We recently compiled a list of the 12 Small-Cap Semiconductor Stocks to Buy Now.In this article, we are going to take a look at where Veeco Instruments Inc. (NASDAQ:VECO) stands against the other small-cap semiconductor stocks.
According to Deloitte's 2025 global semiconductor industry outlook, released on February 4, 2025, the semiconductor industry is set for a much better 2025, with projected sales reaching $697 billion, representing an 11.2% year-over-year growth. This projection suggests the industry is on track to achieve the widely accepted goal of $1 trillion in sales by 2030. Deloitte analysts also highlight that "average" chip stock performance over the past two years has been a "tale of two markets": Companies involved in the generative AI chip market have outperformed, while those in automotive, computer, smartphone, and communications semiconductors have lagged.
This growth story aligns with the significant expansion the semiconductor industry has experienced over the past decade, largely driven by advancements in artificial intelligence and high-performance computing. The entire supply chain, from lithography to equipment and packaging, has benefited from this surge, resulting in unprecedented demand for advanced semiconductors. While the majority of investments in these technologies have come from large-cap companies, small-cap companies are often leading the charge on the innovation front within the emerging technologies, and at the same time, offer diversification away from the crowded large-and-mega-cap stocks.
In November 2024, Francis Gannon, Co-chief Investment Officer at Royce Investment Partners, discussed his thesis on small-caps during an interview with Yahoo Finance. He noted that small-caps have been out of favor for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost the small-cap companies, describing this shift as nothing short of a "revolution."
In summary, semiconductors represent a long-term investment opportunity, with the small-cap segment garnering attention as a hot topic in recent months. Exciting return opportunities are anticipated in the coming years. With that, let's explore the top 12 opportunities in the small-cap semiconductor space that we have identified for you.
Our Methodology
To identify the 12 small-cap semiconductor stocks to buy now, we screened U.S. listed semiconductor companies with a market capitalization between $300 million and $2 billion. The stocks were then arranged in ascending order of the number of hedge fund holders for each company, based on hedge fund data from Insider Monkey’s database as of Q3 2024.
Note: All pricing and market cap data is as of market close on February 7.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A one of a kind semiconductor process equipment machine with various parts and components.
Veeco Instruments Inc. (NASDAQ:VECO) is a manufacturer of advanced process equipment and solutions for the semiconductor and advanced packaging industries. The company specializes in manufacturing systems for the deposition of thin films, which are critical in the production of high-performance electronic devices. Its product portfolio includes ion beam, laser annealing, single wafer wet processing, molecular beam epitaxy (MBE) systems, atomic layer deposition (ALD) systems, and other advanced manufacturing technologies. The company's customers are mainly concentrated in four end-markets: semiconductor, compound semiconductor, data storage, and scientific & other.
On January 6, 2025, Citi analyst upgraded Veeco Instruments Inc. (NASDAQ:VECO)’s rating from Neutral to Buy, setting a target price of $33. The analyst believes that the company is nearing a cyclical low, indicating a potential recovery from current levels. His favourable outlook was based on the company’s expanding Serviceable Available Market (SAM) and advancements in laser annealing and nanosecond annealing technologies, which are expected to benefit from the industry’s transition towards gate-all-around (GAA) transistors, backside power, and high bandwidth memory (HBM) technologies. AI-related semiconductor revenue contribution to Veeco Instruments Inc. (NASDAQ:VECO)’s total revenue is projected to double from 10% in 2024 to 20% in 2025, driven by advancements in wet processing technology. Additionally, the analyst believes that the company’s current valuation already accounts for a potential sharp decline in the data storage segment anticipated for 2025.
Overall VECO ranks 2nd on our list of the small-cap semiconductor stocks to buy. While we acknowledge the potential of VECO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VECO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
