11 Best Semiconductor Equipment Stocks to Invest In

In this article, we discuss the 11 best semiconductor stocks to invest in.

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. 

Don’t Miss: 11 Best Semiconductor Stocks To Invest In for the AI Boom

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.

And lastly, as mentioned by Roger, we saw very strong order intake in the fourth quarter in support of future demand. To be able to follow the curve of the industry recovery, we are looking at the combined demand for 2024 and 2025. As mentioned last quarter, we fueled 2024 as a transition year in preparation with the expected strong demand in 2025. We, therefore, continue to make investment this year, both in capacity ramp and in technology to be ready for the upturn in the cycle.”

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).

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.

Best Semiconductor Equipment Stocks to Invest in

11. Nova Ltd. (NASDAQ:NVMI)

Number of Hedge Fund Holders: 21

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).

10. Onto Innovation Inc. (NYSE:ONTO)

Number of Hedge Fund Holders: 23

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.”

9. IPG Photonics Corporation (NASDAQ:IPGP)

Number of Hedge Fund Holders: 25

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.

8. Amkor Technology, Inc. (NASDAQ:AMKR)

Number of Hedge Fund Holders: 26

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.

7. Axcelis Technologies, Inc. (NASDAQ:ACLS)

Number of Hedge Fund Holders: 28

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.

6. Teradyne, Inc. (NASDAQ:TER)

Number of Hedge Fund Holders: 33

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).

5. Entegris, Inc. (NASDAQ:ENTG)

Number of Hedge Fund Holders: 36

Entegris, Inc. (NASDAQ:ENTG) manufactures and supplies various products and solutions, including micro-contamination control products, to semiconductors, glass, and other industries. 

In the fourth quarter, the number of hedge funds with a stake in Entegris, Inc. (NASDAQ:ENTG) remained at 36, the same as the previous quarter, but the combined stake value increased to $2.23 billion in the quarter from $1.69 billion in Q3. With 6.55 million shares worth $785.416 million, Robert Joseph Caruso’s Select Equity Group was the top investor in the company.

The London Company stated the following regarding Entegris, Inc. (NASDAQ:ENTG) in its fourth quarter 2023 investor letter:

“Entegris, Inc. (NASDAQ:ENTG) – ENTG shares rallied during the quarter as visibility in the semiconductor market improved and demand for its value added product suite remains strong. ENTG is benefiting from the higher amount of materials needed for miniaturization and is winning business as its products deliver faster time to yield. Management has been delivering on its debt reduction strategy. We remain attracted to the industry’s high barriers to entry, limited competitors, and high switching costs.”

4. KLA Corporation (NASDAQ:KLAC)

Number of Hedge Fund Holders: 55

KLA Corporation (NASDAQ:KLAC) develops and supplies process equipment, process control equipment, and more. KLA Corporation (NASDAQ:KLAC) is one of the best semiconductor equipment stocks to invest in.

On January 25, KLA Corporation (NASDAQ:KLAC) announced its second-quarter 2024 earnings result with a non-GAAP EPS of $6.16, topping the analysts’ estimates by $0.28. The company generated a revenue of $2.49 billion, which beat the estimates by $30 million.

On February 8, KLA Corporation (NASDAQ:KLAC) announced a quarterly dividend of $1.45, payable by March 1 to the shareholders of record on February 19. The stock’s dividend yield was 0.86% at the time of writing on February 23.

3. ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holders: 62

ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that, through its subsidiaries, is engaged in the development, production, and marketing of semiconductor manufacturing equipment.

In the fourth quarter, the hedge fund sentiment was positive toward ASML Holding N.V. (NASDAQ:ASML) as 62 hedge funds had investments in the stock, compared to 57 funds in Q3. With 4.977 million company shares worth $3.767 billion, billionaire Ken Fisher’s Fisher Asset Management was the most significant stakeholder in the stock.

On January 24, ASML Holding N.V. (NASDAQ:ASML) announced net sales of €7.2 billion in the fourth quarter and €27.6 billion for the full year of 2023.

ClearBridge Investments stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its fourth quarter 2023 investor letter:

“Another welcome change has been the recognition of generative artificial intelligence (AI) opportunities for companies outside the U.S. While our IT holdings trailed their mega cap U.S. counterparts for most of the year, semiconductor equipment makers ASML Holding N.V. (NASDAQ:ASML) and Tokyo Electron, which we consider enablers of AI, as well as enterprise software maker SAP and IT consultant Accenture, which we see as facilitators of AI adoption in new product lines and/or enhanced business models, rose strongly in the quarter. These companies are rolling out new, AI-enhanced products at higher prices which should positively impact earnings in the near term.

