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The semiconductor sector has been on fire, with several exchange-traded funds (ETFs) delivering exceptional returns over the past year. This surge reflects the growing importance of semiconductors in various industries, from consumer electronics to automotive and artificial intelligence.

Leading the pack, the iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) have more than doubled investors’ money, boasting returns of 107.43% and 102.37%, respectively. The SPDR S&P Semiconductor ETF (XSD) follows closely with a 106.35% return. While not quite matching its peers, the Invesco PHLX Semiconductor ETF (SOXQ) still impressed with a 53.27% gain. These stellar performances underscore the semiconductor industry’s robust growth and its pivotal role in driving technological advancements.

On the negative side, The Israel-Hamas conflict poses risks to the global semiconductor industry. Israel is a key player in chip development, hosting design centers for major tech firms like Intel, Nvidia, Apple, Amazon, and Microsoft. Nevertheless, The Global semiconductor sales reached $46.4 billion in April 2024, according to the Semiconductor Industry Association. This represents a 15.8% increase from April 2023’s $40.1 billion and a 1.1% rise from March 2024’s $45.9 billion. April’s semiconductor sales grew significantly in the Americas (32.4%), China (23.4%), and Asia Pacific (11.1%), but declined in Europe (-7.0%) and Japan (-7.8%) compared to last year.

Key Takeaways:

• Nvidia Corporation (NVDA) and Advanced Micro Devices (AMD) excel in high-performance computing and graphics processing.
• Taiwan Semiconductor Manufacturing Company (TSM) dominates the foundry market with cutting-edge manufacturing capabilities.
• NXP Semiconductors (NXPI) focuses on automotive and IoT applications, riding the wave of smart technology adoption.
• Qualcomm Incorporated (QCOM) leverages its leadership in mobile technology to expand into 5G and IoT.
• Monolithic Power Systems (MPWR) stands out for its innovative power solutions.
• Micron Technology (MU) leads in memory and storage solutions.

What are Semiconductor Stocks?

Semiconductor stocks are stocks of companies that are involved in the design, manufacture, and sale of semiconductor chips, also known as integrated circuits or microchips. These chips are crucial components in a wide range of electronic devices, from smartphones and laptops to cars and gaming consoles. They are also essential for emerging technologies such as artificial intelligence (AI), Internet of Things (IoT), and 5G connectivity.

Semiconductor Market Growth:

• By 2030, the global semiconductor market is expected to approach the $1 trillion mark. The projected compound annual growth rate (CAGR) to be 8.8% between 2023-2032, indicating steady and significant expansion. scoop.market.us
• Asia Pacific continues to lead the semiconductor market, a trend likely to persist. This region’s market value is anticipated to more than double from $544.78 billion in 2023 to $1,137.57 billion by 2033, growing at higher CAGR of 7.64%. precedenceresearch

Performance Comparison of Top Semiconductor Stocks

7 Best Semiconductor Stocks to Buy

With the semiconductor industry poised for continued growth driven by transformative technologies, here are five top semiconductor stocks that stand out as compelling investment opportunities: The companies we have listed are based on hedge fund interest, using data from Insider Monkey’s Q2 2024 report.

1. Nvidia Corp. (NVDA)

Number of Hedge Fund Holders (Q2 2024): 180

Nvidia establishes itself as a pioneer in the semiconductor industry, particularly in the fields of artificial intelligence (AI) and high-performance gaming. The company’s GeForce GPUs serve gamers, while its data center products support AI research and applications. Nvidia’s 1-year return reaches an impressive +215.1%, driven by strong demand for its GPUs and AI solutions.

Nvidia dominates the AI landscape with its GPUs, which are widely used in machine learning and deep learning applications. The company’s CUDA architecture and software ecosystem enable developers to create complex AI models. Nvidia’s Drive platform for autonomous vehicles gains traction, positioning the company in the fast-growing autonomous driving market.

According to insidermonkey, Ken Griffin’s Citadel Investment Group holds a significant position in Nvidia Corp. (NVDA), with 148,546,600 shares valued at approximately $18.35 billion

NVIDIA’s Q2 fiscal 2025 saw record-breaking revenue of $26.3 billion, a 154% year-over-year increase and 16% quarter-over-quarter growth. The company made significant strides in AI and data center technology, introducing new GPU systems like the H200 Tensor Core and Blackwell architecture B200. NVIDIA’s Spectrum-X Ethernet networking platform gained broad adoption, while the NVIDIA NIM developer tool attracted over 150 companies for integration.

