In this article, we discuss 10 best small-cap semiconductor stocks to buy now. To skip the detailed analysis of the semiconductor market, go directly to
5. indie Semiconductor, Inc. (NASDAQ:INDI)
Market Cap as of September 22: $919.43 million
indie Semiconductor, Inc. (NASDAQ:INDI) is an American semiconductor and equipment manufacturer. indie Semiconductor, Inc. (NASDAQ:INDI) has been exceeding the market expectation and targets in the past few quarters due to its design line of Lidar, radar, ultrasound, and computer vision in addition to wireless charging, advanced lighting, and power management. The company’s Q4 2021, Q1 2022, and Q2 2022 revenues surged up by 185%, 165%, and 181%, respectively. Due to the market transitioning to EVs, the company saw massive growth in the first half of the year, despite US auto sales dropping by 17%. The silicon content in autos is expected to grow from $500 per vehicle to $7000 in the next decade, which bodes well for indie Semiconductor, Inc. (NASDAQ:INDI) in the long-term.
On July 20, Deutsche Bank analyst Ross Seymore maintained a Buy rating on indie Semiconductor, Inc. (NASDAQ:INDI) with a $10 price target.
Here is what Baron Funds has to say about indie Semiconductor, Inc. (NASDAQ:INDI) in its Q3 2021 investor letter:
“Indie Semiconductor, Inc. is a fabless designer, developer, and marketer of automotive semiconductors for automated driver assistance systems, user experience, and electrification applications. Indie leverages its cross-domain semiconductor expertise in analog, processing, and power chips to integrate multiple chips and capabilities into a single package and offer its customers lower cost products in a smaller form-factor. Indie has strong market share in applications such as Apple CarPlay and ultrasonic parking assist with multiple contracts ramping in the coming quarters in applications such as advanced lighting controls, telematics, and electrification. The stock rose on increasing investor recognition of the longer-term opportunity for the company, especially in light of the current automotive semiconductor supply shortage. Semiconductor content in cars is expected to grow substantially over the coming decade as automated safety features and electrification penetrate an increasing percentage of vehicles.”
4. Photronics, Inc. (NASDAQ:PLAB)
Market Cap as of September 22: $925.34 million
Photronics, Inc. (NASDAQ:PLAB) is one of the world’s largest semiconductor photomask suppliers. Around the end of August, Photronics, Inc. (NASDAQ:PLAB) posted impressive FQ3 results. The revenue surged 8% sequentially to $219.9 million. Net income was recorded at $31.2 million, representing an 82% YoY growth. Most of the revenue for the company is generated from the IC segment, which was up 11% sequentially and 37% on a YoY basis to $161.3 million. However, due to its weak Q4 guidance, the stock has taken a plunge and is trading at the lower end of its 52-week range of $12.18 – $25.81 at $15.00 as of September 23. At this price, the stock seems to provide an attractive buying opportunity.
On August 31, DA Davidson analyst Thomas Diffely reiterated a Buy rating on Photronics, Inc. (NASDAQ:PLAB) and lowered the price target to $28 from $30. The analyst noted that the company had a record high Q3 revenue and strong end market demand but weak Q4 guidance due to market uncertainty. He added that he believes the rough patch will be temporary.
Here is what Meridian Funds specifically said about Photronics, Inc. (NASDAQ:PLAB) in its Q2 2022 investor letter:
“Photronics, Inc. (NASDAQ:PLAB) is a semiconductor capital equipment company and a leader in photomasks, a critical component in the manufacturing of semiconductors and flat panel displays. The company’s earnings declined from a peak in 2015 due in part to a long-term trend within the semiconductor industry away from ASICs to FPGAs, which, to put it simply, allowed more semiconductor functionality to be made with fewer photomasks. Earnings also were pressured by significant investments made by Photronics to build out capacity in China, which took time to ramp up to profitability. We invested in the company in the second quarter of 2021 due to our thesis that 1) increased semiconductor content in a wide variety of products would revitalize the ASIC market; 2) its China investments would pay off, partially helped by an emerging trend toward localization of semiconductor production; and 3) Photronics is a well-managed industry leader with a strong balance sheet and improving return on capital. Despite macroeconomic worries about the semiconductor industry, the company’s stock advanced on news that it had exceeded earnings forecasts for the fourth consecutive quarter, with projections for 2022 earnings per share rising to $1.90 per share, up from less than $1 at the time of our investment. We added to our position in Photronics during the quarter when the strong results were initially not recognized. We believe current secular trends should remain intact for several years, however, we are conscious of the potential for near-term macro-driven volatility.”
3. Xperi Holding Corporation (NASDAQ:XPER)
Market Cap as of September 22: $1.52 billion
Xperi Holding Corporation (NASDAQ:XPER) is an American technology company that offers consumer and entertainment product licensing. The company provides its semiconductor packaging technology to some big names, such as Intel and Samsung.
