These days, you don’t need much extra motivation to consider the bullish case of surging semiconductor stocks. Yes, the spotlight is on the individual innovations, such as artificial intelligence or automated mobility. But these and other advancements must be fueled by something – that something is the underlying semiconductor architecture.
In the immediate sense, the tech-centric Nasdaq Composite index took a heavy blow on Thursday. Yes, the benchmark S&P 500 incurred an almost 1% dip. However, the Nasdaq suffered a nearly 2% erosion. Further, individual names within the innovation ecosystem suffered considerable damage. Over the long run, though, the red ink could end up representing a discounted entry point.
Fundamentally, computer chips represent the backbone of all modern electronic devices. Because of this reality, the entire chip-manufacturing supply chain is a vital component of the global economy. The next geopolitical flashpoint could even spark because of access to these chips. With that in mind, below are surging semiconductor stocks to consider.
Taiwan Semiconductor (TSM)
Known as the world’s largest contract chipmaker, Taiwan Semiconductor (NYSE:TSM) has unsurprisingly performed well this year. Since the beginning of January, TSM stock gained nearly 82% of equity value. One of the pioneers in advanced process technologies like 3 nanometer (nm), Taiwan Semiconductor – abbreviated as TSMC – caters to high-demand sectors like AI and 5G.
Just as well, TSM stock isn’t just a strong performer in the charts; it’s also delivering the goods in the financial statements. In the past four quarters, the tech specialist posted an average earnings per share of $1.32. This beat the analysts’ average estimate of $1.24, translating to a positive earnings surprise of 6.55%.
Now, the one issue with TSM stock is the valuation. Right now, shares trade at 37X trailing-year earnings and 14.34X trailing-year sales. In contrast, between the first quarter of 2023 to Q1 2024, the aforementioned multiples hit an average of 16.28X and 7.65X, respectively.
For fiscal 2024, analysts anticipate continued expansion, with EPS rising 22.16% to $6.34. Revenue could jump 22.1% to $84.74 billion. It’s one of the top surging semiconductor stocks.
NXP Semiconductors (NXPI)
Based in Netherlands, NXP Semiconductors (NASDAQ:NXPI) offers multiple chip-related products. Its main product portfolio includes microcontrollers and application processors. Fundamentally, NXP represents one of the leading providers of secure connectivity solutions for embedded applications. The company distinguishes itself through automotive chips, which are used for driver safety systems along with autonomous systems.
Since the start of the year, NXPI stock gained over 24% of equity value. However, as with Taiwan Semiconductor, the good news isn’t just focused on the charts. In the past four quarters, NXP posted an average EPS of $3.52. This figure beat out the average consensus view of $3.42, translating to an earnings surprise of just over 3%.
Of course, the boost in value comes at a cost. Right now, NXPI stock trades at 26.1X trailing-year earnings and 5.55X trailing-year revenue. In the past year, the metrics averaged 19.39X and 4.25X, respectively.
It must be said that analysts expect some softness in fiscal 2024. However, in the following year, EPS could rise 14.39% to $15.90. Sales might enjoy a 9% lift to $14.24 billion. It’s another solid idea for surging semiconductor stocks to consider.
ASML (ASML)
Another Dutch enterprise, ASML (NASDAQ:ASML) falls under the semiconductor equipment and materials industry. Per its public profile, ASML develops, produces, markets, sells and services advanced chip-making equipment systems. Specifically, the company has gained fame for its lithography tech, which facilitates the printing of complex designs on silicon wafers. It’s quite literally one of the most important companies in the world.
On a year-to-date basis, ASML stock gained over 48% of market value. That’s not surprising in the least. On a financial note, the semiconductor specialist posted an average EPS of $4.85 over the past four quarters. In contrast, analysts estimated that EPS would land at only $4.50. This performance translated to an earnings surprise of 8.2%.
Of course, with such a robust business, ASML stock does not offer a discount. Right now, shares trade hands at 56.18X earnings and 15.31X sales. However, the metrics averaged 35.61X and 10.8X, respectively, in the past year.
Experts see a modest bump in business in fiscal 2024. However, by fiscal 2025, revenue may jump to $39.92 billion. If so, that would represent a 32.6% lift, making ASML one of the surging semiconductor stocks to consider.
