Semiconductors, the backbone of all electronics and technology products, are vital to multiple sectors. With growing demand for chips and supportive government policies and funding, the semiconductor industry’s growth prospects appear promising.
Given the industry’s tailwinds, fundamentally sound semiconductor stocks Nikon Corporation (NINOY), Infineon Technologies AG (IFNNY), and Everspin Technologies, Inc. (MRAM) could be ideal buys for solid returns.
Semiconductors are crucial for high-computing applications in multiple industries, including consumer electronics, automotive, healthcare, manufacturing, telecommunications, military systems, clean energy, and more. A solid chip industry is critical to the United States’ economic strength, national security, and global competitiveness.
The Semiconductor Industry Association (SIA) announced that global semiconductor sales grew 1.9% month-on-month in September 2023. Moreover, worldwide sales of semiconductors were $134.70 billion in the third quarter of 2023, up 6.3% from the second quarter of this year.
“The long-term outlook for semiconductor demand remains strong, with chips enabling countless products the world depends on and giving rise to new, transformative technologies of the future,” said John Neuffer, SIA president and CEO.
Further, several advancements in generative AI and the growing use of numerous AI-based applications in data centers, edge infrastructure, and endpoint devices require the deployment of graphics processing units (GPUs) and optimized semiconductor devices. This is propelling the demand for AI chips.
According to Gartner, chips designed to execute AI workloads will represent an impressive $53.40 billion revenue opportunity for the semiconductor industry this year, an increase of 20.9% from 2022. In addition, by 2027, AI chips revenue is forecasted to more than double the market size in 2023, reaching $119.40 billion.
Supportive government initiatives could boost the chip industry’s prospects. In July last year, President Biden signed the CHIPS and Science Act into law, allocating nearly $53 billion to improve semiconductor manufacturing, research, and the workforce in the United States.
As per Statista, the semiconductors market in the United States is projected to achieve a revenue of $70.18 billion in 2023. Over the forecast period of 2023-2027, the revenue in the market is expected to grow at an annual rate of 5.7%, resulting in a market volume of $87.43 by 2027.
Given these encouraging trends, let's look at the fundamentals of the three top Semiconductor & Wireless Chip stocks, beginning with number 3.
Stock #3: Nikon Corporation (NINOY)
Headquartered in Minato, Japan, NINOY manufactures and sells optical instruments internationally. The company operates through the Imaging Products Business; Precision Equipment Business; Healthcare Business; and Industrial Equipment and Others segments. It offers products, including digital SLR cameras, FPD lithography systems, biological microscopes, etc.
On November 20, NINOY announced the release of the MAR-M700MFA, the world’s first “multi-turn external battery-free absolute encoder,” to use an all-solid-state battery. An absolute encoder is a sensor device commonly used in industrial robots on automobile manufacturing lines.
This product launch by NINOY is in pursuit of becoming “a key technology solutions company in a global society where humans and machines co-create seamlessly.”
On November 6, NINOY signed a deal with Aeva Technologies to produce sensors for Nikon industrial machines that can scan objects like cars coming off an assembly line for microscopic defects. Aeva sensors aim to make the scanning machines smaller, more functional and cheaper so that more vehicles can be inspected.
On November 1, NINOY and SBI Investment Co., Ltd., a wholly-owned subsidiary of SBI Holdings, announced the establishment of “Nikon-SBI Innovation Fund II”. This Fund will invest in the latest technologies and services like energy, aerospace, and carbon neutral, which are considered new areas looking beyond Nikon’s Medium-Term Management Plan.
NINOY’s revenue for the first half ended September 30, 2023, increased 14.9% year-over-year to ¥331.30 billion ($2.23 billion). Its gross profit grew 7.5% from the year-ago value to ¥142.07 billion ($959.52 million). The company’s profit for the period and EPS came in at ¥9.33 billion ($63.04 million) and ¥28.15, respectively.
As of September 30, 2023, the company’s total current assets stood at ¥646.15 billion ($4.36 billion), compared to ¥617.88 billion ($4.17 billion) as of March 31, 2023.
In the updated consolidated financial forecasts for the year ending March 31, 2024, NINOY affirmed a revenue of ¥690 billion ($4.66 billion).
Analysts expect NINOY’s revenue for the fiscal year (ending March 2024) to increase 45.9% year-over-year to $4.46 billion. Likewise, the company’s revenue for the fiscal year 2025 is estimated to grow 7.4% from the prior year to $4.79 billion.
