It won’t be an exaggeration to say that the semiconductor industry is the backbone of advancements in the tech sector. Deloitte predicts the current year will be quite favorable for the semiconductor industry. The industry saw a 9.4% YoY sales decline in 2023 to $520 billion. In 2024, the industry sales are expected to reach a record $588 billion, up from the previous $574 billion in 2022.
Despite the dip in sales, the semiconductor industry performed well in 2023 and is still gaining in the current year. VanEck Semiconductor ETF (SMH) was up nearly 100% in 2023, and iShares Semiconductor ETF (SOXX) gained close to 80%. At the time of writing on February 23, the former has gained 24.18% year-to-date (YTD), while the latter is up 15.22%.
Between 2023 and 2032, the semiconductor market is expected to grow at a compound annual growth rate (CAGR) of nearly 12.3% and reach $1.8 trillion by the end of the forecasted period.
Semiconductor equipment stocks include companies that manufacture tools to make computer chips in clean rooms, testing devices for both production and research and fixtures to support the semiconductor fabrication facility. According to Grand View Research, the semiconductor equipment market is expected to reach $110.5 billion in 2024 from $103.1 billion in 2023.
Supply chain issues have been haunting the semiconductor industry since the COVID-19 pandemic. However, some of the major players in the industry believe that it is on the way to its recovery. One of the big names in the semiconductor equipment space, ASML Holding N.V. (NASDAQ:ASML)’s President & Chief Executive Officer, Peter Wennink, said the following at the company’s latest earnings call:
“Industry end market inventory levels continue to improve, moving towards more healthy levels. Lithography 2 utilization levels are still running lower than normal but are now improving in both logic and memory. We expect utilization levels to continue to improve over the course of this year.
However, Peter Wennink also warned that market uncertainty persists because of several global macroeconomic concerns. Keeping that in mind, apart from ASML Holding N.V. (NASDAQ:ASML), some of the best semiconductor equipment stocks include Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research Corporation (NASDAQ:LRCX).
11 Best Semiconductor Equipment Stocks to Invest In
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.
Our Methodology
For this article, we identified semiconductor equipment stocks with a market capitalization of $3 billion and above trading on the NYSE and NASDAQ. For that purpose, we used the Yahoo Finance stocks screener. Next, we chose the 11 best semiconductor equipment stocks based on their hedge fund sentiment. The stocks are listed in ascending order of the number of their hedge fund investors as of the fourth quarter of 2023. The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Nova Ltd. (NASDAQ:NVMI) is an Israeli company that develops and sells dimensional and materials metrology solutions.
According to Insider Monkey’s database that tracks 933 elite hedge funds, hedge fund sentiment was positive toward Nova Ltd. (NASDAQ:NVMI) as 21 hedge funds had investments in the stock in Q4 at a combined stake value of $470.168 million, up from 18 at a combined stake value of $254.166 million in the previous quarter. Phill Gross And Robert Atchinson’s Adage Capital Management owned 1.19 million shares worth $164.013 million and was the most significant investor in the company.
On February 16, Benchmark raised the price target on Nova Ltd. (NASDAQ:NVMI)’s stock to $187 from $150 and kept a Buy rating on the shares after the company announced strong financial Q4 results.
Nova Ltd. (NASDAQ:NVMI) is one of the best semiconductor equipment stocks to invest in, along with Applied Materials, Inc. (NASDAQ:AMAT), Lam Research Corporation (NASDAQ:LRCX), and ASML Holding N.V. (NASDAQ:ASML).
Onto Innovation Inc. (NYSE:ONTO) was established in 2019 after Rudolph Technologies, Inc. and Nanometrics Incorporated merged. The company develops, manufactures, and distributes process control solutions and inspection systems for the semiconductor industry.
On February 8, Onto Innovation Inc. (NYSE:ONTO) posted its Q4 non-GAAP EPS of $1.06, surpassing the analysts’ estimates by $0.05. The revenue of $219 million topped the estimates by $8.12 million.
