With the increasing demand for electronic devices across several sectors, such as consumer electronics, automotive, and industrial equipment, and the rapid adoption of emerging technologies, the semiconductor industry continues to grow and innovate significantly.
Amid this backdrop, investors could consider investing in quality chip stocks NXP Semiconductors N.V. (NXPI), Amkor Technology, Inc. (AMKR), and Silicon Motion Technology Corporation (SIMO), which are poised for success in May.
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors of $137.70 billion for the first quarter of 2024, representing an increase of 15.2% compared to the first quarter of 2023. Also, the year-to-year sales in March increased by 26.3% in the Americas.
John Neuffer, SIA president and CEO, added, “The market is expected to continue to grow during the remainder of the year, with double-digit annual growth projected for 2024.”
The global semiconductor market is expected to grow from $681.05 billion in 2024 to $2.06 trillion by 2032, projecting a CAGR of 14.9% during the forecast period (2024-2032). The industry is growing with rising electronics usage and integration across various end-use industries and the development of AI, IoT, and machine learning in the new age of electronic systems.
Meanwhile, the United States semiconductor market is expected to grow at a CAGR of 8.7%, reaching around $167.92 billion by 2032.
Besides, AI is significantly contributing to the semiconductor market with its immense potential, fueled by its widespread adoption across sectors like healthcare, automotive, financial services, and manufacturing. The global AI chip market is expected to grow at a staggering CAGR of 40.5% to $117.07 billion by 2028.
Given these favorable market trends, let’s look at the fundamentals of the top three Semiconductor & Wireless Chip stocks, beginning with the third choice.
Stock #3: NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, Netherlands, NXPI offers various semiconductor products. Its product portfolio consists of microcontrollers, and application processors, including i.MX application processors and i.MX 8 and 9 family of applications processors. The company markets its products to several OEMs, contract manufacturers, and distributors.
On March 28, NXPI launched its open S32 CoreRide platform and leaped through the integration barriers for next-generation software-defined vehicle (SDV) development. NXPI collaborated with market-leading software and tier-1 suppliers to bring an industry-first platform that combines processing, vehicle networking, and system power management.
The platform addresses the complexity, scalability, cost-efficiency, and development efforts required for next-generation vehicles.
On March 18, 2024, NXPI and NVIDIA Corporation (NVDA) collaborated to enable NVIDIA’s trained AI models to be deployed on NXPI’s broad portfolio of edge processing devices with the eIQ® machine learning development environment. With this partnership, NXPI became the first chip vendor to integrate NVIDIA TAO Toolkit APIs within an AI enablement to ease developers.
The strategic collaboration aims to address the challenges of training and deployment of AI models.
NXPI’s total revenue increased marginally year-over-year to $3.13 billion for the first quarter that ended March 31, 2024. The company’s non-GAAP gross profit grew marginally from the year-ago value to $1.82 billion. Its operating income of $856 million indicates a growth of 3.8% year-over-year.
Also, non-GAAP net income attributable to stockholders came in at $840 million and $3.24 per common share for the quarter, up 0.7% and 1.6% year-over-year, respectively.
As per the guidance for the second quarter of 2024, NXPI expects total revenue of $3.02 billion - $3.22 billion. Further, it expects its non-GAAP gross profit to range between $1.75 billion and $1.90 billion and non-GAAP operating income to range from $1 billion to $1.13 billion. Also, the company’s non-GAAP EPS is projected at $3.00 - $3.41 for the quarter.
Street expects NXPI’s revenue and EPS for the fourth quarter (ending December 2024) to increase 2.3% and 5.3% year-over-year to $3.50 billion and $3.91, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
NXPI’s stock has increased 42.8% over the past six months and 57.2% over the past year to close the last trading session at $263.93.
NXPI’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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Momentum, Sentiment, and Quality. Within the Semiconductor & Wireless Chip industry, NXPI is ranked #12 out of 91 stocks.
Click here to access additional ratings of NXPI for Value, Growth, and Stability.
Stock #2: Amkor Technology, Inc. (AMKR)
AMKR provides outsourced semiconductor packaging and test services globally. The company offers turnkey packaging and test services, flip-chip scale package products, flip-chip stacked chip scale packages, flip-chip ball grid array packages, and memory products.
