The semiconductor market teeters on transformative shifts as global sales projections surpass spring estimates. Demonstrating resilience, the sector outperformed expectations in the second and third quarters, indicating a trajectory toward substantial growth.

Anticipating sustained growth momentum, it seems wise to invest in fundamentally robust semiconductor stocks STMicroelectronics N.V. (STM), Everspin Technologies, Inc. (MRAM) and ChipMOS TECHNOLOGIES INC. (IMOS) for substantial year-end gains. Prior to exploring these stocks, delve into the industry's growth drivers.

Despite five quarters of year-over-year declines in semiconductor markets, a reversal is expected in the fourth quarter of 2023. This shift is due to the effectiveness of production cuts that have permeated the supply chain, signaling a recovery in year-over-year growth.

According to SEMI, electronic sales are expected to increase by 22% quarter-on-quarter in the fiscal fourth quarter of 2023, following a 7% increase in the fiscal third quarter. Furthermore, IC sales are expected to rise by 4% sequentially, building on the 7% increase in the third quarter, owing to increased end demand and inventory normalization.

The spike in demand for high-performance GPU-based servers and accelerator cards in data centers, driven by advances in generative AI (GenAI) and huge language models, is also expected to boost semiconductor industry growth. Gartner (IT) forecasts that global semiconductor revenue will increase 16.8% to $624 billion in 2024.

According to World Semiconductor Trade Statistics (WSTS), the semiconductor market is expected to be valued at $520 billion this year. Looking ahead to 2024, a strong upswing is expected, with predictions of a 13.1% increase, resulting in a global semiconductor industry capitalization of $588 billion.

The memory market, expected to rise by more than 40% from the previous year to over $130 billion in 2024, is the predominant driver of the industry's expected expansion. Concurrently, other significant segments such as discrete, sensors, analog, logic, and micro are predicted to expand in the single digits.

This upswing in demand will be intensified by the sustained expansion and integration of technologies like Artificial Intelligence (AI), 5G, and the Internet of Things (IoT) across diverse industries.

Consequently, semiconductor manufacturers are poised to invest in capacity enhancements, innovative production techniques, and R&D to fulfill escalating market demands. Looking ahead, the global semiconductor chip market is anticipated to grow at a 7.1% CAGR and reach $1.12 trillion by 2032.

In light of these encouraging trends, let’s look at the fundamentals of the three Semiconductor & Wireless Chip stocks.

Stock #3: STMicroelectronics N.V. (STM)

Based in Geneva, Switzerland, STM designs, manufactures, and markets semiconductor products. Its segments include Automotive and Discrete Group; Analog, MEMS, and Sensors Group; and Microcontrollers and Digital ICs Group. The company caters to automotive, industrial, personal electronics, and communications equipment markets.

On December 4, STM's MasterGaN1L and MasterGaN4L debuted the next generation of integrated gallium-nitride (GaN) bridge devices that simplify the power-supply design by exploiting wide-bandgap technology to meet the most recent eco-design standards. These gadgets have an optimized turn-on delay when compared to their predecessors.

This breakthrough might propel STM to the forefront of technical innovation, fostering improved performance and environmental sustainability in power-supply solutions.

On November 29, STM launched the STSAFE-V100-Qi secure element to enhance privacy and security when charging portable car devices. STM also announced a partnership with indie Semiconductor, Inc. (INDI), a pure-play automotive semiconductor business.

The collaboration to include this breakthrough into INDI's Qi wireless in-car charging reference design confirms STM's technological superiority and opens up new revenue opportunities in the booming automotive semiconductor market.

For the third quarter that ended September 30, 2023, STM’s net revenues increased 2.5% year-over-year to $4.43 billion. Its gross profit grew 2.4% from the year-ago value to $2.11 billion.

Also, as of September 30, 2023, the company’s current assets came in at $10.99 billion, compared to $9.81 billion as of December 31, 2022. In addition, its total assets amounted to $22.56 billion, up from $19.98 billion as of December 31, 2022.

For the fiscal year ending December 2023, STM’s revenue is estimated to grow 7.6% year-over-year to $17.35 billion. Similarly, the company’s EPS for the current year is expected to rise 1.9% from the prior year to $4.27. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.

