The semiconductor industry is expected to grow due to rising chip demand, AI adoption, emerging technologies such as 5G and IoT, and ongoing research and development efforts.
Therefore, it could be wise to own fundamentally strong chip stocks Amkor Technology, Inc. (AMKR), ASE Technology Holding Co., Ltd. (ASX) and Applied Materials Inc. (AMAT).
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the prospects semiconductor industry.
The semiconductor market in the United States is critical to the worldwide technology industry. The Semiconductor Industry Association (SIA) reported that global semiconductor industry sales totaled $46.6 billion in October 2023, up 3.9% from $44.9 billion in September 2023. The World Semiconductor Trade Statistics (WSTS) has projected that global semiconductor sales will rise 13.1% year-over-year to $588.40 billion in 2024.
The global AI chip market is expected to reach $383.70 billion by 2032, growing at a 38.2% CAGR. The rapid growth of the AI chip market can be attributed to the increasing adoption of artificial intelligence in various industries such as healthcare, automotive, and manufacturing.
According to precedence research, the global semiconductor market is expected to reach $1.88 trillion by 2032, with a CAGR of 12.3%. Investors’ interest in chip stocks is evident from the VanEck Vectors Semiconductor ETF’s (SMH) 13.6% returns over the past three months.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Semiconductor & Wireless Chip stocks, starting with the third stock.
Stock #3: Amkor Technology, Inc. (AMKR)
AMKR is a leading semiconductor packaging and test services provider, including several services, such as design, testing, and packaging for semiconductor devices. Its product line includes a variety of packages used in networking, computing, storage, mobile consumer electronics, and other fields.
AMKR’s forward EV/Sales of 1.18x is 58.7% lower than the industry average of 2.86x. Its forward EV/EBITDA of 6.95x is 53.4% lower than the industry average of 14.90x.
AMKR’s trailing-12-month ROTA of 6.04% is significantly higher than the industry average of 0.31%. Its trailing-12-month ROCE of 11.09% is 771.8% higher than the industry average of 1.27%.
For the fiscal third quarter ended September 30, 2023, AMKR achieved a gross profit of $282.75 million and an operating income of $166.60 million. Its net income for the quarter amounted to $133.45 million and the company reported EPS of $0.54. Additionally, the company’s EBITDA reached $333 million.
The company reported total current liabilities of $1.60 billion as of September 30, 2023, compared to total current liabilities of $1.66 billion as of December 31, 2022.
The consensus revenue estimate of $6.89 billion for the year ending December 2024 represents a 7% increase year-over-year. Its EPS is expected to grow at 46% year-over-year to $2.03 for the same period. It surpassed EPS estimates in three of four trailing quarters. AMKR’s shares have gained 35.1% over the past three months to close the last trading session at $30.26.
AMKR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMKR also has an A grade for Momentum and a B for Value and Sentiment. It is ranked #15 out of 91 stocks in the Semiconductor & Wireless Chip industry. Click here for the additional POWR Ratings for Growth, Stability and Quality for AMKR.
Stock #2: ASE Technology Holding Co., Ltd. (ASX)
Headquartered in Kaohsiung, Taiwan, ASX and its subsidiaries provide semiconductor packaging, testing, and electronic manufacturing services in the United States, Taiwan, Asia, Europe, and internationally.
ASX’s forward EV/Sales of 1.20x is 57.9% lower than the industry average of 2.86x. Its forward EV/EBIT of 17.08x is 14.1% lower than the industry average of 19.89x.
ASX’s trailing-12-month ROTA of 5.35% is significantly higher than the industry average of 0.31%. Its trailing-12-month ROCE of 12.83% is 909.2% higher than the industry average of 1.27%.
ASX’s total net revenues for the fiscal third quarter that ended September 30, 2023, came in at NT$154.17 billion ($4.90 billion). Its net income attributable to ASX and EPS came in at NT$8.78 billion (279.34 million) and NT$2, respectively. Its total current assets came in at NT$292.69 billion ($9.30 billion), compared to NT$271.03 billion ($8.61 billion) as of June 30, 2023.
Additionally, its net cash generated from operating activities rose 12.1% year-over-year to NT$20.88 billion ($663.20 million).
Analysts expect ASX’s revenue to increase 12.4% year-over-year to $21.08 billion for the year ending December 2024. Its EPS is expected to grow 48.7% year-over-year to $0.74 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 33.8% over the past year to close the last trading session at $8.59.
It’s no surprise that ASX has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Momentum and a B for Sentiment. It is ranked #13 in the same industry.
Beyond what is stated above, we’ve also rated ASX for Growth, Stability and Quality. Get all ASX ratings here.
Stock #1: Applied Materials Inc. (AMAT)
AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates through three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.
AMAT’s forward non-GAAP P/E of 19.45x is 17% lower than the industry average of 23.44x. Its forward EV/EBIT of 16.74x is 15.8% lower than the industry average of 19.89x.
AMAT’s trailing-12-month ROTA of 22.31% is significantly higher than the 0.31% industry average. Its trailing-12-month ROCE of 48.04% is significantly higher than the 1.27% industry average.
During the fourth quarter that ended October 29, 2023, AMAT reported net sales of $6.72 billion. Its adjusted gross profit rose 2.2% from the year-ago value to $3.18 billion. In addition, the company’s adjusted net income and adjusted EPS increased 2.6% and 4.4% year-over-year to $1.79 billion and $2.12, respectively.
Street expects AMAT’s revenue to come in at $26.15 billion for the year ending October 2024. Its EPS is expected to come in at $7.67 for the same period. It surpassed EPS estimates in all four trailing quarters. Shares of AMAT have gained 50.4% over the past year to close the last trading session at $149.31.
AMAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #8 in the same industry. It has an A grade for Momentum and a B for Quality. To see additional AMAT’s ratings for Growth, Value, Stability and Sentiment, click here.
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AMAT shares were trading at $149.02 per share on Friday afternoon, down $0.29 (-0.19%). Year-to-date, AMAT has declined -8.05%, versus a -1.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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