In this article, we will take a look at the 10 best semiconductor equipment stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Semiconductor Equipment Stocks to Buy.
"This Is Probably The First Year Of What Could Be A 5 Or 10 Year Investment Cycle"
On April 19 BofA Securities' senior semiconductor analyst, Vivek Arya, appeared in an interview on CNBC where he talked about the semiconductor space and how advancements in artificial intelligence have the potential to play a key role in driving its growth. Arya noted that the adoption of AI applications is still in an early stage and 2023 "is probably the first year of what could be a 5 or 10 year investment cycle". Arya noted that managing AI workloads requires high levels of computational power and resources. He talked about how NVIDIA Corporation (NASDAQ:NVDA) is now competing with cloud services providers such as Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) for chip market share.
Vivek Arya noted that though NVIDIA Corporation (NASDAQ:NVDA) is at the forefront of the AI chip trade, Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG) also have their own AI chips, Inferentia and TPU respectively.
Amazon's (NASDAQ:AMZN) AWS Inferentia offers native support for PyTorch and Tensorflow, two of the most widely used deep learning frameworks for building production systems. Alphabet Inc. (NASDAQ:GOOG) has the Tensor Processing Unit (TPU), an AI accelerator for deep learning applications. Moreover, Microsoft Corporation (NASDAQ:MSFT) is also developing its own AI chip. On April 18, Reuters reported that Microsoft Corporation (NASDAQ:MSFT) has been working on its AI chip since 2019 and it is now in a testing phase.
Vivek Arya talked about chip pricing and how the increasing adoption of AI by cloud services providers is calling for more high performance semiconductors. He said that though NVIDIA's (NASDAQ:NVDA) new chips are up to 3 times more expensive than the company's previous generation products, they are also offering higher performance and increased energy efficiency. Arya further spoke about the success of ChatGPT and how it has "created this cycle of adoption that is just kicking off". Here is what Vivek Arya said:
"It's not just the top three or four hyperscalers, you know, remember each of them used to be a startup at one point and they displaced the incumbent. And now what we have in the valley is three or four hundred startup companies that are trying to develop new and innovative applications with this new technology. So when they do that they need compute power that is available on the cloud and that is where the need for GPUs, we think, can grow even faster than what we had anticipated last year."
As AI adoption increases, the need for more sophisticated and powerful semiconductors is expected to grow. Moreover, as cloud services providers start making in-house chips for high performance computing applications, the semiconductor equipment industry is poised to exhibit strong growth. Some of the best semiconductor equipment stocks to buy now include ASML Holding N.V. (NASDAQ:ASML), Lam Research Corporation (NASDAQ:LRCX), and Applied Materials, Inc. (NASDAQ:AMAT). Let's now discuss these stocks, among others, in detail below.
We screened for semiconductor equipment stocks using Yahoo Finance’s stock screener. Each stock's hedge fund sentiment was then sourced from Insider Monkey’s database of 900 elite money managers. We narrowed down our selection to stocks that were the most popular among hedge funds and ranked them in ascending order of the number of hedge funds that have stakes in them.
On February 17, Deutsche Bank analyst Ross Seymore raised his price target on indie Semiconductor, Inc. (NASDAQ:INDI) to $15 from $10 and maintained a Buy rating on the shares.
Shares of indie Semiconductor, Inc. (NASDAQ:INDI) have surged 43.52% since the beginning of 2023, as of April 26. The stock is placed tenth among the best semiconductor equipment stocks to buy now.
23 hedge funds held stakes in indie Semiconductor, Inc. (NASDAQ:INDI) at the close of the fourth quarter of 2022. The total value of these stakes amounted to $109.4 million. As of December 31, Soros Fund Management is the top investor in the company and has a position worth $51 million.
Baron Funds made the following comment about indie Semiconductor, Inc. (NASDAQ:INDI) in its Q4 2022 investor letter:
“indie Semiconductor, Inc. (NASDAQ:INDI) is a fabless designer, developer, and marketer of automotive semiconductors for advanced driver assistance systems and connected car, user experience, and electrification applications. We added to our position in the quarter, taking advantage of a sell-off in the stock when the company announced a capital raise to fund future acquisitions. We continue to believe that the automotive semiconductor vertical is attractive as silicon content in cars increases over time and that indie remains on track to deliver profitability by the end of this year while sustaining its rapid pace of growth. Given their track record, we also trust indie’s management to deploy its recently raised capital into an accretive acquisition that enhances the company’s long-term growth prospects.”