Xperi Holding Corporation (NASDAQ:XPER) has shown significant growth and stability in the past few years. The company’s IP licensing business holds more than 11,000 patents and generates an average recurring revenue of $375 million. Between 2016 and 2020, Xperi Holding Corporation (NASDAQ:XPER) saw revenue and FCF growth of 4.2% and 2.95%, respectively. There was a slight dip in revenues and FCF in 2021 to $878 million from $892 million in the prior year due to R&D expenses. However, the company has since rebounded as it recorded a $925 million revenue LTM.
Xperi Holding Corporation (NASDAQ:XPER) is a small-cap dividend stock with a yield of 1.36% as of September 22. The latest quarterly dividend of $0.05 was paid out on September 19 to the shareholders of record as of August 29.
2. SiTime Corporation (NASDAQ:SITM)
Market Cap as of September 22: $1.711 billion
SiTime Corporation (NASDAQ:SITM) is a California-based semiconductor company that provides silicon timing systems to its customers.
SiTime Corporation (NASDAQ:SITM) has the perfect opportunity for the fast-growing 5G market through its Communications & Enterprise end market. The company can capture a significant part of the $48 billion 5G market. Furthermore, SiTime Corporation (NASDAQ:SITM) also caters to the automotive, industrial, and aerospace sectors. The global IoT automotive market alone is expected to grow at a CAGR of 25.5% to $286 billion in 2028, which proves to be a significant growth prospect for the company.
The most significant advantage that SiTime Corporation (NASDAQ:SITM) holds is its supply during these harsh economic conditions and supply constraints. The company has increased its inventory by $4 million from the previous quarter.
1. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Market Cap as of September 22: $1.93 billion
Axcelis Technologies, Inc. (NASDAQ:ACLS) is an American semiconductor equipment and materials company. It produces ion implantation and other processing equipment, including curing systems used to fabricate semiconductor chips.
The most significant chunk of revenue for Axcelis Technologies, Inc. (NASDAQ:ACLS) comes from the ion implantation segment at 97%. The total addressable market for ion implantation has more than doubled to $2.25 billion in the last three years. In addition, the company has announced its new Axcelis Asia Operations Center to increase the production of ion implantation systems. The new 44,000 square feet facility is set to expand Axcelis Technologies, Inc. (NASDAQ:ACLS)’s market to South Korea and the rest of Asia.
On August 4, Stifel analyst Patrick Ho maintained a Buy rating on Axcelis Technologies, Inc. (NASDAQ:ACLS) and raised his price target to $93 from $89. The analyst mentioned that he became more “encouraged” on the company’s near-term prospects and position heading into 2023 after the company’s Q2 conference call.
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On September 8, at the Evercore ISI Technology, Media & Telecom Conference, Wolfspeed, Inc. (NYSE:WOLF) Chief Executive Gregg Lowe claimed that the semiconductor market is in the early stages of a once-in-a-generation technology shift. He said:
“The market is exploding from a growth perspective… This isn’t something that happens all the time in semiconductors. This is an enormous shift that happens about every 50 years. The last time there was a shift like this was when digital transistors went from bipolar to CMOS (complementary metal-oxide semiconductor).”
The global semiconductor market size was $527.88 billion in 2021, which is expected to grow to $1.38 trillion by 2029 at a CAGR of 12.2%. The most significant growth in the market is owed to the surging use of consumer electronics and the development of artificial intelligence, the Internet of Things, and machine learning.
Despite the growing demand for semiconductors in the market, the industry saw a partial decline recently due to supply constraints and labor shortages. Deloitte claims that the labor shortage might become more severe due to the addition of increased semiconductor manufacturing facilities outside China, Taiwan, and South Korea. The deficits will be due to increased demand for software skills to program and integrate chips. According to a report, semiconductor sales were $50.2 billion in June 2022 and declined by 2.3% in July to $49 billion. However, the semiconductor industry saw a 0.5% growth in sales in Q2 2022 from Q1. The current shortages in sales have been the lowest since the US-China trade war in 2019.
Despite the shortages and declining sales, there are some small-cap semiconductor stocks that investors need to take a look at. These companies are on their way to overcome the industry’s current obstacles and maintaining secular tailwinds for the semiconductor market. Investors are usually focused on mainstream players like Broadcom Inc. (NASDAQ:AVGO), NVIDIA Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD). However, we discuss small-cap semiconductor stocks in this article.
Our Methodology
After carefully assessing several small-cap semiconductor stocks, we chose these 10 stocks due to their future growth catalysts, positive analyst ratings, and strong historical data. All of these companies have a market cap below $2 billion as of September 22, 2022. If you are interested in large-cap semiconductor stocks, please see 10 best cheap semiconductor stocks to buy.