Gaming revenue reached $2.9 billion, up 16% year-over-year and 9% quarter-over-quarter. Innovations included NVIDIA ACE for digital humans and Project G-Assist for real-time AI gaming assistance. GeForce NOW surpassed 2,000 games and expanded into Japan. Professional Visualization revenue grew to $454 million, a 20% year-over-year increase, driven by advancements in generative AI for industrial applications and OpenUSD workflows.

Automotive and Robotics revenue increased to $346 million, up 37% year-over-year and 5% quarter-over-quarter. NVIDIA’s Isaac robotics platform gained traction among major manufacturers like BYD Electronics and Siemens. The company introduced Omniverse Cloud Sensor RTX microservices for autonomous machine development and won the Autonomous Grand Challenge at the CVPR conference for its end-to-end driving technology.

According to Wall Street Analyst on NVDA stock. Of the 61 analysts following the stock, 48 give it a Buy and 4 has it at Hold.

Why We Picked Nvidia Corp. (NVDA)

Nvidia stands out in the semiconductor industry due to its leadership in high-performance computing and artificial intelligence (AI). The company’s GeForce GPUs are sought after for gaming and AI applications, reflecting its strong market demand. Nvidia’s investment in research and development (R&D) ensures it remains at the forefront of technological innovation. The company benefits from diverse revenue streams, including gaming, data centers, and automotive technologies. Nvidia’s strong financial performance and innovative products make it a top pick for investors looking to capitalize on technological advancements.

2. Advanced Micro Devices Inc. (AMD)

Number of Hedge Fund Holders (Q2 2024): 108

AMD makes significant strides in the semiconductor market, challenging industry giants with its Ryzen CPUs and Radeon GPUs. The company’s focus on high-performance computing and server markets pays off, with a 1-year return of +127.6%. AMD’s collaboration with major tech companies and its innovations in chip design continue to propel its growth.

AMD’s EPYC processors for data centers gain market share due to their superior performance and energy efficiency. The company’s Radeon graphics cards compete effectively with Nvidia, providing gamers with high-performance options. AMD’s commitment to innovation shows in its use of advanced manufacturing processes, such as 7nm and 5nm technologies.

According to insidermonkey, Crake Asset Management’s Martin Taylor holds 2.79 million AMD shares worth $453.04 million.

AMD’s second quarter 2024 financial results show strong performance, with revenue reaching $5.8 billion. The Data Center segment saw remarkable growth, driven by AMD Instinct GPU shipments and EPYC CPU sales. While Client segment revenue increased, Gaming and Embedded segments experienced declines. The company reported solid gross margins and earnings per share, both on a GAAP and non-GAAP basis.

AMD expanded its AI solutions portfolio with new CPUs, GPUs, NPUs, and software offerings. Highlights include an updated Instinct accelerator roadmap, the introduction of Ryzen AI 300 Series processors for AI PCs, and the formation of the Ultra Accelerator Link promoter group. Cloud providers showcased offerings powered by AMD Instinct MI300X accelerators, and the company launched new products for workstations and enterprises. AMD also announced partnerships with Sun Singapore and Optiver, demonstrating the versatility of its technology across various industries.

According to Wall Street Analyst on AMD stock. Of the 54 analysts following the stock, 37 give it a Buy and 10 has it at Hold.

Why We Picked Advanced Micro Devices Inc. (AMD)

AMD excels in high-performance computing and graphics processing with its Ryzen CPUs and Radeon GPUs. The company’s aggressive growth strategy and innovative chip designs have enabled it to capture significant market share from competitors. AMD’s partnerships with major technology companies support its growth in the server and gaming markets. The company’s commitment to cutting-edge technologies like 7nm and 5nm process nodes positions it well for future expansion. AMD’s strong performance and competitive edge make it a compelling choice for investment.

3. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

Number of Hedge Fund Holders (Q2 2024): 160

TSMC leads the world’s contract manufacturing of semiconductors, producing chips for major companies like Apple, AMD, and Nvidia. With its advanced manufacturing capabilities, TSMC achieves a 1-year return of +41.7%. The company’s investments in leading-edge technologies like 5nm and 3nm processes position it well for future growth.

