The semiconductor sector is seeing a surge as AI and 5G technologies drive demand. AI's rapid adoption requires advanced chips, particularly GPUs and AI-specific processors, to power everything from data centers to autonomous vehicles.
Given this backdrop, it could be wise for investors to scoop up shares on fundamentally sound semiconductor stocks, like Amkor Technology, Inc. (AMKR), Taiwan Semiconductor Manufacturing Company Limited (TSM), and QUALCOMM Incorporated (QCOM), which are seeing growing revenues, reflecting the increasing adoption of AI across industries.
5G infrastructure is also a key growth driver for semiconductors, as these chips are essential for network hardware, smartphones, and IoT devices. Reports suggest that 5G-Advanced, the next evolution of 5G, will enhance mobility and power efficiency with improved speed and coverage maximization. This expansion aligns with the broader digital transformation across industries.
According to Deloitte’s report, the global sales in the semiconductor industry for fiscal year 2024 are projected to be $588 billion, marking a 13% increase over the fiscal year 2023. Further, the semiconductor industry’s outlook remains optimistic, as the global semiconductor market is anticipated to reach $1.14 billion by 2033, exhibiting a CAGR of 7.6%.
With AI, IoT, and 5G still in the early phases of adoption, demand for semiconductors will likely continue rising, boosting both established players and new entrants. Moreover, tech companies are continuing to innovate, and governments are investing in 5G infrastructure, where private 5G networks will be developed at military bases, as per the Defense Department (DOD).
Thus, semiconductor firms are well-positioned to benefit from this structural growth. With that in mind, let’s evaluate the fundamentals of the featured Semiconductor & Wireless Chip industry stocks, starting with number three:
Stock #3: Amkor Technology, Inc. (AMKR)
AMKR offers outsourced semiconductor packaging and test services across multiple regions, including the United States, Japan, Europe, the Middle East, Africa, and the Asia Pacific. The company provides a full suite of services, including wafer bumping, wafer probing, wafer back-grinding, package design, packaging, system-level and final testing, and drop shipment.
On September 23, AMKR paid a quarterly distribution of $0.08 per share on its common stock. The company pays an annual dividend of $0.32, which translates to a yield of 1.07% at the current share price level, while its four-year average dividend yield is 0.81%. Moreover, AMKR’s dividend payments have grown at a CAGR of 25.3% over the past three years.
For the nine-month period that ended September 30, 2024, AMKR's net sales stood at $4.69 billion. Its attributable net income amounted to $248.36 million, representing an increase of 2.5% from the last year. Also, the company’s EPS for the period increased marginally year-over-year to $1.
For the fourth quarter of 2024, AMKR anticipates net sales to range from $1.60 billion to $1.70 billion, with a gross margin of 13.5%-15.5%. Net income is projected to be between $70 million and $110 million, or $0.28 to $0.44 per diluted share.
Street expects AMKR’s revenue for the fiscal fourth quarter (ending December 2024) to increase 3.8% year-over-year to $1.82 billion. Its EPS for the same period is expected to register a 7.7% growth from the prior year, settling at $0.52. In addition, it surpassed the consensus revenue and EPS in three of the trailing four quarters, which is promising.
Shares of AMKR have gained 42.2% over the past year to close the last trading session at $29.53.
AMKR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AMKR has a B grade for Value, Momentum, and Sentiment. It is ranked #11 out of 91 stocks in the Semiconductor & Wireless Chip industry. Click here to access the other LYB ratings for Growth, Stability, and Quality.
Stock #2: Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM globally manufactures, tests, and markets integrated circuits and other semiconductor products. Its products are used in high-performance computing, smartphones, the Internet of Things, automotive, and digital consumer electronics.
On October 4, TSM and AMKR signed a Memorandum of Understanding to enhance Arizona’s advanced packaging and testing capabilities, bolstering the region’s semiconductor ecosystem.
In this agreement, AMKR will contract turnkey advanced packaging and test services to TSM. These services should support TSM’s customers, particularly those utilizing Phoenix’s advanced wafer fabrication facilities.
In the fiscal third quarter that ended on September 30, 2024, TSM’s net sales increased 38.9% year-over-year to NT$759.69 billion ($23.66 billion). Its gross profit grew 48.1% from the prior year’s quarter to NT$439.34 billion ($13.69 billion).
Its income from operations came in at NT$360.77 billion ($11.24 billion), up 58.2% year-over-year. In addition, the company’s net income and EPS increased 54.2% year-over-year to NT$325.26 billion ($10.13 billion) and NT$12.54, respectively.
According to TSM’s outlook for its fiscal fourth quarter 2024, it is projecting revenue to be between $26.10 billion and $26.90 billion. Additionally, its gross profit margin is expected to grow between 57%-59%. The company also expects operating profit margin to range between 46.5% and 48.5%.
Analysts expect TSM’s revenue for the fiscal fourth quarter (ending December 2024) to grow 32.3% year-over-year to $26.22 billion, while its EPS for the same quarter is expected to increase 51% year-over-year to $2.17. Moreover, the company has topped the street revenue and EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 126.4% over the past year and 66% over the past nine months to close the last trading session at $194.68.
TSM’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Sentiment and Quality and a B for Momentum. Within the same industry, it is ranked #8. Click here to see TSM’s ratings for Growth, Value, and Stability.
Stock #1: QUALCOMM Incorporated (QCOM)
QCOM engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On October 24, QCOM collaborated with Mistral AI to bring Mistral AI’s new state-of-the-art generative AI models, Ministral 3B and Ministral 8B, to devices powered by Snapdragon. This collaboration of generative AI is compact and powerful and should enable the devices to have other benefits as well, like reliability, enhanced privacy, and cost efficiency.
In the same month, QCOM announced a collaboration with Google. This strategic collaboration will allow Snapdragon Digital Chassis and Google’s in-vehicle technologies to deliver a standardized reference framework for the development of generative AI-enabled digital cockpits and software-defined vehicles (SDV).
QCOM's revenues for the third quarter (ended June 23, 2024) increased 11.1% year-over-year to $9.39 billion. The company reported a non-GAAP operating income of $3.02 billion, indicating a 19.7% growth from the prior year's quarter. QCOM’s non-GAAP net income came in at $2.65 billion, up 25.8% year-over-year, while its net income per share grew 24.6% from the prior-year quarter to $2.33.
Looking ahead, QCOM anticipates revenue for the fiscal fourth quarter of 2024 to fall between $9.50 billion and $10.30 billion, and QCT segment and QLT segment revenues are expected to be in the range of $8.10 billion-$8.70 billion and $1.35 billion-$1.55 billion, respectively. The company also projects non-GAAP EPS to range from $2.45 to $2.65.
The consensus revenue estimate of $9.93 billion for the fiscal fourth quarter (ended September 2024) represents a 14.6% increase year-over-year. The consensus EPS estimate of $2.57 for the current quarter indicates a 27.1% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 61.8%, closing the last trading session at $172.22.
It’s no surprise that QCOM has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. Out of 91 stocks in the Semiconductor & Wireless Chip industry, QCOM is ranked first.
Beyond what is stated above, we’ve also rated QCOM for Growth, Value, Momentum, Stability, and Sentiment. Get all QCOM’s ratings here.
What To Do Next?
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TSM shares were trading at $198.24 per share on Tuesday afternoon, up $3.56 (+1.83%). Year-to-date, TSM has gained 92.26%, versus a 23.72% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
