Investing in the Future of AI Chips: Top 3 Semiconductor Stocks to Consider in 2024
The future of the US economy holds the potential for significant transformation, driven by technological advancements, innovation and evolving global dynamics. Investments in sectors like semiconductors are likely to play pivotal roles, fostering economic growth and job creation. The industry’s market value is predicted to increase to $1 trillion by 2030. We recommend jumping on the train as early as possible before it builds up too much speed. Here are three semiconductor stocks to start off investing in.
Monolithic Power Systems (MPWR)
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Monolithic Power Systems (NASDAQ:MPWR) is a world-leading semiconductor design and manufacturing company. Yahoo! Finance has nine analysts predicting a one-year price range on MPWR to be between $500.00 and $750.00, with a mean of $624.50.
MPWR presents robust financials. The company reports $474.8 million in revenue for Q4 2023, growing at a 9.36% one-year CAGR. Its $175.1 million in cash from operations, which grew by over 1000% YoY, strongly indicates profitability. Management effectively balanced liabilities and assets, increasing total assets by 20.5% YoY to $2.33 billion, while reducing total liabilities by 4.3% YoY to $383.2 million.
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The company has global expansions and a stock repurchasing program, positioning them for further growth in 2024. Opening a semiconductor design center in Portugal enhances the development of power chips for various markets (EVs, solar and cloud computing), broadening the company’s market reach. The announcement of a $640 million stock repurchasing program will dilute the outstanding amount of MPWR shares, serving as a value boost once executed in the future.
Monolithic Power Systems is one of the top semiconductor stocks investors should buy in 2024 because of the company’s robust financials, the opening of a new semiconductor design center and more mentioned above.
NXP Semiconductors N.V. (NXPI)
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NXP Semiconductors (NASDAQ:NXPI) is a Dutch semiconductor design and manufacturing company. Yahoo! Finance has 17 analysts predicting a one-year price range on NXPI to be between $150.00 and $280.00, with a mean of $225.77.
NXPI demonstrates strong financials. The company reports $3.43 billion in revenue for Q4 2023, growing at a 1.8% one-year CAGR. Its 22.9% net profit margin, which grew 7% YoY, is a good indicator of profitability. Management improved the company’s profitability significantly, as seen through $787 million which grew 6.6%, outpacing revenue growth of 1.8%.
The company has innovations and planned expansions, positioning the company for a breakout. NXP has partnered in joint research with Arizona State University (ASU) to refine the packaging process within semiconductor manufacturing, further aided by a $17.5 million investment from the university. Austin, TX city council has approved incentives for NXP’s $290 million investment for factory expansion in Austin, improving factory output and research capabilities.
NXP Semiconductors is a stock investors should buy now in 2024 because of the company’s strong financials, joint research to improve the semiconductor manufacturing process with ASU and more mentioned above.
Micron Technology (MU)
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Micron Technology (NASDAQ:MU) produces computer memory and storage technologies and is a solid leader in the semiconductor industry with an 18.37% market share versus its’ competitors as of Q4 2023.
The company has received many bullish analyst ratings for 2024, with 31 analysts predicting a mean one-year price target of $93.89, ranging from $42.43 to $140.00.
Q1 FY24 reported solid earnings for Micron. While many are concerned with its lack of profitability, the company continues to improve. Revenue of $4.73 billion beats expectations by $100 million and grows 15.6% YoY and EPS of -$0.95 beats expectations by $0.06. The company also had a significant gain in operating cash flow to $1.4 billion, increasing from $249 million the prior quarter and $943 million in Q1 2023.
Micron management emphasized their expectations for improved fundamentals heading into 2024. After a year of recovery, leading them to grow 60% from lows in 2022, there is optimism surrounding data center AI applications. The company is still well-fitted to benefit from AI with its industry-leading products.
Micron is also expanding into other facets of AI, with a Qualcomm (NASDAQ:QCOM) collaboration bringing its technology to smartphones. Its industry-leading technology unlocks generative AI at the edge, with advanced power-saving capabilities.
Overall, Micron has shown its growth capability through its recent recovery year and is currently rated as one of the best semiconductor stocks for 2024.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article
Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.
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