Shares of STM have gained 16.1% over the past month and 34.3% year-to-date, closing the last trading session at $47.48.

STM’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

STM has an A grade for Value and a B for Momentum, Sentiment and Quality. It is ranked #3 out of 92 stocks within the Semiconductor & Wireless Chip industry.

In addition to the POWR Ratings I’ve highlighted, you can see STM’s ratings for Growth and Stability here.

Stock #2: Everspin Technologies, Inc. (MRAM)

MRAM manufactures and sells magnetoresistive random access memory (MRAM) products, including Toggle MRAM, spin-transfer torque MRAM, and tunnel magnetoresistance sensor products. The company serves original equipment, contract, and design manufacturers.

On October 17, MRAM strategically revealed the expansion of its premier industrial high-density STT-MRAM product line, the EMxxLX. Introduced last year, the EMxxLX stands as the most advanced persistent memory solution, catering to electronic systems prioritizing data persistence, integrity, low power, low latency, and security. 

This expansion reinforces MRAM's commitment to providing cutting-edge solutions across various industries, positioning it for sustained growth and technological leadership.

For the third quarter that ended September 30, 2023, MRAM’s revenue increased 8% year-over-year to $16.47 million. Its adjusted EBITDA rose 18.7% from the year-ago value to $4.01 million.

Furthermore, the company’s net income and comprehensive income grew 27.8% from the prior year’s quarter to $2.44 million, while net income per common share increased 22.2% from the year-ago value to $0.11.

Wall Street expects MRAM’s revenue to grow 1.3% year-over-year to $15.90 million for the fiscal fourth quarter ending December 2023. Likewise, the company’s revenue for the current quarter is expected to come in at $0.12, up 43.9% from the prior year’s period. Also, the company topped the consensus revenue and EPS in all of the trailing four quarters.

The stock has gained 60.6% year-to-date, closing the last trading session at $8.64.

MRAM’s strong prospects 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.

MRAM has an A grade for Sentiment and a B for Value, Momentum, and Quality. It is ranked #2 out of 92 stocks within the same industry.

Click here to access the additional MRAM ratings (Stability and Growth). 

Stock#1: ChipMOS TECHNOLOGIES INC. (IMOS)

Headquartered in Hsinchu, Taiwan, IMOS researches, develops, manufactures, and sells high-integration and high-precision integrated circuits and associated assembly and testing services. Its segments include Testing; Assembly; Testing and Assembly for LCD, OLED and Other Display Panel Driver Semiconductors; Bumping; and Others.

On November 9, IMOS disclosed its unaudited consolidated revenue for October 2023, amounting to $60.7 million. This marked a 3% rise from September 2023 and a substantial 25.2% surge from October 2022. The company thrived due to robust demand for its memory products despite market softness in specific sectors and customer segments.

This positive financial performance underscores IMOS's resilience and adaptability in navigating market dynamics.

During the third quarter that ended September 30, 2023, IMOS’ revenue increased 6.2% year-over-year to NT$5.58 billion ($177.12 million). Its gross profit grew 9.5% from the year-ago value to NT$889.08 million (28.21 million). Also, the company’s operating profit rose 22.7% from the year-ago value to NT$487.15 million ($15.46 million).

In addition, as of September 30, 2023, the company’s cash and cash equivalents stood at NT$11.31 billion ($358.97 million), compared to NT$9.90 billion ($314.06 million) as of December 31, 2022.

The consensus revenue estimate of $173.04 million for the fiscal fourth quarter ending December 2023 reflects a 12.4% year-over-year improvement. Similarly, the consensus revenue estimate of $165.25 million for the first quarter of fiscal 2024 (ending March 2024) exhibits a 10.3% rise from the previous year. Also, the company topped the consensus revenue in three of the four trailing quarters.

The stock has gained 12.6% over the past month and 23.3% year-to-date to close the last trading session at $26.46.

IMOS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

IMOS has an A grade for Momentum and Sentiment and a B for Growth, Value, and Stability. It has topped the 92-stock Semiconductor & Wireless Chip industry.

Click here to access additional IMOS ratings for Quality.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

STM shares were trading at $47.98 per share on Wednesday morning, up $0.50 (+1.05%). Year-to-date, STM has gained 35.34%, versus a 20.60% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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