Best Small-Cap Semiconductor Stocks to Buy Now
10. SkyWater Technology, Inc. (NASDAQ:SKYT)
Market Cap as of September 22: $310.69 million
SkyWater Technology, Inc. (NASDAQ:SKYT) is an American semiconductor company that serves customers in computation, aerospace, defense, automotive and transportation, bio-health, consumer, and IoT sectors.
SkyWater Technology, Inc. (NASDAQ:SKYT) went public in April 2021 and raised $97 million in an IPO at a per share price of $14. Since then, the company has been slowly growing. In July, the company announced the development of its U.S. semiconductor R&D and production facility in Indiana through a public-private partnership with the state and Purdue University to pursue CHIPS for America Act funding, valued at $1.8 billion. The facility’s primary purpose is to ensure the growth of semiconductor capabilities in the US and create a stable and resilient supply chain.
On August 16, Needham analyst Rajvindra Gill maintained a Buy rating on SkyWater Technology, Inc. (NASDAQ:SKYT) and increased the price target to $20 from $15. He stated that the company’s Q2 revenue is about to reach a major breakeven point, and its gross margins are expected to improve once the inflation slows down in the next year.
Broadcom Inc. (NASDAQ:AVGO), NVIDIA Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD) are some of the significant semiconductor stocks, in addition to SkyWater Technology, Inc. (NASDAQ:SKYT).
9. Magnachip Semiconductor Corporation (NYSE:MX)
Market Cap as of September 22: $480.021 million
Magnachip Semiconductor Corporation (NYSE:MX) is a Luxembourg-based mixed-signal semiconductor and display solutions company that serves communications, consumer, industrial, and automotive applications. On September 12, Magnachip Semiconductor Corporation (NYSE:MX)’s management announced that it is increasing its previous $75 million stock repurchase program to $87.5 million, while $37.5 million worth of shares had already been repurchased.
Magnachip Semiconductor Corporation (NYSE:MX)’s involvement in accelerating the global silicon power MOSFET market seems to be its most significant growth catalyst. On September 6, the company announced its third-generation 200V medium voltage Metal-Oxide-Semiconductor Field-Effect Transistors for Light Electric Vehicles (LEV) motor controllers and industrial power supplies. From the previous 100V MV MOSFET, the capacitance was reduced by 50%. Magnachip Semiconductor Corporation (NYSE:MX)’s MV MOSFET product line now ranges from 40V to 200V. According to research by Omdia, the global silicon power MOSFET market’s growth rate is expected to be 11.5% for the automotive sector and 9.6% for the industrial sector.
According to the Insider Monkey database, 27 hedge funds held stakes in Magnachip Semiconductor Corporation (NYSE:MX), with a combined value of $210.848 million as Q2 2022. Toronado Partners remained the most prominent shareholder, with 2.57 million shares worth $37.92 million.
Here is what Altron Capital Management has to say about Magnachip Semiconductor Corporation (NYSE:MX) in its Q4 2021 investor letter:
“MagnaChip Semiconductor Corp. (NYSE:MX). While the previous buyout offer from Wise Road Capital did not go through as many expected, the company is still in talks with other potential buyers. Furthermore, the company announced a USD 75 million share buyback, which represents a significant percentage of the company’s shares. While we do not generally enter positions with the anticipation of a buyout, it is the case that a MagnaChip acquisition will be the most likely outcome.”
8. Navitas Semiconductor Corporation (NASDAQ:NVTS)
Market Cap as of September 22: $736.356 million
Navitas Semiconductor Corporation (NASDAQ:NVTS) is an Ireland-based semiconductor company that produces GaN and SiC power integrated circuits across several countries. Investment advisories Needham and Rosenblatt reiterated Buy ratings on Navitas Semiconductor Corporation (NASDAQ:NVTS) in September, assigning price targets of $8 and $12, respectively.
In mid-August, Navitas Semiconductor Corporation (NASDAQ:NVTS) announced the acquisition of GeneSiC Semiconductor. The deal consisted of $100 million in cash and 24.9 million of the company shares with probable earn-out payments of approximately $25 million. GeneSiC is an attractive addition to Navitas Semiconductor Corporation (NASDAQ:NVTS)’s portfolio and has an EBITDA margin of 25%. The total market opportunity of both companies is expected to reach $20 billion by 2026.