On an individual stock basis, the largest contributors to absolute returns in the quarter included ASML and Tokyo Electron in the IT sector.”

2. Lam Research Corporation (NASDAQ:LRCX)

Number of Hedge Fund Holders: 67

Lam Research Corporation (NASDAQ:LRCX) is a California-based company that provides manufacturing and servicing of semiconductor processing systems.

On February 8, Lam Research Corporation (NASDAQ:LRCX) declared a quarterly dividend of $2.00, payable by April 3 to the shareholders of record on March 13. At the time of writing on February 23, the stock’s dividend was 0.86%.

According to Insider Monkey’s database, 67 hedge funds had investments in Lam Research Corporation (NASDAQ:LRCX)’s stock in the fourth quarter. Fisher Asset Management was the most significant investor in the company, with 2.97 million shares worth $2.328 billion, representing 1.14% of the investment portfolio.

Vulcan Value Partners commented on Lam Research Corporation (NASDAQ:LRCX) in its third quarter 2023 investor letter. Here is what it said:

“Lam Research Corporation (NASDAQ:LRCX) designs and manufactures equipment used in the fabrication of semiconductors. Lam is a wonderful business with great long-term prospects. The company has shown tremendous financial resilience against what is currently a challenging industry backdrop. After a significant increase in its stock price over the last year, our margin of safety narrowed. We followed our discipline and sold our position to reallocate capital into businesses with larger discounts.”

1. Applied Materials, Inc. (NASDAQ:AMAT)

Number of Hedge Fund Holders: 70

Applied Materials, Inc. (NASDAQ:AMAT) is a California-based company that is engaged in the development, manufacturing, and marketing of semiconductor wafer fabrication equipment and more.

In the last three months, 23 Wall Street analysts covered Applied Materials, Inc. (NASDAQ:AMAT), and 17 kept a Buy rating on the stock. The average price target of $217.52 represented an upside of 10.18% at the time of writing on February 23.

On February 20, Argus analyst Jim Kelleher raised the price target on Applied Materials, Inc. (NASDAQ:AMAT)’s stock to $230 from $170 and maintained a Buy rating. 

Generation Investment Management mentioned Applied Materials, Inc. (NASDAQ:AMAT) in its second quarter 2023 investor letter. Here is what it said:

Applied Materials, Inc. (NASDAQ:AMAT): Semiconductor revenue has grown 6% per year since 2010, driven by increasing demand for smartphones, datacentres and electronic content in vehicles and industrial settings.4 Through work spanning six roadmaps covering many sub-themes within semiconductors (including industry consolidation, capital equipment and generative AI), we are confident that these trends will continue or even accelerate in the coming decades. The rise of generative AI in particular will require high-performing semiconductors, such as Nvidia’s GPUs, in datacentres.

Traditionally the industry relied on semiconductor manufacturers to deliver steady advances in semiconductor performance while reducing costs. This phenomenon is known as Moore’s Law, which was identified by Intel founder Gordon Moore. Traditionally, Moore’s Law relied on shrinking the light source used to expose photosensitive material on a silicon wafer to make smaller semiconductors, which in turn led to falling costs.

In recent years, however, Moore’s Law has slowed. Manufacturing has run up against the limits of physics. Making semiconductors smaller more cheaply has therefore become difficult. The latest generation of lithography machines that create this light source are marvels of modern science, but they are also expensive to produce, not to mention power-hungry. Delivering performance improvements in the most advanced semiconductors is now becoming costlier. This presents a risk, both to generative AI and a net zero world.

All is not lost, however. The semiconductor industry attracts some of the best minds in the world, many of whom are looking at alternative ways to continue to deliver more power-efficient and cheaper semiconductors. A key area of focus is around developing new materials used in manufacturing semiconductors, and new ways of applying (‘deposition’) and selectively removing (‘etch’) these materials to create the desired semiconductor. Applied Materials is one of the companies in the vanguard of these developments…” (Click here to read the full text)

You can also look at the 13 Best Buy-the-Dip Stocks To Buy Right Now and the 12 Best Gold Stocks Under $25.

Suggested articles:

• 20 Richest People in Africa in 2024
• Top 10 Uranium Producing Companies In The World
• 12 Best Rising Penny Stocks To Buy

Disclosure. None. 11 Best Semiconductor Equipment Stocks to Invest In is originally published on Insider Monkey.