The extensive usage of semiconductors in a wide range of end-use applications such as electronics, industrial equipment, automotive, networking and communications, and data processing is the major factor that boosts the growth of the global semiconductors market. The global semiconductor market is poised to grow at a CAGR of 7.6% by 2033.
Since introducing the CHIPS Act in Congress, companies within the semiconductor industry have unveiled over 90 new manufacturing projects in the United States, representing nearly $450 billion in investments across 28 states.
These projects are expected to generate tens of thousands of direct jobs and support hundreds of thousands more across the U.S. economy. This shows how important semiconductor chips have become in the modern economic backdrop.
Against this backdrop, let’s compare two established semiconductor stocks to analyze which semiconductor stock offers more chip power: QUALCOMM Incorporated (QCOM) and Texas Instruments Incorporated (TXN).
The Case for QUALCOMM Incorporated Stock
With a $184.88 billion market cap, QUALCOMM Incorporated (QCOM) engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
QCOM’s stock has gained 15.7% over the past nine months and 54.1% over the past year to close the last trading session at $165.96.
QCOM’s forward EV/EBITDA of 12.77x is 11% lower than the industry average of 14.35x. Its forward EV/EBIT multiple of 14.51 is 27.8% lower than the industry average of 20.11.
QCOM’s total revenues for the fiscal third quarter that ended on June 30, 2024, amounted to $9.39 billion, increased 11.1% year-over-year, while the company’s net income and EPS came in at $2.13 billion and $1.88, increased 18.3% and 17.5%, respectively.
Analysts expect QCOM’s revenue for the fourth quarter (ending September 2024) to increase 13.8% year-over-year to $9.86 billion. Likewise, its EPS for the same quarter is projected to grow 26.1% year-over-year to $2.55. Moreover, the company has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is excellent.
QCOM’s POWR Ratings reflect its 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, with each factor weighted to an optimal degree.
The stock has an A grade for Quality. SKX is ranked first out of 91 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings I’ve just highlighted, you can see QCOM’s ratings for Growth, Momentum, Value, Sentiment, and Stability here.
The Case for Texas Instruments Incorporated Stock
Valued at $186.12 billion by market cap, Texas Instruments Incorporated (TXN) designs, manufactures, and sells semiconductors to electronics designers and manufacturers in the United States and internationally. The company operates through Analog and Embedded Processing segments.
TXN’s stock has gained 18.2% over the past six months to close the last trading session at $203.85. However, over the past month, the stock has declined 2.9%.
TXN’s forward EV/EBIT of 34.98x is 74% higher than the industry average of 20.11x.
TXN’s revenues for the fiscal second quarter ended June 30, 2024, decreased 15.6% year-over-year to $3.82 billion. its gross profit declined 24% year-over-year to $2.22 billion. Additionally, the company’s net income and EPS decreased 34.6% and 34.8% over the year-ago quarter, reaching $1.13 billion and $1.22, respectively.
Analysts expect TXN’s EPS for the quarter ending September 2024 to decrease 23.8% year-over-year to $1.41, while its revenue for fiscal 2025 is expected to increase 14.2% year-over-year to $17.97 billion.
TXN’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.
TXN has a C grade for Stability and Momentum. It is ranked #60 among 91 stocks in the same industry.
Click here for the additional POWR Ratings for TXN (Quality, Value, Sentiment, and Growth).
QUALCOMM (QCOM) vs. Texas Instruments (TXN): Which Semiconductor Stock Offers More Chip Power?
As semiconductors become more advanced, they enable greater performance in critical technologies like AI, 5G, cloud computing, and electric vehicles. These chips power everything from smartphones to data centers, making them essential for technological innovation.
As demand for faster, smaller, and more energy-efficient devices grows, the semiconductor industry expands to meet these needs, driving both technological and economic growth.
Leading semiconductor companies QCOM and TXN stand to capitalize on the optimistic industry outlook. However, QCOM’s strong financial performance, lower valuation, and promising near-term outlook favor it as the better semiconductor 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 Chip industry here.
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QCOM shares were trading at $166.74 per share on Tuesday afternoon, up $0.78 (+0.47%). Year-to-date, QCOM has gained 16.95%, versus a 20.78% 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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