12 High Growth Semiconductor Stocks That Are Profitable
In this article, we discuss the 12 high-growth semiconductor stocks that are profitable. To skip the detailed analysis of the semiconductor industry, go directly to the 5 High Growth Semiconductor Stocks That Are Profitable.
Semiconductors are a global need and their supply is required by every sector of the market. The industry has been facing a global shortage since the COVID-19 pandemic as the whole world moved their lives online, generating demand for electronics. The semiconductor supply was already quite flaky before the pandemic due to reasons including, but not limited to, political tensions and the trade war between the US and China. The pandemic was just a catalyst in realizing the supply chain weaknesses in the industry.
On September 6, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s Chairman, Dr. Mark Liu, said that the semiconductor supply chain will take around 18 months to ease. He said:
"Currently, we can't fulfill 100% of our customers' needs, but we try to support about 80%. We think this is a temporary phenomenon. After our expansion of [advanced chip packaging capacity], it should be alleviated in one and a half years."
The generative AI trend has further increased the demand for semiconductors. NVIDIA Corporation (NASDAQ:NVDA) controls 80% of the supply of the GPUs used for training and developing AI applications. The company was the headliner during the AI surge and has gained over 241% year-to-date (YTD) on December 22. NVIDIA Corporation (NASDAQ:NVDA) became a trillion-dollar market cap company in May this year and generated revenues of $38.82 billion in the first nine months of the year, up from $20.9 billion during the same period in 2022.
To compete with NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD) launched its latest AI accelerator, Instinct MI300X, on December 6. The company raised its AI accelerator total addressable market from $150 billion to $400 billion.
Another semiconductor company that is expected to take over a significant part of AI-related processing units' market share is Intel Corporation (NASDAQ:INTC). At its third-quarter earnings call, the company’s CEO, Pat Gelsinger, said:
“We see the AI workload as a key driver of the $1 trillion semiconductor TAM by 2030. We are empowering the market to seamlessly integrate and effectively run AI in all their applications. For the developer working with multi-trillion-parameter frontier models in the cloud, Gaudi and our suite of AI accelerators provides a powerful combination of performance, competitive MLPerf benchmarks, and a very cost-efficient TCO. However, as the world moves toward more AI-integrated application, there's a market shift toward local inferencing. It's a nod to both the necessity of data privacy and an answer to cloud-based inference cost. With AI-accelerated Xeon for enterprise, Core Ultra launching the AI PC generation, and OpenVINO enabling developers seamless and versatile support for a range of client and edge silicon, we are bringing AI to where the data is being generated and used rather than forcing it into the cloud. Our expansive footprint spanning cloud and enterprise servers to volume clients and ubiquitous edge devices positions us well to enable the AI continuum across all our market segments.”
While we have spent most of our time discussing AI, we have not discussed the other major catalyst that will increase semiconductor demand in the future, the EV industry. The automotive industry has long been dependent on the semiconductor industry. The demand has increased due to the rise in EVs. Battery electric vehicles require more than twice as many semiconductors compared to internal combustion engine vehicles. According to our previous report, the semiconductor demand in the automotive sector is expected to triple by 2030 due to EVs and autonomous vehicles.
Judging by the speed of technology’s evolution, semiconductors are one of the most indispensable components in the world. With that in mind, some of the best high-growth semiconductor stocks include NVIDIA Corporation (NASDAQ:NVDA), Aehr Test Systems (NASDAQ:AEHR), and Arm Holdings plc (NASDAQ:ARM).
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.
Our Methodology
For this article, we made a list of semiconductors, semiconductor equipment, and related software companies. Most of the semiconductor companies saw a decline in year-over-year (YoY) revenue growth so we kept the bar low and chose the stocks with over 6% YoY revenue growth and a positive net income in their latest quarter. The companies are listed in ascending order of their latest quarter YoY revenue growth.
Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm on our list of high growth semiconductor stocks. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12 High Growth Semiconductor Stocks That Are Profitable
12. inTEST Corporation (NYSE:INTT)
Latest Quarter YoY Revenue Growth: 6.1%
Number of Hedge Fund Holders: 12
inTEST Corporation (NYSE:INTT) is a semiconductor equipment and materials company that provides manufacturing and testing process solutions to several industries. It is headquartered in New Jersey.
inTEST Corporation (NYSE:INTT)’s stock was owned by 12 hedge funds in the third quarter, with a combined stake value of $15.011 million.
