We recently published a list of 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025. In this article, we are going to take a look at where Analog Devices, Inc. (NASDAQ:ADI) stands against other high growth semiconductor stocks that are profitable.
Semiconductors have led industrial advancements and aided key applications such as personal computing, data centers, and cloud computing. As per PwC, Memory ICs were the fastest-growing semiconductor category over the previous 2 decades, with DRAM and HBM standing out. The broader DRAM market is supported by cost and scale, while HBM, because of its advanced technological requirements, reflects a high-barrier, closed-loop ecosystem.
Global Semiconductor Sales Rose 20.7% YoY in November 2024
The Semiconductor Industry Association (SIA) announced that global semiconductor sales touched $57.8 billion during November 2024 month, demonstrating 20.7% growth as compared to November 2023 total of $47.9 billion and 1.6% growth as compared to the October 2024 total of $56.9 billion. As per the report published by SEMI (Semiconductor Equipment and Materials International), the semiconductor industry is expected to begin 18 new fab construction projects in 2025. These new projects will include three 200mm and fifteen 300mm facilities. Notably, the majority will begin operations from 2026 – 2027.
In 2025, the Americas and Japan will be the leading regions with 4 projects each. Next, China and Europe & Middle East regions have 3 planned construction projects. Finally, Taiwan has 2 planned projects, with Korea and Southeast Asia having 1 project each for this year. As per SEMI’s President and CEO, investments have been fueling leading-edge and mainstream technologies to cater to dynamic global demands. Gen-AI and high-performance computing continue to fuel advancements in the leading-edge logic and memory segments. However, mainstream nodes have supported crucial automotive, IoT, and power electronics applications.
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Semiconductor Capacity to Ramp Up
SEMI projects semiconductor capacity to accelerate further, with a 6.6% yearly growth rate to a total of 33.6 million wafers per month (wpm) for 2025. This expansion is expected to primarily stem from leading-edge logic technologies in high-performance computing (HPC) applications and higher penetration of generative AI in edge devices. Overall, the broader semiconductor industry continues to focus on building advanced computing capabilities, and responding to the increased computational demands of LLMs.
Moving forward, foundry suppliers are expected to be the leaders in purchases of semiconductor equipment. The Foundry segment can increase capacity by 10.9% YoY, increasing from 11.3 million wpm in 2024 to 12.6 million wpm in 2025.
Our Methodology
To list the 10 High Growth Semiconductor Stocks That Are Profitable Heading into 2025, we conducted extensive research and scanned through several online rankings to shortlist companies having ~10% revenue growth over the previous 5 years and TTM net income of at least $400 million. We also mentioned the hedge fund sentiments around each stock, as of Q3 2024. Finally, the stocks were ranked in ascending order of their hedge fund sentiments.
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 technician working on power management in a semiconductor factory.
Analog Devices, Inc. (NASDAQ:ADI)
5-year Sales Growth: ~10%
TTM net income: $1,635.3 Million
Number of Hedge Fund Holders: 63
Analog Devices, Inc. (NASDAQ:ADI) remains a critical player in the semiconductor industry, which specializes in designing, manufacturing, and marketing analog, mixed-signal, and digital signal processing (DSP) integrated circuits. With the broader semiconductor industry moving towards an upcycle, Analog Devices, Inc. (NASDAQ:ADI) is well-placed to capitalize on the recovery. Its high-quality assets, strong industrial exposure, and new design wins throughout business lines offer a robust foundation for outperformance.
If the recovery paces up, Analog Devices, Inc. (NASDAQ:ADI) is expected to see significant upside potential. Its ability to innovate and adapt to a dynamic market environment, together with a strong presence in secular growth areas, can enable it to capture a significant share of the market during the upcycle. Truist Securities increased the price objective on the shares of Analog Devices, Inc. (NASDAQ:ADI) from $216.00 to $230.00.
Many applications need analog-to-digital and digital-to-analog conversion in order to bridge real-world signals with digital systems. With industries adopting more advanced technologies, the demand for Analog Devices, Inc. (NASDAQ:ADI)’s precision signal processing will continue to grow. Some of the key markets are automotive, industrial automation, communications, and consumer electronics. Carillon Tower Advisers, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Analog Devices, Inc. (NASDAQ:ADI) rebounded as management teams at several semiconductor companies in the analog space called the bottom, seeing improved conditions ahead. The analog semiconductor industry is a very cyclical business that has underperformed the broader semiconductor industry for several years.”
Overall, ADI ranks 7th on our list of high growth semiconductor stocks that are profitable. While we acknowledge the potential of ADI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than ADI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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