The chip industry is on track for growth this year, buoyed by rebounding memory chip sales and expanding demand in PC and smartphone markets. So, investors could consider buying top chip stocks QUALCOMM Incorporated (QCOM), ChipMOS TECHNOLOGIES INC. (IMOS), and Everspin Technologies, Inc. (MRAM), which are emerging as dominant players in the chip market.
Global semiconductor sales surged 15.2% year-over-year in January 2024, totaling $47.60 billion, marking the largest percentage increase since May 2022. SIA projects continued market growth for the rest of the year, with annual sales expected to rise by double digits compared to 2023.
Besides, according to SEMI’s Semiconductor Manufacturing Monitor (SMM) report, the global semiconductor manufacturing industry is poised for recovery this year, after electronics and IC sales have shown a 1% and 10% year-over-year increase in the last quarter of 2023.
Further growth is anticipated in the first quarter of 2024, with IC sales expected to increase by 18% year-over-year and electronics sales projected to edge up 3%. Capital expenditures and fab utilization are also anticipated to witness mild recovery beginning in the first quarter, with the Memory CapEx 9% rise quarter-on-quarter and Non-Memory CapEx climbing 16%.
Moreover, the memory chip market is growing globally due to rising demand from smartphones, laptops, IoT devices, and automotive applications. Manufacturers are innovating with higher-density chips and low-power solutions to meet the increasing storage needs and energy efficiency demands of modern technologies.
The global memory chip market is estimated to grow at a CAGR of 7.5% to hit $321 billion by 2030.
The rapid adoption of cutting-edge technologies such as artificial intelligence (AI), the Internet of Things (IoT), 5G, and cloud computing further drives the need for specialized semiconductor solutions. The global AI chip market is expected to expand at a CAGR of 28.8% from 2024 to 2032, reaching a value of $191.24 billion by 2032.
Considering these favorable trends, let’s examine the fundamentals of three Semiconductor & Wireless Chip industry stock picks, beginning with the third choice.
Stock #3: QUALCOMM Incorporated (QCOM)
QCOM pioneers wireless technologies worldwide, operating through segments focused on technology development, licensing, and strategic investments. Its offerings range from integrated circuits to intellectual property licenses, spanning 3G/4G/5G standards and diverse industry sectors.
On March 5, 2024, QCOM increased its quarterly cash dividend from $0.80 to $0.85 per share, raising the annual payout to $3.40 per share, payable after March 21, 2024. The company pays $3.20 annually, which translates to a yield of 1.91% on the prevailing price level. Its four-year average dividend yield is 2.23%.
The company’s dividend payouts have grown at CAGRs of 6.8% and 5.2% over the past three and five years, respectively. Moreover, the company boasts a 20-year record for consecutive years of dividend growth.
In the fiscal 2024 first quarter that ended December 24, 2023, QCOM non-GAAP total revenues increased 4.9% year-over-year to $9.92 billion. The company’s non-GAAP operating income and net income grew 10.5% and 15.5% from a year-ago quarter to $3.62 billion and $3.10 billion, respectively. Moreover, its non-GAAP EPS grew 16% from the previous year’s quarter to $2.75.
For the second quarter of the fiscal year 2024, QCOM expects revenues to range between $8.90 billion and $9.70 billion, with anticipated non-GAAP EPS in the range of $2.20 to $2.40.
Analysts expect QCOM's revenue to increase 6.3% year-over-year to $38.09 billion, and its EPS is anticipated to grow 15.3% year-over-year to $9.72 for the fiscal year ending September 2024. Also, the company surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is remarkable.
QCOM's shares have surged 16.8% over the past three months and 51.7% over the past six months to close the last trading session at $167.52.
QCOM’s POWR Ratings reflect this strong outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
The stock has a B grade for Sentiment and Quality. In the Semiconductor & Wireless Chip industry, QCOM is ranked #4 out of 89 stocks.
For additional ratings on QCOM’s Growth, Value, Momentum, and Stability, click here.
Stock #2: ChipMOS TECHNOLOGIES INC. (IMOS)
Based in Hsinchu, Taiwan, IMOS manufactures integrated circuits and provides assembly and testing services globally. Its product offerings include back-end assembly and testing services for memory and logic/mixed-signal semiconductors and services for display panel driver semiconductors.
On March 8, 2024, IMOS reported a 23.6% year-over-year increase in February 2024 revenue, reaching NT$1.78 billion ($56.20 million). This represents a 4% increase from January 2024 and is attributed to improvements in the memory segment despite fewer working days due to holiday closures and ongoing customer inventory rebalancing.
During the fourth quarter, which ended December 31, 2023, IMOS' revenue increased 22.2% year-over-year to NT$5.73 billion ($187 million). The company's net profit attributable to equity holders surged 211.2% from the previous year’s quarter to NT$482 million ($15.70 million).
Furthermore, the company’s net free cash flow for the fiscal year 2023 stood at NT$1.34 billion ($43.70 million).
Street anticipates IMOS' revenue for the first quarter (ending March 2024) to grow 8.5% year-over-year to $162.61 million. Similarly, the company’s revenue is estimated to increase by 10.1% year-over-year to $745.20 million for the fiscal year ending December 2024. Moreover, IMOS surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 16% over the past three months and 32.1% over the past six months to close the last trading session at $31.41.
IMOS’ robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
IMOS has a B grade for Value, Momentum, and Sentiment. Within the same industry, it is ranked #2.
Click here for IMOS’ additional ratings for Growth, Stability, and Quality.
Stock #1: Everspin Technologies, Inc. (MRAM)
MRAM specializes in manufacturing and selling magnetoresistive random access memory products globally, serving industries like industrial, medical, automotive, aerospace, and data centers. Its product range includes Toggle MRAM, spin-transfer torque MRAM, and tunnel magnetoresistance sensor, and it also offers foundry services.
On March 11, 2024, MRAM submitted an application for the CHIPS Incentives Program under the CHIPS for America initiative, aiming to secure an additional 200mm MRAM capacity and enhance long-term R&D IP capability. The funding from the CHIPS Act is expected to bolster its MRAM technology advancements and strengthen its position as a leader in the chip landscape.
MRAM reported a total revenue of $63.77 million in the fiscal year ended December 31, 2023, marking a 6.3% increase from the previous year. During the same period, the company’s net income grew 47.7% year-over-year to $9.05 million, and its adjusted EBITDA grew 29.7% from the previous year to $15.31 million.
Moreover, the company’s net income per common share rose 44.8% from the prior year to $0.42.
For the first quarter of 2024, MRAM anticipates total revenue between $13.5 million and $14.5 million.
Street expects MRAM to post revenue and EPS of $60.05 million and $0.43, respectively, for the fiscal year ending December 2024. For the fiscal year 2025, the consensus revenue estimate of $70 million indicates an improvement of 16.6% year-over-year. In addition, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters.
MRAM’s shares have soared 26% over the past year to close the last trading session at $8.04.
MRAM’s POWR Ratings reflect its optimistic prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
MRAM has an A grade for Sentiment and a B for Value and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked first among 89 stocks.
In addition to the POWR Ratings stated above, one can access MRAM’s additional Growth, Momentum, and Stability ratings here.
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QCOM shares were trading at $168.00 per share on Tuesday afternoon, up $0.48 (+0.29%). Year-to-date, QCOM has gained 16.75%, versus a 9.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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