Emerging technologies like artificial intelligence and the widespread adoption of advanced memory chips in industrial applications are expected to drive growth in the chip industry.
As the industry shows solid potential, investors could consider quality chip stocks Nikon Corporation (NINOY), Everspin Technologies, Inc. (MRAM), and Taiwan Semiconductor Manufacturing Company Limited (TSM) this August to capitalize on the industry’s tailwinds.
The semiconductor market's growth is attributed to the increasing consumption of consumer electronics devices across the globe. Additionally, the emergence of advanced technologies like artificial intelligence (AI), the Internet of Things (loT), and machine learning (ML) are providing new opportunities for the market.
Moreover, the increasing demand for faster and more advanced memory chips in industrial applications drives market growth. According to a report by Future Market Insight, the global semiconductor capital equipment market is expected to reach $161 billion by 2033 at a CAGR of 7%.
Furthermore, the potential and benefits of artificial intelligence (AI) have ignited a surge of interest in the AI chips market, prompting numerous businesses, including startups, to make their foray into this domain.
As a result, the AI chips market is estimated to expand at a CAGR of 61.5% to reach $210.51 billion in 2027.
Let’s discuss the stocks mentioned above in detail:
Nikon Corporation (NINOY)
Headquartered in Tokyo, Japan, NINOY manufactures and sells optical instruments in Japan, North America, Europe, China, Thailand, and internationally. It operates through Imaging Products Business; Precision Equipment Business; Healthcare Business; Components Business; and Industrial Metrology and Other segments.
On July 27, 2023, NINOY announced the release of the AX R MP with NSPARC super-resolution multiphoton confocal microscope, which enables extremely sensitive array detection and super-resolution in deep areas within large living organisms specimens. This product will contribute to the understanding of brain diseases such as Alzheimer's and Parkinson's disease, as well as drug discovery research.
On July 26, NINOY announced a joint development agreement with the 4JET Group (4JET), pioneers in the use of pulsed laser radiation for ablation and modification of surfaces, to accelerate innovation and deployment of laser-based riblet technology.
NINOY pays $0.32 annually as dividends. This translates to a yield of 2.60% at the current market price, compared to the 4-year average dividend yield of 3.26%.
NINOY’s trailing-12-month gross profit margin of 46.04% is 30.4% higher than the industry average of 35.30%. Its trailing-12-month net income margin of 7.16% is 71.3% lower than the industry average of 4.18%.
During the fiscal year ended March 31, 2023, NINOY’s revenue increased 16.4% year-over-year to YEN628.11 billion ($4.42 billion). Profit for the year increased 2.4% year-over-year to YEN43.28 billion ($304.72 million), whereas its EPS increased 8% year-over-year to YEN124.77.
NINOY’s revenue is expected to increase 49.8% year-over-year to $4.58 billion during the fiscal year ending March 2024.
The stock has gained 49.9% year-to-date to close the last trading session at $13.25.
NINOY’s POWR Ratings reflect this promising outlook. 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.
It has a B grade in Value, Stability, and Quality. The stock is ranked #5 out of 92 stocks in the Semiconductor & Wireless Chip industry.
Beyond what is stated above, we’ve also rated NINOY for Growth, Momentum, and Sentiment. Get all NINOY ratings here.
Everspin Technologies, Inc. (MRAM)
MRAM manufactures and sells magnetoresistive random access memory (MRAM) products in the United States, Hong Kong, Japan, China, Canada, Germany, and internationally.
MRAM’s trailing-12-month gross profit margin of 56.30% is 16.2% higher than the industry average of 48.45%. Its trailing-12-month net income margin of 8.19% is 293% lower than the industry average of 2.08%.
In the fiscal first quarter (ended March 31, 2023), MRAM’s total revenues increased 3.5% year-over-year to $14.85 million, while its gross profit grew marginally from the year-ago quarter to $8.43 million. The company’s net income came in at $761 thousand and $0.04 per share, respectively, for the same period. Also, its adjusted EBITDA stood at $2.32 million for the same period.
Street expects MRAM’s revenue to increase 2% year-over-year to $15 million in the fiscal second quarter (ended June 2023). Its EPS is expected to be $0.08 for the same quarter. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock gained 72.8% year-to-date to close its last trading session at $9.61.
It’s no surprise that MRAM has an overall rating of B, which translates to a Buy in our POWR Ratings system.
MRAM also has an A grade for Sentiment and a B in Value and Quality. It is ranked #6 in the same industry.
For additional ratings for MRAM for Momentum, Stability, and Growth, click here.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally.
TSM pays $1.78 annually as dividends. This translates to a yield of 1.97% at the current market price, compared to the 4-year average dividend yield of 2.31%.
TSM’s trailing-12-month gross profit margin of 58.63% is 21% higher than the industry average of 48.45%. Its trailing-12-month net profit margin of 43.33% is significantly higher than the industry average of 2.08%.
TSM’s net revenue came in at NT$480.84 billion ($15.68 billion) in the second quarter ended June 30, 2023. Meanwhile, its net income came at NT$181.80 billion ($5.93 billion) and income from operation came in at NT$201.96 billion ($6.58 billion). Also, its EPS stood at NT$7.01.
Analysts expect TSM’s revenue to be $17.04 billion for the fiscal third quarter ending September 2023. Its EPS is expected to be $1.16 in the same quarter. Also, the company has surpassed EPS estimates in each of the trailing four quarters.
The stock has gained 17.6% over the past three months to close the last trading session at $99.15.
TSM also has an A grade for Momentum and a B in Quality. It is ranked #27 in the same industry.
Click here to see the additional POWR Ratings for TSM (Value, Stability, and Sentiment.).
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NINOY shares were trading at $13.17 per share on Tuesday morning, down $0.08 (-0.60%). Year-to-date, NINOY has gained 48.98%, versus a 20.28% 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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