Growth and Stability).
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AVGO shares were trading at $880.35 per share on Thursday afternoon, down $6.68 (-0.75%). Year-to-date, AVGO has gained 60.30%, versus a 13.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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