We recently published a list of the 11 Best Semiconductor Equipment Stocks to Buy According to Analysts. In this article, we are going to take a look at where Teradyne, Inc. (NASDAQ:TER) stands against other best semiconductor equipment stocks to buy according to analysts.
As per Straits Research, the US semiconductor manufacturing equipment market size was pegged at US$13.2 billion in 2024. It is expected to grow from US$13.5 billion in 2025 to US$16.5 billion by 2033. This growth is expected to stem from increasing investments in domestic semiconductor manufacturing and the higher demand for advanced semiconductors in critical sectors, including artificial intelligence (AI), 5G, and EVs.
Market Drivers for Semiconductor Manufacturing Equipment
Straits Research highlighted that the resurgence of semiconductor manufacturing in the US is aided by the government initiatives. The federal push is targeted at reducing the dependency on Asian imports as well as strengthening the domestic supply chains. Leading companies continue to establish new fabs in the US, which helps create demand for advanced wafer manufacturing and fabrication equipment. Overall, the increased requirement for high-performance chips in sectors including defense, telecommunications, and automotive further cements the growth of semiconductor equipment.
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Growth Opportunities for Semiconductor Equipment
The rapid adoption of AI and 5G technologies in the United States continues to present strong opportunities for the broader semiconductor manufacturing equipment market, highlighted Straits Research. AI chips, primarily the ones utilized in data centers and autonomous vehicles, need advanced manufacturing techniques, fueling demand for cutting-edge equipment. Furthermore, the launch of 5G networks has been driving rapid production of semiconductors, which are capable of handling higher data transmission rates, further enhancing the need for advanced fabrication technology. The US is well-placed as a leader in AI and 5G development, with leading companies driving innovation, demonstrating strong growth potential.
KPMG believes that Al is now the most important application fueling semiconductor companies’ revenue as businesses continue to incorporate the technology in their digital transformations. As a result, the spending on Al semiconductors is projected to be $174 billion in 2025, which is expected to increase to $280 billion in 2028. KPMG also highlighted that semiconductor leaders opine that Al enablers (which include high-bandwidth memory) are the production technology that can have an impact on the broader industry over the upcoming 3 years. In an era in which Al applications are present in all the industries – ranging from autonomous vehicles to healthcare diagnostics, household devices to personalized recommendations—there remains a higher demand for semiconductors aiding Al capabilities.
Our Methodology
To list the 11 Best Semiconductor Equipment Stocks to Buy According to Analysts, we used a screener to shortlist the companies catering to the broader semiconductor equipment market. Next, we filtered out the stocks that analysts see significant upside to. The stocks are arranged in ascending order of their average upside potential, as of April 9. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of engineers discussing around a fully-equipped flex test platform system.
Teradyne, Inc. (NASDAQ:TER)
Average Upside Potential: ~52.4%
Number of Hedge Fund Holders: 61
Teradyne, Inc. (NASDAQ:TER) offers testing equipment, which includes automated test equipment for semiconductors system testing for hard disk drives, circuit boards, and electronics systems, and wireless testing for devices. Analyst Krish Sankar of TD Cowen maintained a “Buy” rating on the company’s stock. The analyst’s rating is backed by factors highlighting the growth potential and recovery. Despite the challenges, the company expects a recovery in H2 of the year, which can be driven by improvements in the semiconductor test market. As per the analyst, Teradyne, Inc. (NASDAQ:TER)’s long-term growth prospects are promising, with an emphasis on expanding the Industrial Automation division. The company continues to roll out new products and seeks to increase its market share and targets CAGR, which exceeds the industry peers, says Sankar.
Teradyne, Inc. (NASDAQ:TER) remains well-placed to benefit from the recovery in smartphone units and the higher adoption of leading-edge nodes in semiconductor manufacturing. The industrial sector, which includes automotive manufacturing, exhibits another area for potential growth. With industrial automation advancing and the automotive industry shifting toward electric and autonomous vehicles, the demand for semiconductor components in such applications can increase. This trend can also result in higher demand for Teradyne, Inc. (NASDAQ:TER)’s testing solutions.
Furthermore, the pivot to leading-edge nodes in semiconductor manufacturing throughout sectors can fuel demand for the company’s advanced testing equipment. Parnassus Investments, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Teradyne, Inc. (NASDAQ:TER), a supplier of automated test equipment for semiconductors, was affected by a broad sell-off in semiconductor-related stocks. We see some “green shoots” in demand and believe Teradyne is well positioned as artificial intelligence moves to smartphones and PCs.”
Overall, TER ranks 7th on our list of best semiconductor equipment stocks to buy according to analysts. While we acknowledge the potential of TER 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than TER but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.