NINOY’s shares have gained 7.2% year-to-date to close the last trading session at $9.43.
NINOY’s POWR Ratings reflect this robust 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.
The stock has a B grade for Value and Stability. Within the Semiconductor & Wireless Chip industry, NINOY is ranked #9 of 92 stocks.
Click here to access additional ratings of NINOY for Growth, Momentum, Quality and Sentiment.
Stock #2: Infineon Technologies AG (IFNNY)
Based in Neubiberg, Germany, IFNNY designs, develops, manufactures, and markets semiconductors and semiconductor-based solutions globally. The company operates through Automotive; Green Industrial Power; Power & Sensor Systems; and Connected Secure Systems segments.
On November 29, IFNNY introduced the industry’s first USB 10 Gbps peripheral controller, EZ-USB FX10. The device offers fast connectivity with USB 10Gbps and LVDS interfaces, enhancing the bandwidth up to three times compared to its predecessor.
The EZ-USB FX10 can function on a smaller PCB footprint and thus helps to optimize the BOM. Also, the 10 x 10 mm² BGA package makes it ideal for space-constrained applications, and it supports USB-C direct connection without a high-speed signal multiplexer. This new launch should bode well for the company.
In the fourth quarter that ended September 30, 2023, IFNNY’s revenue increased marginally year-over-year to €4.15 billion ($4.55 billion). Its profit from continuing operations grew 2.5% from the year-ago value to €748 million ($820.32 million). The company’s profit for the period came in at €753 million ($825.81 million), up 2.4% from the prior year’s quarter.
In addition, the company’s adjusted earnings per share for the quarter was €0.65, an increase of 3.2% year-over-year.
For the fiscal year ending September 2024, the consensus revenue estimate of $18.53 billion indicates an improvement of 4.9% year-over-year. Further, analysts expect IFNNY’s revenue and EPS for the fiscal year 2025 to grow 10.7% and 24.5% year-over-year to $20.52 billion and $3.20, respectively.
Over the past month, IFNNY’s stock has gained 26.3% and 22.4% year-to-date to close the last trading session at $37.57.
IFNNY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has a B grade for Stability, Value and Momentum. It is ranked #4 of 92 stocks within the Semiconductor & Wireless Chip industry.
To see additional POWR Ratings of IFNNY for Sentiment, Growth, and Quality, Click here.
Stock #1: Everspin Technologies, Inc. (MRAM)
MRAM manufactures and sells magnetoresistive random access memory (MRAM) products worldwide. The company provides Toggle MRAM, spin-transfer torque MRAM, tunnel magnetoresistance sensor products, and foundry services for MRAM products. It offers its products for applications, including industrial, medical, automotive, and data center markets.
On October 17, MRAM announced the expansion of its flagship industrial, high-density STT-MRAM product family, the EMxxLX. The EMxxLX product is the highest-performing persistent memory available right now. It is ideal for electronic systems such as industrial IoT, network/enterprise infrastructure, aeronautics/avionics, etc.
The new extended EMxxLX device offers the highest combination of performance, endurance, and retention. Expanding its EMxxLX MRAM product line might extend the company’s market reach and drive its profitability.
For the third quarter ended September 30, 2023, MRAM’s total revenue grew 8% year-over-year to $16.47 million. The company’s gross profit rose 10.6% year-over-year to $9.92 million. Also, its adjusted EBITDA increased 18.7% from the prior year’s quarter to $4.01 million.
Furthermore, the company’s net income increased 27.8% from the previous year’s period to $2.43 million. And the net income per common share came in at $0.11, up 22.2% from the prior year’s quarter.
For the fourth quarter of fiscal 2023, MRAM expects its total revenue to be in the range of $15.40 million to $16.40 million. Also, the company’s net income per share is expected to be between $0.01 and $0.06.
Street expects MRAM’s revenue and EPS for the fourth quarter (ending December 2023) to increase 1.3% and 43.9% year-over-year to $15.90 million and $0.12, respectively. Also, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of MRAM have surged 64.7% year-to-date and 39.5% over the past year to close the last trading session at $8.86.
MRAM’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value, Momentum, and Quality. It is ranked #2 out of 92 stocks in the Semiconductor & Wireless Chip industry.
Click here to access additional MRAM ratings for Growth and Stability.
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IFNNY shares were trading at $39.19 per share on Wednesday morning, up $1.62 (+4.32%). Year-to-date, IFNNY has gained 30.75%, versus a 20.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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