Axcelis Technologies Inc. (NASDAQ:ACLS) is involved in the design, manufacture, and servicing of capital equipment for the semiconductor industry. Shares of Axcelis Technologies Inc. (NASDAQ:ACLS) have gone up by 104.16% over the past 6 months, as of April 26.
On February 27, Loop Capital analyst Scott Graham took coverage of Axcelis Technologies Inc. (NASDAQ:ACLS) with a Buy rating and a $150 price target. The stock is one of the best semiconductor equipment stocks to buy now.
24 hedge funds disclosed having stakes in Axcelis Technologies Inc. (NASDAQ:ACLS) at the end of Q4 2022. The total value of these stakes amounted to $319 million. As of December 31, Rima Senvest Management is the largest shareholder in the company and has a stake worth $141.7 million.
Photronics, Inc. (NASDAQ:PLAB) is one of the largest semiconductor photomask manufacturers and distributors in the world. At the close of the fourth quarter of 2022, 25 hedge funds were bullish on Photronics, Inc. (NASDAQ:PLAB) and disclosed stakes worth $104.2 million in the company. Of those, Two Sigma Advisors was the top stockholder and disclosed a position worth $12.9 million.
This April, Northland analyst Gus Richard revised his price target on Photronics, Inc. (NASDAQ:PLAB) to $18 from $21 and maintained an Outperform rating on the shares.
Photronics, Inc. (NASDAQ:PLAB) is one of the best semiconductor equipment stocks to buy now and is currently trading at a compelling valuation. As of April 26, the stock is trading at a TTM PE ratio of 8x.
Entegris, Inc. (NASDAQ:ENTG) is a leading manufacturer and supplier of micro contamination control products, specialty chemicals, and advanced materials for the semiconductor industry. The stock is placed seventh on our list of the best semiconductor equipment stocks to buy now and has gained 11.45% year-to-date, as of April 26.
On April 17, Deutsche Bank updated its price target on Entegris, Inc. (NASDAQ:ENTG) to $90 from $95 and maintained a Buy rating on the shares.
At the close of Q4 2022, Entegris, Inc. (NASDAQ:ENTG) was spotted on 28 hedge funds' portfolios. These funds held positions worth $1.02 billion in the company. As of December 31, Select Equity Group is the leading investor in the company and has a stake worth $491.2 million.
Brown Capital Management made the following comment about Entegris, Inc. (NASDAQ:ENTG) in its Q4 2022 investor letter:
“Entegris, Inc. (NASDAQ:ENTG) is a world-class supplier of advanced materials and process solutions for the semiconductor, life-sciences and other high-tech industries. Semiconductors have become more relevant as the world digitalizes. These transformative technologies require advanced chips that consume more materials and are less tolerant of contaminants during manufacturing. Entegris operates at this intersection of material intensity and material purity, which has allowed it to grow 50% faster than the semiconductor industry over the past five years. Entegris is the largest independent semiconductor materials supplier with a unique set of assets that boost manufacturing yields, saving customers time and money. Consumables comprise 80% of sales, making it less subject to the industry’s volatile capital-expenditure swings. The company has a myriad of competitive advantages including scale, reputation and deep materials expertise that create a solid competitive moat.”
At the end of the fourth quarter of 2022, 30 hedge funds were long Ambarella, Inc. (NASDAQ:AMBA) and held positions worth $416.3 million in the company. Of those, Point72 Asset Management is the dominant shareholder in the company and has disclosed a position worth $45.8 million.
Wall Street is bullish on Ambarella, Inc. (NASDAQ:AMBA). This April, Imperial Capital analyst Brian Ruttenbur upgraded Ambarella, Inc. (NASDAQ:AMBA) to Outperform from In-Line and maintained his $95 price target on the shares.
As of April 26, Ambarella, Inc. (NASDAQ:AMBA) has gone up by 14.99% over the past 6 months. The stock is one of the best semiconductor equipment stocks to buy now, according to hedge funds.