TSMC maintains a significant technological edge over its competitors, thanks to its commitment to R&D. The company’s 3nm process technology sets new standards for chip performance and efficiency. TSMC’s ability to produce chips at scale ensures that it remains the go-to foundry for top tech companies.

According to insidermonkey, Fisher Asset Management, led by Ken Fisher, owns 28.41 million TSM shares valued at $4.94 billion.

TSMC reported robust financial results for Q1 2024, with revenue reaching $18.87 billion, marking a 12.9% year-over-year increase. Net income and diluted EPS both rose by 8.9% compared to the previous year. The company’s advanced technologies, particularly 3nm and 5nm processes, continued to drive growth, accounting for 65% of total wafer revenue. Despite a slight decrease from Q4 2023 due to smartphone seasonality, TSMC maintained strong profitability with a gross margin of 53.1% and a net profit margin of 38%.

Looking ahead to Q2 2024, TSMC anticipates continued growth driven by demand for its cutting-edge 3nm and 5nm technologies. The company projects revenue between $19.6 billion and $20.4 billion, with an expected gross profit margin of 51-53% and an operating profit margin of 40-42%. While smartphone seasonality may persist, TSMC remains optimistic about its performance, particularly in the high-performance computing sector.

According to Wall Street Analyst on TSM stock. Of the 43 analysts following the stock, 31 give it a Buy and 2 has it at Hold.

Why We Picked Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

TSMC dominates the foundry market with its advanced manufacturing technologies. The company’s 3nm and 5nm process technologies set new industry standards and attract top tech clients like Apple and Nvidia. TSMC’s consistent innovation and investment in R&D ensure it remains a leader in semiconductor manufacturing. The company’s global manufacturing footprint and strategic partnerships position it advantageously in the semiconductor ecosystem. TSMC’s market leadership and technological prowess make it a top stock pick.

4. NXP Semiconductors (NXPI)

Number of Hedge Fund Holders (Q2 2024): 52

NXP specializes in automotive and Internet of Things (IoT) applications, making it a key player in the smart technology space. The company’s 1-year return reflects its success in these rapidly growing markets. NXP’s focus on secure connectivity and embedded applications ensures its relevance in the evolving tech landscape.

NXP’s automotive semiconductors power various systems in modern vehicles, including infotainment, safety, and autonomous driving features. The company’s IoT solutions enable secure connections for smart homes and industrial applications. NXP’s Near Field Communication (NFC) technology remains a leader in contactless payment systems.

According to insidermonkey, NXP Semiconductors: First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds 797,374 shares valued at $214.6 million

NXP Semiconductors reported mixed results for Q2 2024, with revenue down 5% year-on-year to $3.13 billion. Despite this decline, the company maintained strong margins, with GAAP gross margin at 57.3% and non-GAAP at 58.6%. NXP generated $761 million in operating cash flow and $577 million in free cash flow. The company continued its capital return policy, distributing $570 million to shareholders through dividends and share repurchases.

In the same quarter, NXP made significant technological advancements and strategic moves. The company introduced the 5nm S32N55 processor for vehicle super-integration and collaborated with ZF on SiC-based traction inverter solutions for EVs. Additionally, NXP announced plans to form a joint venture with VIS to build a new 300mm semiconductor wafer facility in Singapore, focusing on mixed-signal, power management, and analog products for various end markets.

According to Wall Street Analyst on NXPI stock. Of the 31 analysts following the stock, 14 give it a Buy, 11 has it at Hold and 1 calls it a Sell.

Why We Picked NXP Semiconductors (NXPI)

NXP is a key player in the automotive and IoT markets, with a strong focus on secure connectivity and embedded solutions. The company’s diverse product portfolio and strategic focus on growth areas like automotive and smart technology drive its success. NXP’s expertise in automotive semiconductors and innovative IoT solutions support its relevance in emerging tech markets. The company’s solid financial performance and strategic market positioning make it an attractive investment for those looking to benefit from smart technology trends.

5. Qualcomm Incorporated (QCOM)

Number of Hedge Fund Holders (Q2 2024): 100

Qualcomm continues to lead in mobile technology, and its expansion into 5G and IoT drives its growth. With a 1-year return of +0.9%, Qualcomm benefits from its patents and innovations in wireless technology. The company’s role in 5G deployment and its extensive product portfolio make it a strong contender in the semiconductor market.

