Rising demand for consumer electronics like smartphones, laptops, and TVs drives the semiconductor chip industry, propelled by technological advancements and growing needs for convenience and connectivity. The semiconductor chip market is expected to grow at a CAGR of 8.4% by 2031.
Additionally, AI integration is driving the adoption of silicon chipsets in the automotive industry, while technologies like big data, facial recognition, and machine learning enable semiconductor advancements. According to the Semiconductor Industry Association, the semiconductor industry continues to thrive in late 2024, recording $166 billion in global sales, up 23.2% year-over-year during the third quarter.
Against this backdrop, let’s compare two established semiconductor stocks to analyze which chipmaker stock is a smarter investment: QUALCOMM Incorporated (QCOM) and ON Semiconductor Corporation (ON).
The Case for QUALCOMM Incorporated Stock
Valued at $176.13 billion by market cap, QUALCOMM Incorporated (QCOM) provides commercial real estate professional and investment management services to corporate and institutional clients in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
QCOM’s stock has gained 24.1% over the past year to close the last trading session at $158.70.
Its trailing-12-month asset turnover ratio and trailing-12-month gross profit margin of 0.73x and 56.21% are 19.7% and 10.7% higher than the industry averages of 0.61x and 50.80%, respectively.
For the third quarter that ended September 29, 2024, QCOM’s revenues increased 18.7% year-over-year to $10.24 billion. Its net income grew 96% year-over-year to $2.92 billion. Its net income per share increased 96.2% year-over-year to $2.59.
Street expects QCOM’s revenue for the first quarter ending December 2024 to increase 10.5% year-over-year to $10.96 billion. Its EPS is expected to increase 7.4% year-over-year to $2.95. Moreover, the company has surpassed revenue and EPS estimates in each of the trailing four quarters.
QCOM’s POWR Ratings reflect bright prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
QCOM is ranked first out of 90 stocks in the Semiconductor & Wireless Chip industry. It has an A grade for Quality and a B for Value. To see QCOM’s Growth, Momentum, Sentiment, and Stability ratings, click here.
The Case for ON Semiconductor Corporation Stock
Valued at $30.28 billion by market cap, ON Semiconductor Corporation (ON) provides intelligent sensing and power solutions in the United States and internationally. The company operates through Power Solutions Group, Advanced Solutions Group, and Intelligent Sensing Group.
ON’s stock has plunged 4.8% over the past month to close the last trading session at $13.63.
ON’s forward EV/EBITDA of 11.91x is 23.9% lower than the 15.66x industry average. Likewise, its 15.44x forward EV/EBIT is 28.4% lower than the 21.56x industry average. However, its forward EV/Sales of 4.34x is 35.6% higher than the 3.20x industry average.
ON’s non-GAAP revenue for the fiscal third quarter ended September 30, 2024, was reported at $1.77 billion. However, non-GAAP net income attributable to ON and EPS plunged 30.3% and 28.8% year-over-year to $423.80 million and $0.99, respectively.
Analysts expect ON’s revenue for the quarter ending December 31, 2024, to increase 12.6% year-over-year to $1.76 billion. Its EPS for the same quarter is expected to decline 21.6% year-over-year to $0.98. However, the company has surpassed revenue and EPS estimates in each of the trailing four quarters.
ON’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
ON has a B grade for Value. It is ranked #49 in the same industry.
Click here for the additional POWR Ratings for ON (Momentum, Stability, Quality, Sentiment, and Growth).
QUALCOMM Incorporated (QCOM) vs. ON Semiconductor (ON): Which Chipmaker Is a Smarter Investment?
The global semiconductor industry is a powerhouse of innovation and increasingly vital for numerous sectors. The industry continues its growth trajectory, fueled by burgeoning demand and a surge in new semiconductor companies.
Leading chipmaker companies QCOM and ON stand to capitalize on the optimistic industry outlook. However, QCOM’s higher profitability and promising near-term outlook favor it as the better chip-maker stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Semiconductor & Wireless Chips industry here.
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QCOM shares were trading at $162.69 per share on Monday afternoon, up $4.16 (+2.62%). Year-to-date, QCOM has gained 14.11%, versus a 28.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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