On November 6, Lake Street lowered inTEST Corporation (NYSE:INTT)’s price target to $19 from $26 and reaffirmed a Buy rating on the company shares. The firm believes that the company had a “good quarter” and provided “soft” guidance.
NVIDIA Corporation (NASDAQ:NVDA), Aehr Test Systems (NASDAQ:AEHR), and Arm Holdings plc (NASDAQ:ARM) are some of the best high-growth semiconductor stocks along with inTEST Corporation (NYSE:INTT).
11. PDF Solutions, Inc. (NASDAQ:PDFS)
Latest Quarter YoY Revenue Growth: 6.3%
Number of Hedge Fund Holders: 17
PDF Solutions, Inc. (NASDAQ:PDFS) is an American company that specializes in software, hardware, and semiconductor-based intellectual property. The company’s products are used in the manufacturing and testing processes of integrated circuits and systems on chips.
According to TipRanks, all three analysts that covered PDF Solutions, Inc. (NASDAQ:PDFS)’s stock over the last three months have kept a Buy-equivalent rating on the stock. The average price target of $47.00 represented an upside of 40.47% as of the December 22 market close.
In the third quarter, Andrew N. Wiener’s Samjo Capital increased its stake in PDF Solutions, Inc. (NASDAQ:PDFS) by 103% and remained the most prominent hedge fund investor of the company. The firm owned 1.1 million of PDF Solutions, Inc. (NASDAQ:PDFS) shares worth $35.68 million.
10. Photronics, Inc. (NASDAQ:PLAB)
Latest Quarter YoY Revenue Growth: 8.2%
Number of Hedge Fund Holders: 22
Photronics, Inc. (NASDAQ:PLAB) is a Connecticut-based semiconductor equipment and materials company. It is one of the world’s largest semiconductor photomask suppliers.
Photronics, Inc. (NASDAQ:PLAB) released its 2023 annual revenue report on December 13. The company generated record revenues for the sixth year in a row at $892.1 million. Photronics, Inc. (NASDAQ:PLAB) posted GAAP earnings of $2.03 per diluted share, up from $1.94 per diluted share in 2022.
Some of the most prominent hedge funds were quite bullish on Photronics, Inc. (NASDAQ:PLAB) in the third quarter. Israel Englander’s Millennium Management was the leading investor in the company, with 860,988 shares worth $17.4 million. D E Shaw and Tudor Investment Corp also increased their holdings in the company by 69% and 274%, respectively.
ClearBridge Investments made the following comment about Photronics, Inc. (NASDAQ:PLAB) in its Q2 2023 investor letter:
“Another IT holding, Photronics, Inc. (NASDAQ:PLAB), also posted substantial returns for the quarter on the back of strong quarterly earnings and the AI-driven tech rally. Despite growing demand for high-end photomasks, the industry is capacity constrained and outsourced manufacturers such as Photronics stand to benefit. This has created a much more favorable environment for the company, which has shown increasing pricing power and longer-term contracts with major semiconductor manufacturers. We believe that the company’s investment and expansion of its manufacturing capabilities will allow it to continue to capture greater market share and extend its lead as the top merchant option in the industry.”
9. Himax Technologies, Inc. (NASDAQ:HIMX)
Latest Quarter YoY Revenue Growth: 11.6%
Number of Hedge Fund Holders: 9
Himax Technologies, Inc. (NASDAQ:HIMX) is a Taiwanese semiconductor manufacturing company primarily focusing on display imaging technologies.
Himax Technologies, Inc. (NASDAQ:HIMX) showed a revenue growth of 11.6% YoY in its latest quarter. However, the company expects a quarter-over-quarter revenue decline of 5% to 11% in Q4.
In the third quarter, 9 hedge funds had a stake in Himax Technologies, Inc. (NASDAQ:HIMX), up from 6 in the previous quarter.
8. ASML Holding N.V. (NASDAQ:ASML)
Latest Quarter YoY Revenue Growth: 15.5%
Number of Hedge Fund Holders: 57
ASML Holding N.V. (NASDAQ:ASML) is a Netherlands-based company that provides semiconductor manufacturing equipment. It is one of the most profitable high-growth semiconductor stocks.
On December 22, ASML Holding N.V. (NASDAQ:ASML) announced that it sent out its first shipment of its “High NA” extreme ultraviolet lithography systems to Intel Corporation (NASDAQ:INTC). Each of the above-mentioned systems is valued at over $300 million.
On December 13, ASML Holding N.V. (NASDAQ:ASML) announced that it would invest $760 million in partnership with Samsung Electronics Co. to construct a research plant in South Korea using the company’s extreme ultraviolet equipment technology.
