Semiconductor stocks and the companies they represent are ready for big things in 2024. One research firm claims that 2024 will kickstart a prolonged 20% CAGR trend next year, with artificial intelligence and vehicle-centric utility leading the way. Of course, this year marked record runs for mega-sized semiconductor stocks like Nvidia (NASDAQ:NVDA). But Nvidia and its kin aren’t the only players in the game. Instead, a range of small-cap semiconductor stocks and companies in semiconductor support roles offer the biggest investment opportunity for 2024.
Aehr Test Systems (AEHR)
Small-cap stocks fell from the spotlight amid the larger battle between giants like Nvidia and ON Semiconductor (NASDAQ:ON). But 2024 marks a pivot point that focuses on small-caps, and Aehr Test Systems (NASDAQ:AEHR) is a crucial link in semiconductor production. Rather than producing chips themselves, Aehr acts as a third-party test solution and thus stands to win no matter which semiconductor mega-stock pulls ahead in the overall race.
Aehr’s test systems help companies ensure quality and reliability before sending them to end-users via semiconductor supply chains. Aehr contributes its services to Samsung, Texas Instruments (NASDAQ:TXN) and more. At the same time, its scope spans chip testing across 5G infrastructure, self-driving cars, data center expansion and similar next-gen semiconductor stock trends.
To be fair, Aehr is on a record run and gained nearly 2,000% over the past five years. But its 1-year performance, while great, pales compared to the mega-caps it supports. As semiconductors increasingly insert themselves into daily life, sensitive test solutions will become more important, making Aehr one of the top semiconductor stocks to buy.
Skyworks Solutions (SWKS)
Skyworks Solutions (NASDAQ:SWKS) is a niche semiconductor stock that primarily services wireless devices to help users connect with cell towers and other transmitters. To that end, SWKS’ biggest customer is also one of the world’s biggest cell phone manufacturers, Apple (NASDAQ:AAPL). If Apple bets on SWKS then it’s safe to say the company offers a quality product. Of course, over-reliance on a single customer isn’t ideal, so investors should balance that risk accordingly.
But institutional investors aren’t shaken and collectively own an 85% stake. Of those institutional owners, just 19 own more than 50% of the company’s tradable shares, so there’s clearly “smart money” riding on SWKS. Those experts might be betting on the fact that the wide 5G market will grow 32% annually for the rest of the decade, offsetting the Apple risk slightly. Either way, SWKS is an overlooked semiconductor stock with an oversized impact and massive money interests.
Taiwan Semiconductor Manufacturing Company (TSM)
Okay, so Taiwan Semiconductor Manufacturing Company (NYSE:TSM) isn’t unknown or overlooked among semiconductor stocks. But despite its prominence on industry expert lists of top semiconductor stocks, shares “only” climbed 38% this year. Compare that to Nvidia’s +220% explosion and it’s clear TSM’s pricing isn’t meeting its potential.
TSM is unique because it’s a global stock that, in addition to being international itself, also services a wider overseas base than many US-centric semiconductor stocks. For example, Japan is pouring cash into TSM’s coffers to build local plants and help train Japanese researchers and technicians. While this helps TSM from an investment perspective by increasing income opportunities, it also helps diversify its region-specific risk amid ongoing Chinese conflict concerns.
And, speaking of financials, TSM’s are hard to beat. The company’s debt is nearly nonexistent and its net margin is sizeable. International stocks tend to suffer more than most amid global economic unease, but TSM’s financial management skills kept them afloat and thriving. They’re also ready to enter 2024 with a bang.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.