Qualcomm’s Snapdragon processors power many of the world’s leading smartphones, providing high performance and energy efficiency. The company’s 5G modems enable faster and more reliable mobile connections. Qualcomm’s IoT solutions support a wide range of applications, from smart homes to industrial automation.

According to insidermonkey, Matrix Capital Management, led by David Goel and Paul Ferri, owns 10 million Qualcomm shares worth $1.99 billion.

Qualcomm reported strong financial results for the third quarter of fiscal 2024, with revenues of $9.4 billion and non-GAAP earnings per share of $2.33, both within or exceeding guidance ranges. The company saw particular strength in its QCT segment, with record automotive revenues and continued growth in IoT and handsets. Qualcomm highlighted its leadership in on-device AI and the launch of Snapdragon X Series platforms powering next-generation Windows PCs with Microsoft Copilot+.

Looking ahead, Qualcomm provided an optimistic outlook for Q4 and reaffirmed expectations for approximately 20% non-GAAP EPS growth in fiscal 2024. The company emphasized its diversification strategy and opportunities in automotive, IoT, and AI. Key announcements included collaborations with Samsung, Aramco, and expansion of the Qualcomm AI Hub to support Snapdragon-powered PCs, underscoring Qualcomm’s focus on AI and next-generation computing experiences.

According to Wall Street Analyst on QCOM stock. Of the 39 analysts following the stock, 17 give it a Buy, 13 has it at Hold and 1 calls it a Sell.

Why We Picked Qualcomm Incorporated (QCOM)

Qualcomm excels in mobile technology, with its Snapdragon processors and 5G modems driving growth in smartphones and connected devices. The company’s leadership in 5G technology and extensive patent portfolio provide a competitive advantage. Qualcomm’s expansion into IoT and automotive markets demonstrates its strategic diversification. The company’s strong financial performance and innovative product offerings make it a valuable stock for investors interested in mobile and wireless technologies.

6. Monolithic Power Systems (MPWR)

Number of Hedge Fund Holders (Q2 2024): 35

Monolithic Power Systems focuses on power management solutions, addressing the needs of various industries, including automotive, industrial, and consumer electronics. The company’s innovative approach results in a 1-year return of +79.8%. MPWR’s emphasis on energy-efficient solutions positions it well for future growth.

MPWR’s power management ICs optimize the performance and energy efficiency of electronic devices. The company’s battery management solutions support the growing market for electric vehicles and portable electronics. MPWR’s commitment to innovation ensures that its products meet the needs of evolving technologies.

According to insidermonkey, Impax Asset Management, under Ian Simm’s leadership, holds 212,185 Monolithic Power Systems shares, valued at $173.3 million.

Monolithic Power Systems reported a revenue of $507.4 million for Q2 2024, reflecting a 10.8% increase from the previous quarter and a 15.0% increase year-over-year. The GAAP gross margin was 55.3%, slightly down from 56.1% a year ago, while the Non-GAAP gross margin was 55.7%. GAAP operating expenses rose to $164.0 million from $135.4 million, with Non-GAAP operating expenses at $111.7 million. GAAP operating income increased to $116.5 million from $112.3 million in the same quarter last year, and Non-GAAP operating income was $171.0 million.

GAAP net income for Q2 2024 was $100.4 million, or $2.05 per diluted share, compared to $99.5 million, or $2.04 per diluted share, in Q2 2023. Non-GAAP net income was $155.1 million, or $3.17 per diluted share, up from $137.5 million, or $2.82 per diluted share, in the previous year. The increase in non-GAAP figures excludes expenses related to stock-based compensation, acquisition-related intangible assets amortization, and deferred compensation plan impacts. GAAP other income was $7.5 million, while non-GAAP other income stood at $6.2 million.

According to Wall Street Analyst on MPWR stock. Of the 15 analysts following the stock, 8 give it a Buy, 5 has it at Hold.

Why We Picked Monolithic Power Systems (MPWR)

MPWR stands out for its specialization in power management solutions, which address the needs of various industries. The company’s focus on energy-efficient technologies and diverse application areas drive its growth. MPWR’s innovative power management ICs support the evolving needs of automotive, industrial, and consumer electronics markets. The company’s strong financial performance and commitment to innovation make it a compelling investment choice for those interested in power management solutions.

