As the U.S. economy gears up for sustained growth in the imminent future, the realm of semiconductor stocks presents a shimmering opportunity for investors. The industry’s meteoric ascent was unmistakable, scaling to a formidable $573 billion evaluation in 2022, with projections tantalizingly hinting at a stratospheric revenue milestone of $1.4 trillion by 2029, underpinning a robust 12.2% industry CAGR. Leader of the pack, Advanced Micro Devices (AMD), stands tall, flaunting a colossal $288.6 billion market cap.
When the economic winds blow favorably, the savvy investor seeks to ride the surge of semiconductor stocks, a journey that promises hefty returns. And what better time to seize this opportunity than now when these top-tier companies are basking in the glow of discounted prices – a bargain beckoning for potential profit.
The Dominance of Advanced Micro Devices (AMD)
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Advanced Micro Devices (NASDAQ:AMD) emerges as a juggernaut in the semiconductor landscape, rivaling Titans with an imposing $177.87 billion valuation and a staggering annual growth rate of 84.11%.
A quarter that echoes with resounding success, Q4 2023 witnessed AMD’s financial report basking in the spotlight of achievement. A revenue crescendo of $6.17 billion, marking a magnificent 10.16% YoY growth, reverberated through the financial sphere. Net income and diluted EPS witnessed an astronomical year-over-year increase of 3076% and 4100%, clocking in at $667 million and $0.42, respectively. Armed with robust profits and burgeoning yearly growth, AMD is primed to set sail on the seas of triumph.
A strategic pivot towards developers of AI capabilities instead of pigeonholing users in specific models is AMD’s ace up the sleeve. By crafting GPUs like the MI300X, the company positions itself to ride the crest of the artificial intelligence wave, accentuating its competitive edge.
Microchip (MCHP): A Diamond in the Rough
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Microchip (NASDAQ:MCHP) emerges as a beacon of hope for discerning investors, weathering a 4.37% YTD decline, nestled against a backdrop of a 12-month median price target of $94.00, promising a remarkable 9.0% upswing from its current $86.24 price – a perfect storm for acquisition.
In the annals of 2024, Microchip carved a tale of triumph, unveiling a revenue bonanza of $8.4 billion and an EPS standing tall at $4.93. Enthroned with a lofty FCF margin of 26.29%, eclipsing the sector’s 9.24% median, Microchip stands as a testament to operational excellence.
The crowning jewel in Microchip’s recent narrative is the acquisition of Microsemi, fortifying its foothold in aerospace, defense, data center, and communications sectors. A stalwart in microcontrollers, constituting 56.4% of the revenue mix, and analog goods chiming in at 24.4% of FY23 revenue, Microchip’s future revenue trajectory seems destined for a northward journey.
Axcelis (ACLS): A Gem Waiting to Shine
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Axcelis (NASDAQ:ACLS) stands at the intersection of innovation and profitability, offering shares at a discounted rate, plunging 16.36% within the last year.
Sporting a modest P/E ratio of 16.18, nearly half of the iShares Semiconductor ETF’s average P/E ratio, Axcelis shines bright on the radar of analysts as an underrated gem. Forecasts from eight discerning analysts paint a picture of a median 12-month price target of $169.15, hinting at a tantalizing 56.56% surge in comparison to Axcelis’s current valuation.
With AI stepping into the spotlight alongside advancements in the EV sector, Axcelis dances on the cusp of potential growth. The AI chip renaissance, coupled with the automotive industry’s propulsion, sets the stage for a monumental impact. The flagship Purion Power Series, featuring H200 and XE SiC systems, spearheads the EV revolution, endeavoring to overcome obstacles and make EVs as robust, efficient, and cost-effective as their ICE counterparts.
On the date of publication, Michael Que discloses no positions in the securities mentioned in this article. The views expressed herein are solely those of the author, adhering to the InvestorPlace.com Publishing Guidelines.
The contributing researchers affirm no positions in the securities discussed in this article.