SaltLight Capital mentioned ASML Holding N.V. (NASDAQ:ASML) in its second quarter 2023 investor letter. Here is what it said:
“ASML Holding N.V. (NASDAQ:ASML) has no competitor. We’d characterise it as a monetary ‘apex’ predator. This privileged position allows the company to capture value within the semiconductor ecosystem. You can see it in their margins and operating leverage. ASML’s customers are so eager for their products that they are willing to pay upfront, two years before a machine is even delivered! This is a testament to the company’s unrivalled capabilities and the high demand for its unique offerings. It will keep this privileged position as long as it continues to push the frontiers of chip density.
ASML announced, this quarter, that their first High-NA machines (costing $200m per machine) are going to start shipping in 2024. This is a new source of its technological moat and earnings for the next decade. For the curious reader, we recommend looking up Extreme Ultraviolet Lithography tools to truly grasp how this technology could be considered ‘magic’ for what it accomplishes.”
7. Allegro MicroSystems, Inc. (NASDAQ:ALGM)
Latest Quarter YoY Revenue Growth: 15.9%
Number of Hedge Fund Holders: 24
Allegro MicroSystems, Inc. (NASDAQ:ALGM) is a New Hampshire-based company that is engaged in the designing, development, and marketing of analog and mixed-signal semiconductors.
On November 3, TD Cowen lowered the price target on Allegro MicroSystems, Inc. (NASDAQ:ALGM)’s stock to $35 from $40 and maintained an Outperform rating on the shares.
Allegro MicroSystems, Inc. (NASDAQ:ALGM) was covered by 5 Wall Street analysts over the last three months, and 4 kept a Buy rating on the stock.
TimesSquare Capital Management mentioned Allegro MicroSystems, Inc. (NASDAQ:ALGM) in its third-quarter investor letter. Here is what it said:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, and systems that improve productivity or efficiency for their clients. One blemish in the sector was Allegro MicroSystems, Inc. (NASDAQ:ALGM), which develops semiconductor magnetic sensors and power management chips. In July, we trimmed our position as its shares rallied ahead of its quarterly report. Then in August, Allegro reported better-than-anticipated results and increased its near-term guidance. However, on the earnings call its management seemed more cautious with the outlook, especially related to volatility for its sales in China, and Allegro’s shares pulled back by -30%. Speaking with management later, we gained a better sense of short-term concerns with China—that comprise less than a quarter of Allegro’s business—and the expected rebound, so we added back to our position.”
6. Synopsys, Inc. (NASDAQ:SNPS)
Latest Quarter YoY Revenue Growth: 24.2%
Number of Hedge Fund Holders: 57
Synopsys, Inc. (NASDAQ:SNPS) is an American technology company with a diverse product portfolio including tools and services for semiconductor design and manufacturing. It is headquartered in California.
On December 22, Reuters reported that Synopsys, Inc. (NASDAQ:SNPS) is planning to acquire ANSYS, Inc. (NASDAQ:ANSS) and has already submitted an offer. The acquisition value offer puts ANSYS, Inc. (NASDAQ:ANSS) at around $400 per share, and the deal could be announced shortly.
On December 10, Wells Fargo analyst Gary Mobley maintained an Overweight rating on Synopsys, Inc. (NASDAQ:SNPS)’s shares and raised the price target to $630 from $620. Over the last three months, 10 out of 10 analysts that have covered the company stock kept a Buy-equivalent rating on Synopsys, Inc. (NASDAQ:SNPS).
Synopsys, Inc. (NASDAQ:SNPS) is one of the best high-growth semiconductor stocks besides NVIDIA Corporation (NASDAQ:NVDA), Aehr Test Systems (NASDAQ:AEHR), and Arm Holdings plc (NASDAQ:ARM).
TimesSquare Capital Management commented on Synopsys, Inc. (NASDAQ:SNPS) in its third quarter, 2023 investor letter. Here is what it said:
“Across the Information Technology universe, we seek companies possessing differentiated capabilities, products, and services. Synopsys, Inc. (NASDAQ:SNPS), a supplier of electronic design automation software for use in designing and testing integrated circuits, edged forward 5%. The company reported a solid fiscal fourth quarter and raised forward guidance. Despite macroeconomic concerns, their customers remain focused on developing next generation semiconductors with their electric design automation tools. We trimmed the position as it approached our price target.”
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Disclosure. None. 12 High Growth Semiconductor Stocks That Are Profitable is originally published on Insider Monkey.