7. Micron Technology Inc. (MU)

Number of Hedge Fund Holders (Q2 2024): 120

Micron leads in memory and storage solutions, critical components for data centers, PCs, and mobile devices. With a 1-year return of XX%, Micron continues to innovate in DRAM and NAND technologies. The growing demand for data storage and memory solutions supports Micron’s ongoing success.

Micron’s 3D NAND technology provides high-density storage solutions for various applications. The company’s DRAM products support the memory needs of high-performance computing and data center operations. Micron’s focus on innovation and manufacturing efficiency positions it as a leader in the memory market.

According to insidermonkey, Citadel Investment Group, led by Ken Griffin, holds a put option on 7,059,800 Micron Technology shares, worth $928.6 million.

Micron Technology, Inc. reported impressive third-quarter fiscal 2024 results with revenue reaching $6.81 billion, a significant increase from $5.82 billion last quarter and $3.75 billion a year ago. GAAP net income was $332 million ($0.30 per diluted share), while non-GAAP net income stood at $702 million ($0.62 per diluted share).

Operating cash flow surged to $2.48 billion compared to $1.22 billion in the previous quarter and $24 million a year earlier. CEO Sanjay Mehrotra highlighted robust AI demand and strong performance, noting 17% sequential revenue growth and record data center SSD revenue. Micron is well-positioned to achieve substantial revenue growth in fiscal 2025.

According to Wall Street Analyst on MU stock. Of the 41 analysts following the stock, 28 give it a Buy and 2 has it at Hold.

Why We Picked Micron Technology Inc. (MU)

Micron is a leader in memory and storage solutions, with a strong presence in DRAM and NAND technologies. The company’s innovative memory products support high-performance computing, data centers, and mobile devices. Micron’s commitment to technological advancements and expansion of production capacity address the growing demand for memory and storage solutions. The company’s solid financial performance and market leadership make it a top pick for investors focusing on memory and storage technologies.

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Conclusion

The semiconductor industry continues to be a critical driver of technological innovation, powering advancements in AI, 5G, IoT, and numerous other fields. The seven stocks highlighted in this article – Nvidia, AMD, TSMC, NXP Semiconductors, Qualcomm, Monolithic Power Systems, and Micron Technology – represent some of the most promising investment opportunities in the semiconductor sector for 2024.

FAQs

1. Is Investing in Semiconductors a Good Idea?

Semiconductors are integral to the global tech industry, powering everything from virtual reality headsets to self-driving cars. As technology continues to transform our lives, the demand for semiconductors will only increase, providing a long-term investment opportunity. The semiconductor sector is experiencing a strong rebound, with the VanEck Semiconductor ETF (SMH) outperforming other sectors. This recovery is predicted to continue, driven by increasing demand from various industries.

2. How can I gain diversified exposure to the semiconductor industry?

Investors seeking broad exposure to the semiconductor space have a few options. One is to buy a diversified portfolio of individual semiconductor stocks, such as the five highlighted here. Another is to invest in a semiconductor-focused exchange-traded fund (ETF) like the iShares Semiconductor ETF (SOXX) or the VanEck Semiconductor ETF (SMH). These ETFs hold a basket of 25-50 leading semiconductor stocks across different sub-sectors.

3. What are the risks of investing in semiconductor stocks?

The semiconductor industry is highly cyclical, meaning that chip demand and stock prices tend to fluctuate with the broader economy. The sector is also heavily reliant on technology innovation and can face disruption from new architectures or competitors. Geopolitical risks are a factor, too, given the geographic concentration of chip production in Asia and tensions between the US and China. Investors should be prepared for volatility and take a long-term perspective.

4. How does the US CHIPS Act impact the semiconductor industry?

The US CHIPS Act, signed into law in 2022, provides $52 billion in subsidies and incentives for domestic semiconductor production and research. The goal is to boost US chip manufacturing capacity and reduce reliance on overseas supply chains. The CHIPS Act is a tailwind for US semiconductor firms like Intel, Micron, TI, and GlobalFoundries as it will help them expand production and compete with Asian rivals. But it will take time for these investments to bear fruit.

5. What’s the outlook for the semiconductor industry?

The long-term outlook for the semiconductor industry is bright, driven by the proliferation of connected devices, the buildout of 5G networks, the rise of AI and machine learning, and the digitization of industries like healthcare, energy, and transportation. As the world becomes more tech-centric, demand for chips is expected to grow steadily over the next decade. While there may be short-term bumps along the way, the sector’s long-term growth prospects remain intact.