On April 8, 2024, AMKR and Infineon Technologies AG (IFNNY) entered a multi-year partnership to operate a dedicated packaging and test center at AMKR’s manufacturing site in Porto, whose operations are expected to commence in the first half of 2025.
The long-term agreement will further strengthen the companies’ partnership and align with AMKR’s operations, enhancing supply chain resiliency for advanced products supporting automotive and industrial end markets.
On January 16, AMKR and GlobalFoundries Inc. (GFS) announced their strategic partnership to strengthen the European Union automotive supply chain and expand services for global customers.
AMKR’s extensive global footprint and solid European presence combined with GFS’ tools, processes, and expertise will enable the Porto site to help the European Union pursue its goals of ensuring supply chain stability and delivering the next-generation automotive and other critical chip solutions.
During the first quarter that ended on March 31, 2024, AMKR posted total net sales of $1.37 billion, and its gross profit increased 3.7% year-over-year to $201.64 million. The company’s operating income grew 6.4% from the year-ago value to $73.13 million.
In addition, net income attributable to Amkor came in at $58.90 million and $0.24 per common share, up 29.9% and 33.3% from the prior year’s quarter, respectively.
As per the company guidance for the second quarter of 2024, AMKR expects net sales of $1.40 billion to $1.50 billion, and its net income is expected to be between $35 million and $75 million, or $0.14 to $0.30 per share.
Analysts expect AMKR’s revenue for the third quarter (ending September 2024) to grow 2.5% year-over-year to $1.87 billion, and its EPS for the same period is expected to increase 22.2% year-over-year to $0.66. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
AMKR’s shares have gained 37.6% over the past six months and 49.6% over the past year to close the last trading session at $32.69.
AMKR’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Momentum and Sentiment. It also has a B grade for Value. Within the Semiconductor & Wireless Chip industry, AMKR is ranked #8 out of 91 stocks.
In addition to the POWR Ratings we’ve stated above, we also have AMKR ratings for Growth, Stability, and Quality. Get all AMKR ratings here.
Stock #1: Silicon Motion Technology Corporation (SIMO)
Based in Hong Kong, SIMO designs, develops, and markets NAND flash controllers for solid-state storage devices. It offers controllers for computing-grade solid-state drives (SSDs), enterprise-grade SSDs, eMMC, and UFS mobile embedded storage. It markets its products under SMI, Shannon Systems, FerriSSD, Ferri-eMMC, and Ferri-UFS brands.
On March 13, SIMO launched the UFS (Universal Flash Storage) 4.0 controller, the SM2756, as the flagship of the industry's broadest merchant portfolio of UFS controller solutions for the growing requirements of AI-powered smartphones and other high-performance applications.
The company also unveiled its second generation UFS3.1 controller, which supports the latest high-speed 3D TLC and QLC NAND. It extends the company’s leadership in the large and growing UFS3 market and offers a more cost-effective, high-performance, and low-power controller.
SIMO’s net sales increased 52.6% year-over-year to $189.31 million for the first quarter that ended March 31, 2024, and its non-GAAP gross profit grew 62.3% from the year-ago value to $85.19 million. The company’s non-GAAP operating profit of $22.65 million indicates a growth of 75.6% from the prior year’s quarter.
Furthermore, the company’s non-GAAP net income and earnings per ADS came in at $21.59 million and $0.64, up 93.4% and 93.9% year-over-year, respectively.
As per the company’s business outlook, SIMO expects revenue between $199 million and $208 million in the second quarter of 2024. For the full year 2024, the company expects its revenue to range from $800 million to $830 million.
Street expects SIMO’s revenue and EPS for the second quarter (ending June 2024) to increase 45.3% and 139.3% year-over-year to $203.88 million and $0.91, respectively. Also, the company has topped the consensus revenue estimate in all four trailing quarters, which is remarkable.
Shares of SIMO have surged 29.8% over the past six months and 39.7% over the past year to close the last trading session at $75.13.
SIMO’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
SIMO has an A grade for Sentiment and a B for Momentum, Value, and Growth. It is ranked #6 out of 91 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have SIMO ratings for Quality and Stability. Get all SIMO ratings here.
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NXPI shares were trading at $265.69 per share on Tuesday morning, up $1.76 (+0.67%). Year-to-date, NXPI has gained 16.18%, versus a 10.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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