In the dynamic world of semiconductor stocks, discerning investors are always looking for the next big opportunity. Consequently, the quest for the top semiconductor stocks to buy has never been more intriguing. And this is especially true as the sector recovers from recent challenges and looks ahead to a more prosperous future.
Further, the ongoing transformation of the automotive market toward electric vehicles and the rapid expansion of 5G technology remain major catalysts fueling this resurgence. Additionally, the relentless march of digitalization across major industries pushes demand for advanced semiconductors.
Additionally, artificial intelligence (AI) adds a compelling dimension to this growth narrative. The AI market alone is projected to skyrocket from $118 billion in 2022 to a phenomenal $300 billion by 2026. With this backdrop, 2023 has unfolded as a pivotal year. It’s revealed challenges and significant buying opportunities in the semiconductor space. Let’s look closely at the following three best stocks.
Skyworks Solutions (SWKS)
Renowned for servicing wireless companies, Skyworks Solutions (NASDAQ:SWKS) has effectively carved out a unique niche in the semiconductor space.
SWKS’s semiconductors have proven mission-critical to the wireless ecosystem, from cell towers to user phones. Notably, the company is poised for expansion with the rapidly expanding 5G network. As such, its components are crucial for band switching, a key feature in 5G technology.
Also, SWKS’s partnership with industry titan Apple is noteworthy, attributing nearly 60% of its 2022 sales to this collaboration. Although single client dependency is risky, the burgeoning 5G market, projected to rise 32% annually through 2030, mitigates this risk. SWKS has achieved a year-to-date (YTD) gain of 8%. Further, over five years, the stock has risen by 39%, offering a total return of 54%.
Impressively, institutional investors own more than 80% of the company’s shares. In fact, this institutional interest suggests something extraordinary about this semiconductor stock. With a forward dividend yield of 2.75%, an annual payout of $2.72, a 5-year growth rate of 13.18%, and a consistent dividend growth for eight years, SWKS stands out as an incredibly promising investment.
Moreover, Qualcomm offers a robust dividend yield, with its stock price rising over 18% YTD and an astounding 120% in the past five years. Further elevating its prospects, QCOM is at the forefront of developing AI-enabled chips, poised to revolutionize mobile devices with AI capabilities.
Although a dip occurred earlier this year due to sluggish phone sales and a decrease in 5G telecom investment, Qualcomm has rebounded emphatically. And, this resurgence is backed by a solid earnings report, indicating stabilization in its end markets. Looking ahead to 2024, Qualcomm’s venture into AI chips could be a game-changer for the company, offering a lucrative upside for investors. So, as Qualcomm gears up for this technological leap, it stands as a promising investment in the evolving tech sphere.
KLA Corporation (KLAC)
KLA Corporation (NASDAQ:KLAC) is another strong contender in the semiconductor sector, specializing in process control and yield management systems space.
Known for its high-quality and diverse product portfolio, the company is a formidable player in its niche. KLAC’s focus on advanced inspections is increasingly relevant, indicating an increasing demand for its services.
KLA Corporation is effectively positioned to benefit from the ongoing U.S.-China chip war. This conflict leads to a diversification of supply chains, expanding KLAC’s total addressable market (TAM). With export controls against China intensifying and more countries participating, KLA Corporation’s specialized services will likely witness increased demand.
Moreover, it has beaten analyst estimates across both in the past 17 consecutive quarters. Its gross profit margin stood at a superb 59%. And, its net income has increased by 30% year over year (YOY), comfortably surpassing the sector median. KLAC’s forward dividend yield is 1.07%, with a consistent 5-year growth rate of 13.50%. Notably, the company demonstrated 14 years of dividend growth, signaling strong financial health and a commitment to delivering value to shareholders.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.