Here is what Baron Funds has to say about Navitas Semiconductor Corporation in its Q4 2021 investor letter:
“Navitas Semiconductor Corporation is the industry leader in gallium nitride (“GaN”) power semiconductors. The company’s shares rose during the quarter after its SPAC transaction closed. Navitas is seeing strong momentum in its mobile charger and consumer business driven by its monolithically integrated GaN power ICs (full power systems on a single chip), which provide greater reliability and performance compared to competitors that supply discrete power devices (that require multiple power components to create a system). The company also released its initial sample products for higher power end markets in data center, renewable energy, and automotive, which remain on track to generate revenues in the coming years. We believe that Navitas will continue to see strong growth by leveraging its unique technology to maintain leading share of the GaN power semiconductor market, which is expected to grow rapidly in the coming years driven by GaN’s improved efficiency compared to silicon, generating energy and cost savings for customers.”
7. SMART Global Holdings, Inc. (NASDAQ:SGH)
Market Cap as of September 22: $820.86 million
SMART Global Holdings, Inc. (NASDAQ:SGH) is an American semiconductor company that develops specialty solutions for computing, memory, and LED markets across the globe.
SMART Global Holdings, Inc. (NASDAQ:SGH) saw a difficult spell after Q3 2021, but it has bounced back recently. The company reported an EPS of $0.87 vs. the $0.75 consensus, and revenue grew 5.8% on a YoY basis to $463 million. Moreover, the recent acquisition of Stratus Technologies is expected to provide a significant upside in its gross margin and EPS in the future. SMART Global Holdings, Inc. (NASDAQ:SGH) acquired Stratus Technologies for $225 in cash and an earning payout of up to $50 million.
On June 30, Stifel analyst Brian Chin reaffirmed a Buy rating on SMART Global Holdings, Inc. (NASDAQ:SGH) shares and lowered the price target to $32 from $45. The analyst added that although the timing of the Stratus acquisition “may not be seen as ideal,” he views substantial margin accretion and revenue synergy potential.
Here is what Meridian Funds specifically said about SMART Global Holdings, Inc. (NASDAQ:SGH) in its Q2 2022 investor letter:
“SMART Global Holdings, Inc. (NASDAQ:SGH) is a diversified technology company with leading market positions in memory controllers, LEDs, high-performance computing (HPC), and the internet of things (IoT). The company hit a rough patch in 2019 and early 2020 when earnings declined due to a combination of volatility in its memory business caused by weakness in Brazil and inventory corrections, growth investments the company had made in new products ahead of revenue, and order delays in its HPC business. While none of these developments is particularly unusual, it is uncommon for all three to turn negative at the same time. Our investment thesis was that the company’s impressive new management team could not only smooth out some of the volatility in the business but also drive growth through superior capital allocation and organic investment. We also believed that strong secular trends were in place for memory controllers, driven by the increased importance of memory for computing speeds and increased memory content in devices, and for HPC, driven by artificial intelligence and machine learning. Smart Global’s stock traded lower during the quarter due to macro concerns and weakness in its Brazil segment, which is highly exposed to a slowdown in consumer demand for mobile devices and PCs. We took advantage of the downturn and increased our position. We are comfortable with the volatility of the Brazil business as, over cycles, this segment is a solid cash generator that helps fund investments in the strong secular growth prospects for memory controllers and HPC.”
6. Alpha and Omega Semiconductor Limited (NASDAQ:AOSL)
Market Cap as of September 22: $890.686 million
Alpha and Omega Semiconductor Limited (NASDAQ:AOSL) designs, develops, and sells power semiconductor products for various technology applications. The company primarily serves the Hong Kong, South Korea, and the United States markets.
Alpha and Omega Semiconductor Limited (NASDAQ:AOSL)’s primary growth catalyst is the application of its products in every device that uses a power circuit. The company has 2400 different semiconductor products, and its portfolio is expanding at a rapid pace. As of FQ3 2022, 43% of its products were used in computing segments such as notebooks, computers, and graphic cards, 22% in home appliances such as TVs and gaming consoles, 19% in the industrial segment, and 14% in the communications sector. This diversified portfolio of products is set to provide a certain kind of stability to the company stock.
As of Q2 2022, 16 hedge funds had a stake in Alpha and Omega Semiconductor Limited (NASDAQ:AOSL), with Renaissance Technologies being the most significant stakeholder. The firm owned 329,100 shares of the company worth $10.972 million.
On August 11, Benchmark analyst David Williams reaffirmed a Buy rating on Alpha and Omega Semiconductor Limited (NASDAQ:AOSL) shares and lowered the price target to $60 from $70. The analyst believes that the company continues to execute well and stays resilient despite the worsening consumer environment.
Alpha and Omega Semiconductor Limited (NASDAQ:AOSL) is one of the notable semiconductor stocks, along with Broadcom Inc. (NASDAQ:AVGO), NVIDIA Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD).
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Disclosure: None. 10 Best Small-Cap Semiconductor Stocks to Buy Now is originally published on Insider Monkey.