Onto Innovation Inc. (NYSE:ONTO) was mentioned in TimesSquare Capital Management’s second-quarter investor letter. Here is what it said:
“Serving to partially counter that weakness, Onto Innovation Inc. (NYSE:ONTO) offers process controls used to perform macro defect inspections for semiconductor manufacturing. Strong results were coupled with higher forward guidance. Management noted the benefit from research & development spending on increased chip complexity. Onto rose 32% and we trimmed the position on this strength.”
IPG Photonics Corporation (NASDAQ:IPGP) is a Massachusetts-based company that is engaged in the development and manufacturing of fiber lasers, fiber amplifiers, and diode lasers.
On January 25, Seaport Research initiated coverage of IPG Photonics Corporation (NASDAQ:IPGP)’s stock with a Buy rating and a $125 price target.
In the fourth quarter, 25 hedge funds held a stake in IPG Photonics Corporation (NASDAQ:IPGP)’s stock, up from 23 in the previous quarter. With over 4.257 million shares worth $462.124 million, Jean-Marie Eveillard’s First Eagle Investment Management was the top investor in the company.
IPG Photonics Corporation (NASDAQ:IPGP) takes the ninth spot on our list of the best semiconductor equipment stocks to invest in.
Amkor Technology, Inc. (NASDAQ:AMKR) is an Arizona-based company that is engaged in providing turnkey packaging and test services to its clients.
In the fourth quarter, Amkor Technology, Inc. (NASDAQ:AMKR) announced a GAAP EPS of $0.48, surpassing the estimates by $0.07. The revenue of $1.75 billion topped the estimates by $30 million.
On February 20, Amkor Technology, Inc. (NASDAQ:AMKR) declared a quarterly dividend of $0.07875, payable by April 1 to the shareholders of record on March 12. At the time of writing on February 23, the stock’s dividend yield was 1.02%.
On February 6, DA Davidson raised the price target on Amkor Technology, Inc. (NASDAQ:AMKR)’s stock to $35 from $30 and maintained a Buy rating on the shares. The analyst made a note of the better-than-expected Q4 results.
Axcelis Technologies, Inc. (NASDAQ:ACLS) manufactures equipment for the semiconductor industry, including ion implantation products. The company takes the seventh spot on our list of best semiconductor equipment stocks to invest in.
According to TipRanks, over the last three months, 6 Wall Street analysts covered Axcelis Technologies, Inc. (NASDAQ:ACLS), and 3 kept a Buy rating on the shares. At the time of writing on February 23, the average price target of $152.50 represented an upside of 36.71%.
On February 7, Axcelis Technologies, Inc. (NASDAQ:ACLS) announced its Q4 earnings result with a GAAP EPS of $2.15, which beat the estimates by $0.11. The revenue jumped 16.6% YoY to $310.29 million, topping the estimates by $11.66 million.
According to Insider Monkey’s database, 28 hedge funds held a stake in Axcelis Technologies, Inc. (NASDAQ:ACLS)’s stock in the fourth quarter. In the quarter, Israel Englander’s Millennium Management massively upped its stake in the stock by 299% to 509,824 company shares worth $66.119 million, representing 0.02% of the investment portfolio.
Teradyne, Inc. (NASDAQ:TER) serves the semiconductor industry by developing, manufacturing, and selling automation equipment.
On January 22, Teradyne, Inc. (NASDAQ:TER) declared a quarterly dividend of $0.12, payable by March 15 to the shareholders of record on February 16. At the time of writing on February 23, the stock’s dividend yield was 0.48%.
According to Insider Monkey’s database that tracks 933 elite hedge funds, 33 hedge funds held a stake in Teradyne, Inc. (NASDAQ:TER)’’s stock in the fourth quarter. The top investor in the company was Catherine D. Wood’s ARK Investment Management, which increased its stake by 6% to 1.5 million shares worth $162.829 million.
On February 6, Citi analyst Atif Malik raised the price target on Teradyne, Inc. (NASDAQ:TER)’s stock to $112 from $98 and kept a Buy rating on the shares.
Applied Materials, Inc. (NASDAQ:AMAT), Lam Research Corporation (NASDAQ:LRCX), and ASML Holding N.V. (NASDAQ:ASML) are some of the best semiconductor equipment stocks to invest in besides Teradyne, Inc. (NASDAQ:TER).
