3 Top Semiconductor Stocks Primed to Produce Outsized Profits

Stocks to buy

The semiconductor industry is considered to be the backbone of AI and quantum computing. So, it’s no wonder that many of the top semiconductor stocks are reaping the benefits of the AI boom. Not only that, but these companies also have revenue diversification that spans multiple industries. This diversified setup helps protect them from risk and bolsters their income streams. I would not be surprised if they end up ruling the market for the years to come. 

To come up with the list, I screened the market using the following criteria:

  1. Operates in the semiconductor and semiconductor equipment sector
  2. Has at least three years of consistent double-digit revenue growth
  3. Has at least three years of consistent double-digit earnings growth

I then sorted them based on their latest earnings growth, ending up with three semiconductor stocks with excellent financials that place them in a great position to lead the industry. 

QuickLogic Corporation (QUIK)

Source: Shutterstock

QuickLogic Corporation (NASDAQ:QUIK) is a semiconductor company that specializes in fabless semiconductor manufacturing for ultra-low powered semiconductors. The company has continued to pursue developing artificial intelligence chips that focus on low-power and multi-core semiconductors. 

With the boom in AI and the increased interest in quantum computing, the company’s embedded Field Programmable Gate Arrays, or FPGA, is a crucial component in the growing AI demand. QuickLogic has been getting several contract wins with the platform, highlighting its process superiority. Since its IP business model launch in 2020, total revenue has surged by 146%. 

QuickLogic reported a strong fiscal year 2023, with revenue growing 31% year over year and basic EPS of -$0.02 a share, a 32-cent improvement. QuickLogic also expanded its sales funnel to a record $168 million and secured a new IP contract targeting a 12nm fabrication node, indicating promising future revenue streams. 

Speaking of revenue and income, the company has shown double-digit growth over the past three years: 

  • 47% revenue growth and 50% EPS growth in 2021
  • 27% revenue growth and 40% EPS growth in 2022

This strong growth trajectory makes QUIK stock a great candidate for one of the top semiconductor companies in the market. 

Axcelis Technologies (ACLS)

Source: Pavel Kapysh / Shutterstock.com

A designer and manufacturer of various components used in semiconductor manufacturing, Axcelis Technologies (NASDAQ:ACLS) offers various ion implant types for different customer requirements. Axcelis also provides aftermarket lifecycle services and products that its customers can use for upgrades and maintenance. 

Its Purion flagship system has received strong market recognition and Texas Instrument’s Supplier Excellence Award for 2023. According to President and CEO Russell Low, the company continues to expand its footprint globally with the Purion series.

Axcelis reported a record-breaking FY23 revenue and EPS driven by its Purion Power Series product line. Revenue grew 23% while net income increased 35%.

Russell Low attributes its success to strong execution and robust demand, especially in the power market, where Axcelis has a significant presence. As for previous metrics, Axcelis registered the following increases: 

  • 40% revenue growth and 96% EPS growth in 2021
  • 39% revenue growth and 88% EPS growth in 2022

So, if you’re looking for semiconductor stocks with massive potential, then ACLS might be for you. 

PDF Solutions (PDFS)

Source: carlos castilla/Shutterstock

PDF Solutions (NASDAQ:PDFS) is a data solutions provider for the semiconductor ecosystem. 

The company’s products allow semiconductor companies to collect and analyze data that will allow the design and manufacturing process to yield higher quality products. 

PDF’s products are powered by its proprietary software, a third-party cloud-hosting platform for its software-as-a-service, and physical IP designs for integrated circuits. The company’s primary products include Exensio Software, Design-for-Inspection System, Characterization Vehicle System, and Cimetrix Software Products.

PDF Solutions also completed its latest FY23 with impressive numbers. Revenue came in at $165.8 million, 12% higher YOY. The company also reported a turnaround profit of 8 cents EPS, improving significantly from last year’s loss of 9 cents. 

Meanwhile, previous years’ numbers reported: 

  • 26% revenue growth and 50% EPS growth in 2021
  • 34% revenue growth and 84% EPS growth in 2022

There may have been short-term weakness in the semiconductor industry. Still, PDF Solutions is optimistic about its FY24 expectations. It sees macro trends of distributed manufacturing, energy electrification and AI boosting its revenue growth in the year’s second half. If that happens, I could see PDF Solutions as one of the top semiconductor stocks to pick if you want market exposure.

On the date of publication, Rick Orford did not have (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.

Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.

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