Microchip Technology (MCHP)
Headquartered in Chandler, Arizona, Microchip Technology (NASDAQ:MCHP) engages in the development, manufacturer and sales of smart, connected and secure embedded control solutions in the Americas and other international regions. Fundamentally, Microchip is one of the most relevant of surging semiconductor stocks thanks to its vast portfolio of microcontrollers, analog and mixed-signal solutions.
Now, it must be said that MCHP stock has only gained 6.4% YTD. However, in the past five years, it has more than doubled in value. Further, while the company hasn’t exactly delivered resoundingly strong financials, it posted an average EPS of $1.23 in the past four quarters. Analysts estimated earnings of $1.22 per share during that time, translating to an earnings surprise of 1.1%.
As with other names mentioned here, MCHP stock is trading at a relative premium, though not to as great of a magnitude. Right now, MCHP trades at 27.58X earnings and 6.89X sales. In the past year, the metrics sat at 20.69X and 5.61X, respectively.
Admittedly, both earnings and sales could take a bit hit by year’s end. However, a sizable recovery trek could begin in the following year, with EPS rising to $4.15 on sales of $6.86 billion.
Broadcom (AVGO)
One of the biggest names among surging semiconductor stocks, Broadcom (NASDAQ:AVGO) designs, develops and supplies various semiconductor devices. However, its main focus is on complex digital and mixed-signal solutions. Broadcom distinguishes itself with its strong presence in the wireless communication realm. It also serves the enterprise storage and broadband sectors.
Although it took a recent hit in terms of volatility, AVGO stock gained over 57% of market value in the year so far. Over the past 52 weeks, the company also doubled in value. Even with rising expectations, Broadcom posted an average EPS of $10.89. This figure beat out the average consensus view of $10.63, resulting in an earnings surprise of 2.45%.
Of course, AVGO stock comes at a premium. Shares trade at 75.17X earnings and 18.4X sales. In the past year, these metrics sat at 27.74X and 11.44X, respectively. That goes to show you the tremendous success that Broadcom achieved.
However, there could be more growth on the way. Fiscal 2024 earnings could rise almost 13% to $47.58 per share. Revenue may sese a 43.7% boost to $51.46 billion.
Marvell Technology (MRVL)
Based in Wilmington, Delaware, Marvell Technology (NASDAQ:MRVL) provides data infrastructure solutions, spanning multiple sectors from the data center to the network edge. Primarily, the company develops and scales complex System-on-a-Chip (SoC) architectures. It’s a key player in the storage, networking and connectivity ecosystems. In particular, it serves the cloud, enterprise and automotive markets.
With so many sectors integrating connectivity solutions, Marvell should see increased demand. Since the start of the year, MRVL stock gained 24%. Financially, it’s not as remarkable as some of the other enterprises. In the past four quarters, the company posted an average EPS of 36 cents, matching the consensus view. However, the earnings surprise came in at 0.4%.
Still, MRVL stock trades at a premium. Right now, the market prices shares at 54.35X earnings and 12.09X revenue. In the past year, these metrics sat at 32.37X and 8.67X, respectively. To be fair, experts see a rough road in the current fiscal year, with earnings and sales projected to dip modestly.
However, a recovery could materialize in the following year, with EPS jumping 74.64% to $2.41. Sales might land at $7.18 billion, up 32.8%. Thus, it’s one of the surging semiconductor stocks to monitor closely.
Micron Technology (MU)
Headquartered in Boise, Idaho, Micron Technology (NASDAQ:MU) designs, develops, manufactures and sells memory and storage products worldwide. It’s relevant among surging semiconductor stocks thanks to being a leading provider of memory and storage solutions. Fundamentally, the company distinguishes itself through various flash memory innovations, and serve applications presenting indirect solutions for emerging innovations like AI and autonomous mobility.
Since the beginning of the year, MU stock gained over 58% of market value. In the past year, it has more than doubled in price. Yet the underlying financial performance suggests more growth may be possible. Notably, in the past two quarters, Micron’s EPS averaged 52 cents. In contrast, analysts were looking for only 13 cents.
However, the valuation seems relatively reasonable. Currently, MU stock trades at 15.2X forward earnings, below the sector median 30.1X. While its price-to-sales multiple is elevated at near 7X, it’s still not bad for what the company brings to the table.
For fiscal 2024, analysts see a big rise in sales to $25.07 billion. If this projection holds true, it would mean a 61.3% lift from last year, making MU one of the surging semiconductor stocks to consider.
On the date of publication, Josh Enomoto 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.