3 Semiconductor Stocks Poised for a Super Cycle Surge in 2024

Whether its the end of the ‘chip glut’ and strong market tailwinds, the three semiconductor stocks are poised for an immense rally

Semiconductor stocks have become increasingly important in today’s digital age. Semiconductors power smartphones, tablets and PCs; these tiny devices are in cars, aircraft and drones. While providing functionality to various electronic devices in the modern era, semiconductors are also critical to supercharging technological revolutions, including artificial intelligence (AI), machine learning and quantum computing breakthroughs.

As the chip glut ends and the macroeconomic environment improves, now may be the time to buy capable semiconductor stocks. Below are three such stocks that are poised for a super cycle surge.

Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ:AMD) made a name when the fabless chipmaker dethroned Intel (NASDAQ:INTC) in the CPU market. AMD is poised to challenge Nvidia (NASDAQ:NVDA), its prime competitor in the GPU chip market. In particular, AMD is slated to enter the AI chip race in 2024 officially. At the beginning of the second half of 2023, the chipmaker finally announced the MI300x GPU chipset, which will eventually compete directly with Nvidia’s A100 and H100 chips to train large language models (LLMs). Later that year, the chipmaker also announced it expected to sell $2 billion in AI chips in 2024.

Let’s recall the AI revolution and its dependency on high-powered GPUs, which incited a strong rally in Nvidia’s share price throughout 2023. AMD’s entrance into the AI chip market could help position the stock for a super cycle rally later in 2024.

ON Semiconductor (ON)

ON Semiconductor (NASDAQ:ON), or “Onsemi,” is a leading provider of power management, analog, sensors and connectivity semiconductor devices. Due to its wide range of products, the chipmaker serves diverse end markets, including industrial and consumer electronics. However, as electric vehicle (EVs) smart connectivity devices have become more mainstream, Onsemi has recently shifted its focus to developing power-efficient semiconductor solutions for these markets.

The semiconductor firm’s exposure to consumer electronics and IoT end-markets has caused a slowdown in top-line growth as there has been a general pullback in consumer spending on electronics since the height of the pandemic. Onsemi’s sluggish quarterly revenue growth in 2023 reflects this recent spending dynamic. However, the chip manufacturers, from Samsung to TSMC (NYSE:TSM), have implied the “chip glut” may be over soon enough. Moreover, Onsemi’s electric vehicle segment could be a bright spot in the coming years as consumers increasingly consider electric vehicles over combustion engine vehicles.

ON shares are trading at only 15.5 times forward earnings, below many semiconductor giants.

ACM Research (ACMR)

ACM Research (NASDAQ:ACMR) is a leading supplier of wet processing equipment and technologies for the semiconductor industry. Firms in charge of manufacturing semiconductor devices often turn to ACM’s wet-cleaning and front-end processing tools to produce higher yields in their manufacturing processes. The company focuses on China, where it conducts most of its product development, manufacturing and support services. While some may see this as a weakness, its focus on China-based customers could allow it to benefit from the burgeoning semiconductor sector there that has become increasingly competitive.

ACM Research is delivering impressive quarterly financial results in 2023. In their second quarter earnings print, the firm announced operations had largely gone back to pre-Covid levels, which would help the company to focus on its growth and expansion efforts. Second quarter revenue came in at $144.6 million, representing a year-over-year (Y/Y) increase of 38.4%. ACM research’s third quarter results were impressive, beating Wall Street’s revenue and earnings estimates. Revenue increased by 53% Y/Y, while non-GAAP EPS increased by 36% Y/Y.

ACM’s share price skyrocketed more than 153% in 2023, and its stock price is off to a good start in 2024. Despite the rally, ACMR still looks cheap. The company’s enterprise value to EBITDA ratio trades around 10.5x forward EBITDA. With an inexpensive valuation, a growing customer base and operations getting back on track, ACM Research could make a profitable long-term bet among semiconductor stocks.

On the date of publication, Tyrik Torres did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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