Semiconductors are the core infrastructure powering the Information Age. Demand for chips is variable though, meaning that corporate inventory levels and sentiment can significantly impact the industry. The market doesn’t seem convinced we’re due for another upturn as the sector’s 3.1% gain over the past six months has trailed the S&P 500 by 2 percentage points.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here is one semiconductor stock poised to generate sustainable market-beating returns and two we’re passing on.

Two SemiconductorStocks to Sell:

Sensata Technologies (ST)

Market Cap: $4.71 billion

Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.

Why Do We Avoid ST?

1. Sales trends were unexciting over the last five years as its 2.7% annual growth was below the typical semiconductor company
2. Sales are projected to tank by 3.4% over the next 12 months as its demand continues evaporating
3. Efficiency has decreased over the last five years as its operating margin fell by 10.3 percentage points

At $32.22 per share, Sensata Technologies trades at 10.1x forward P/E. Check out our free in-depth research report to learn more about why ST doesn’t pass our bar.

Texas Instruments (TXN)

Market Cap: $196.2 billion

Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ: TXN) is the world’s largest producer of analog semiconductors.

Why Are We Wary of TXN?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.3% annually over the last two years
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 8.4 percentage points
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 32.1 percentage points

Texas Instruments is trading at $215.43 per share, or 37.5x forward P/E. Read our free research report to see why you should think twice about including TXN in your portfolio.

One Semiconductor Stock to Buy:

Nova (NVMI)

Market Cap: $8.38 billion

Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.

Why Do We Love NVMI?

1. Market share has increased this cycle as its 14.3% annual revenue growth over the last two years was exceptional
2. NVMI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

Nova’s stock price of $284.50 implies a valuation ratio of 34.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today